The Issue The issue is whether the application made by Plantation General Hospital for certificate of need number 5736 for an open heart surgery program should be granted.
Findings Of Fact General. Procedural background and description of the parties. Plantation General Hospital filed a letter of intent with the Department of Health and Rehabilitative Services (Department) and the local planning agency noticing its intention to file an application for a certificate of need for an adult open heart surgery program on August 28, 1988. Its application for certificate of need No. 5736 was filed on September 28, 1988. On October 10, 1988, the Department notified Plantation of omissions from its application, which were supplemented in a response filed November 14, 1988, and the Department deemed the application complete on November 16, 1988. The Department issued its notice of intent to deny the application on January 30, 1989, and Plantation requested a hearing on that denial. Florida Medical Center, North Ridge General Hospital and Broward General Hospital intervened in the proceeding. Broward General sought to intervene shortly before the hearing was to begin, and its participation was limited. By notice dated May 31, 1989, the Department announced that it had reconsidered its position and would support Plantation's application. Plantation General Hospital is a 264-bed general medical surgical hospital located in the City of Plantation, Broward County, Florida. It is owned by Hospital Development and Services Corporation which in turn is owned by Healthtrust, Inc. It offers acute care services, except for open heart surgery and burn treatment. It does not propose to perform pediatric open heart surgery. It does offer cardiac catheterization and other non-invasive cardiac services such as EKG, stress testing and other procedures. It also has services which would support an open heart surgery program such as radiology, pathology, anesthesiology, neurology, intensive care, and an emergency room. Plantation received a certificate of need in 1984 to operate a cardiac catheterization laboratory, which opened in April of 1985. It now performs a large number of catheterizations, so that there is pressure to offer an open heart surgery program. Diagnostic catheterizations often reveal that a patient could benefit from open heart surgery. Patients prefer to have surgery done at the hospital where the catheterization is done. Conversely, patients often choose a hospital for catheterization that has the capability to perform open heart surgery. Patients having therapeutic catheterization (angioplasty) must be served at a hospital approved to offer open heart surgery. Therapeutic catheterization itself sometimes triggers the need for immediate heart surgery. Plantation is currently constructing a new wing for its obstetrical patients and proposes to convert part of its present obstetric space for use by the open heart surgery program. The proposed open heart area would have a single operating room, a recovery area, a pump room for the heart-lung oxygenator pump, a sub-sterile storage area and a nurses' station. Existing beds near the proposed open heart area are monitored beds which could be converted to cardiovascular intensive care unit beds at a lower cost than would be the case for wholly new construction. That conversion would not require certificate of need review. The project Plantation General proposes involves the renovation of 2,229 square feet at a projected cost of $267,480. Equipment is projected to cost an additional $300,000. Plantation General anticipates the total project cost will be $599,970. Plantation is not a teaching or research hospital and does not propose to offer teaching or research as part of its open heart surgery program. The hospital does not contend that there is an unmet need for indigent open heart health services which its project would fill. It has historically provided some medical service to Medicaid patients and to the medically indigent. Plantation does not contend, however, that the level of its medical services historically provided to the medically indigent, the extent to which it proposes to provide open heart surgery to underserved population groups, or to Medicaid patients enhances its application. These items are neutral factors which have no impact on the need determination. The Intervenors acknowledged that Plantation would provide minimally appropriate open heart services for the indigent. Plantation General's owner, Healthtrust, Inc., has created a limited partnership to become the new owner of its hospital; Hospital Development and Services Corporation will serve as the general partner, and a number of doctors will be limited partners. The partnership offering is closed, and the approvals, transfers, and other activities created by the closing of the partnership are ongoing. It is anticipated that after receipt of all approvals and transfers the partnership will be deemed to have been in effect as of June 1, 1989. Florida Medical Center is a 459 bed acute hospital located in Fort Lauderdale, Broward County, Florida. It provides a full array of cardiac services, with the exception of heart transplants. It offers cardiac catheterization services, and was the first hospital to offer open heart surgery in Broward County. North Ridge Medical Center presented no testimony about its size or location because its standing had been stipulated. It provides a full array of cardiac services including cardiac catheterization and open heart surgery, but not heart transplants. North Ridge performs the largest volume of open heart surgery procedures in Broward County. Broward General Hospital is the largest facility of the four facilities operated by the North Broward Hospital District, an independent special taxing district. Broward General has 744 acute care beds, and is located in Fort Lauderdale, Florida. It operates an array of cardiac services, including cardiac catheterization, coronary angioplasty, cardiac electrophysiology studies, intra-aortic balloon pumping, and insertion of temporary and permanent pacemakers. Its physical plant consist of one open heart surgery suite, one cardiac catheterization laboratory, and cardiac and progressive care beds. On January 26, 1989, North Broward Hospital District entered into a contract with the Cleveland Clinic Florida which will permit the clinic to provide its cardiac services exclusively at Broward General. Broward General is in the process of expanding its open heart surgery suites from one suite to two, its catheterization labs from one to two, and adding 16 coronary care and 24 progressive care beds. Broward General has 29 staff cardiologists, three of whom are Cleveland Clinic Florida physicians who hold interim privileges. Eight cardiovascular surgeons are on its staff, two of whom are Cleveland Clinic Florida physicians. Statutory Criteria for Evaluating Certificate of Need Applications. Consistency with the state health plan and local health plan. Section 381.705(1)(a), Florida Statutes. The Department is required to consider The need for the health care services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. Section 381.705(1)(a), Florida Statutes. Plantation General does not contend that there are emergency circumstances in Broward County which threaten the public health and require approval of its application. Prehearing stipulation, paragraph 12. There is no applicable state health plan because the last plan was specifically drafted to cover the period 1985-87. That last plan does contain a goal stating that it is the state's desire to "ensure the appropriate availability of . . . open heart surgery services at a reasonable cost" and the goal is implemented by an objective, number 4.2, which is "to maintain an average of 350 open heart procedures per program in each district through 1990." This objective is predicated upon the assumption that the Department will interpret subparagraph 11 of Rule 10-5.011(1)(f), Florida Administrative Code, infra, to permit a new program if the existing programs, on the average, provide 350 open heart procedures per year. The correctness of that interpretation is discussed in Findings 60 and 61, as well as in the Conclusions of Law. The state health plan also states that applicants proposing cardiac surgery must make those services available to all segments of the population regardless of their ability to pay. Section 381.705(1)(n). The parties stipulated that Plantation has provided medical services to Medicaid patients and to the medically indigent and the extent to which Plantation proposes to provide open heart services is neither an enhancement nor detraction from its application. Currently five facilities in Broward County provide open heart surgery: Broward General, Florida Medical Center, North Ridge, Holy Cross, and Memorial Hospital. There are no facilities which have not yet opened, but which have obtained certificate of need approval for open heart surgery. During the period of July 1987 - June 1988, current providers had the following volume of procedures: Hospital Broward General Number of Procedures 143 Florida Medical Center 382 North Ridge 781 Holy Cross 362 Memorial 478 Total Dividing the number of procedures 2,146 by the five existing providers yeilds an average of 431 procedures per program. The average number of procedures therefore exceeds 350, which is consistent with the provisions of the old state health plan. The local health plan has three criteria which bear upon the application. It requires that the application be consistent with accreditation standards, the hospital must be willing to accept patients from all payor classes, and must comply with the Department's rules. It is stipulated that Plantation General has full accreditation and if approved will obtain accreditation for its open heart surgery program. Plantation accepts Medicare, Medicaid, private pay, and indigent patients. At page 70, its application states that the hospital will provide 2% of its open heart surgery to indigent patients, 67% of its patients will be Medicare patients and 31% will be private pay patients. The hospital has not projected any Medicaid utilization because open heart surgery is typically performed on older patients, and most of those patients will qualify for Medicare rather than Medicaid due to their age. No Medicaid open heart surgery was reported in HRS District X (Broward County) for the year preceding Plantation's application. The application is consistent with the last state health plan and the local health plan. Availability, utilization, geographic accessibility and economic accessibility of facilities in the district. Section 381.705(1)(b), Florida Statutes. Open heart surgery is available to all residents in Broward County within two hours normal driving time; it is therefore geographically accessible. Plantation does not propose to provide a substantial portion of its open heart services to individuals who reside outside of HRS Service District X (Broward County). Plantation does not contend that there is a pool of patients who are denied access to open heart surgery on financial grounds. The increased access to indigents which Plantation would provide is negligible (only about six surgeries per year), and the parties have stipulated that its commitment to provide services to the medically indigent neither enhanced nor detracted from its application. There is no evidence of any waiting list at facilities which provide open heart surgery which would be alleviated by the approval of Plantation General's application. Plantation's argument that service availability has been a problem for some patients at Plantation who need open heart or emergency angioplasty services is rejected. It can provide diagnostic catheterizations but not angioplasty because it lacks open heart surgery certification. With respect to emergency angioplasty, there is an inherent service availability problem when a hospital such as Plantation establishes a catheterization lab, when it is not approved to provide open heart surgery. Angioplasty can have the unfortunate side effect in a small number of cases of triggering an immediate need from open heart surgery. A patient must be immediately transferred, or the open heart surgery must be performed at Plantation, even though it is not approved for that service. Those problems are problems which Plantation knowingly assumed when it began its catheterization lab knowing that it was not approved for open heart surgery. It is not significant that at times of peak demand at Florida Medical Center there may be no beds available for a patient from Plantation who needs open heart surgery. Patients are commonly transferred to Florida Medical Center because it is the nearest hospital to Plantation. More than one half of its patients who were transferred went to Memorial Hospital, however, not Florida Medical Center. There is no evidence that another hospital in Broward County has not had a bed available for a patient from Plantation who needed open heart surgery when Florida Medical Center's unit was full. The issues of efficiency and the extent of utilization raise the question whether there is additional capacity in existing open heart programs which should be used in preference to opening a new program at Plantation General. This is related to the need calculation made in Rule 10-5.011(1)(f)8, Florida Administrative Code, discussed at Finding 60. An efficiency standard of 350 procedures per year is found in Rule 10-5.011(1)(f)11a(I), Florida Administrative Code. That utilization standard is met by all facilities in Broward County except for Broward General, see, Finding 14, supra. It provided only 143 open heart procedures in the year July 1987-June 1988. Broward General has been providing open heart surgery for 16 years and has not yet approached the 350 procedures per year. Broward General is in the process of substantially expanding its cardiac program, through its association with the Cleveland Clinic, and the addition of a second open heart surgery operating room. That expansion could accommodate the volumes Plantation seeks to achieve. Florida Medical Center already has two open heart surgery rooms in operation and is adding a third. Based upon its current volumes and the fact that there is no reasonable likelihood of real future growth in the use rate for open heart surgery, Broward General and Florida Medical Center have existing capacity to serve the demand for surgeries which Plantation projects it would perform during its first two years of operation. North Ridge provides approximately 600 surgeries per year, and utilizes more than one operating room. It also has capacity to contribute to District X (Broward County), especially given the reduced demand in Broward caused by the reduction in Palm Beach County residents coming to Broward County for open heart surgery. Open heart surgery programs in Palm Beach County hospitals have recently come on line, and are providing surgery for Palm Beach County residents who formerly traveled to Broward. There is no evidence that existing open heart surgery programs lack the capacity to sufficiently handle future demand. There is no proof that existing facilities are being over utilized, which is consistent with the prior finding that there is no waiting list at any provider. All candidates for open heart surgery are currently being served. There is little overlap in the medical staffs of Plantation General and Broward General, and Plantation referred no cases to Broward General for open heart surgery in 1987 and only three in 1988, but the additional capacity of Broward General is an important consideration. Part of the reason for the certificate of need process is to control and reduce capital expenditures, and, through that control to indirectly reduce associated labor costs and other ancillary costs which arise from the proliferation of medical services. To the extent that other institutions, especially Broward General, could provide additional surgery through its approved open heart surgery program, restraining an increase in the number of providers will eventually have the effect of directing patients to hospitals with lower utilization. This might not be the case if there were proof that Broward General did not provide quality care, and residents voted with their feet and shunned the program to seek care elsewhere. The parties have stipulated, however, that there are no quality of care problems with any of the existing open heart surgery programs in the county, including Broward General. Efficiency considerations therefore weigh against approval of the Plantation General application. There are no geographic accessibility problems, nor any reason to believe that access to open heart surgery by medically indigent or other underserved populations would be enhanced by the Plantation General proposal. Ability of applicant to provide quality care. Section 381.705(1)(c), Florida Statutes. Plantation General is fully accredited by the Joint Commission on the Accreditation of Hospitals. It provides quality care in the services now available at Plantation General. Plantation intends to implement its open heart surgery program by forming a steering committee to direct its development, with responsibility to assure that the program will comply with all applicable rules and provide high quality services. In an effort to keep the cost of its program low, the Plantation General application has sought to minimize the renovations, expansions, and the equipment attributable to the program. This attempt at cost effectiveness has serious quality of care implications. It will be difficult to provide a quality open heart program operating at a reasonable surgical volume with a single operating room; the application also proposes only to have one oxygenator pump, which is inadequate. Plantation General is likely to encounter difficulty in finding a sufficient number of skilled personnel to provide a quality program. It assessing the adequacy of a single open heart surgery operating room, it is necessary to keep in mind that Plantation will also be providing therapeutic catheterization, or angioplasty, which requires immediate access to open heart surgery as a back up. The volume of angioplasties will affect the hospital's ability to schedule open heart surgery in its single operating room, for angioplasty cannot take place if there is no operating room available for open heart surgery should the patient require it. Plantation projects it will handle between 203 and 271 angioplasties in the first year its open heart surgery program will operate, and between 218 and 291 angioplasties in the second year. The average time for an angioplasty is 3 to 3.5 hours. The open heart surgery team and other staff also must be available on site while angioplasty proceeds in case they are needed. In terms of the staff necessary to perform open heart surgery, the Plantation application indicates that there will be one surgical team. Each team consists of two surgeons, one anesthesiologist, a circulating nurse, a perfusionist to operate the heart-lung oxygenator pump, and two scrub nurses. Plantation did not adequately explain how its staffing projections would enable the open heart surgery service to cover the projected number of surgeries and angioplasties, given the substantial overtime that would have to be incurred if both the open heart and angioplasty programs operate. In order to provide angioplasty coverage, by 1991-92, Plantation's open heart surgery schedule will have to provide 654 to 873 hours of angioplasty back-up coverage, based on a three hour average angioplasty. In turn, this means that 12.5 to 17 hours of such coverage will be necessary each week based upon an average time of 3 hours for each angioplasty. The cardiac surgeons on staff at Plantation will require about 5 1/2 hours to perform open heart surgery without including clean up or set up time. For Plantation's open heart surgery program during its second year of operation, its health care planner, Mr. Nelson, assumes six operations per week during the first three-quarters of the year and eight per week in the last quarter of the year. The normal operating hours for the program will be 8 to 9 hours per day. Thus, for the first three quarters of 1991-92, open heart surgery will occupy the time available in the single operating room at least three days a week. The 4 to 5 angioplasties still must be covered, which will require at least 2 days of the dedicated open heart surgery room's time. By the last quarter of the second year of operation, the open heart surgery suite will be utilized at least 4 days a week for actual surgery, leaving only one day available for the necessary angioplasty back up coverage. Thus, the single operating room proposed will require the hospital surgical staff to regularly work well beyond normal operating hours and will create substantial scheduling problems to accommodate both open heart surgery and angioplasties. What this means is that it is not likely that the configuration for the open heart surgery program proposed by Plantation will work out. Plantation will have to add staff, and probably renovate and equip another operating room. The Intersociety Commission on Heart Disease Resources guidelines recommend that an open heart program have two fully equipped open heart operating rooms, or a designated open heart operating room immediately adjacent to a general surgical suite which also has the necessary equipment in place to provide open heart surgery. Plantation's proposal would violate these guidelines because it has only a single operating room and only enough equipment in to handle one operating room. Plantation's witness, Mr. Webb, did testify that he has worked in two other facilities with only one open heart operating room, that the rooms were not dedicated solely to open heart, and no serious problems were encountered with these programs, but his testimony did not deal with the problems likely to be encountered by Plantation given its projected open heart volumes and likely angioplasty volumes. It may be true that after the open heart surgery program is implemented, additional operating rooms might be added without requiring additional certificate of need review, but it is improper for the institution to low-ball its application projections, on the assumption that it can later make &*an inadequate proposal sufficient by additional capital expenditures for construction or reconfiguration of operating rooms, acquisition of additional equipment or hiring additional staff. Such a piecemeal process defeats the purpose of certificate of need review; it causes a review of selected portions of a program, rather than the program as it will actually operate. Plantation's intention to purchase a single heart-lung oxygenator pump is a serious deficiency. A single pump is likely to suffer occasional mechanical breakdown, and no other pump will be available in an emergency. More importantly, the pump will certainly need routine maintenance, and the heavy schedule of use for the operating suite based upon the projected volumes of open heart and angioplasty cannot be maintained with a single pump. The pump should not be moved from room to room because of the increased risks of contamination caused by movement. With respect to the configuration of the overall unit, the operating suite will have four cardiovascular intensive care unit beds in its open heart surgery area. This is an adequate design, even though most of the cardiovascular intensive care beds will be on the third floor. Plantation General's ability to provide quality care is also questionable based upon the limited partnership it has formed with its doctors. Since the advent of diagnostic related groups (DRGs), the reimbursement to hospitals from federal sources has been limited to a flat fee arrangement. It is in the interest of the hospital to discharge patients as quickly as possible, to maximize the value of that payment. On the other hand, doctors refer, admit and discharge patients from the hospital, hospital administrators do not. Hospitals therefore seek ways to encourage doctors to share the hospital's financial incentives to make a profit within the payment constraints of diagnostic related groups. One way to do this is to have doctors share in the profitability of the hospital. Plantation General has formed a limited partnership with some of its doctors. Those limited partners must be on the active staff of Plantation. The general partner is Hospital Development and Services Corporation, the owner of Plantation General Hospital. The partnership will lease the hospital, and the limited partners will be paid, based on their units of ownership, upon the operating cash flow of the hospitals. If doctors refer more patients to the hospital, the cash flow will be greater and distributions should be larger. This arrangement is fraught with the potential for abuse which is highlighted in the prospectus for the limited partnership, which states: Prospective Payment System. The Social amendments of 1983 established a prospective payment system for Medicare and amended Section 1866(a)(1)(F) of the Social Security Act (the "Act") to specify that hospitals seeking reimbursement under the prospective payment system must enter into agreements with a utilization and quality control peer review organization ("PRO"). Section 1886(f)(2) of the Act specifies that the Secretary of the Department of Health and Human Services may deny payment or require a hospital to take corrective action if a PRO provides the Secretary of the Department of Health and Human Services with documentation that a hospital has attempted to circumvent the prospective payment system through unnecessary admissions or overutilization. Fraud and Abuse. The Act imposes criminal penalties upon persons who make or receive kickbacks, rebates in connection with the Medicare prog anti-fraud and abuse rules prohibit prov others from soliciting, offering, receiving o directly or indirectly, any remuneration in r either making a referral for a Medicare-covere or item or ordering any covered service Violations of these rules may be punished by up to $25,000 or imprisonment for up to five both. In addition, the Medicare a and Program Protection Act of 1987 makes it a civil offense to violate these prohibitions, punishable by exclusion from the Medicare and Medicaid programs. The Limited Partners are to receive cash distributions based upon the available cash flow, if any, of the Partnership generated through the provision of services to patients admitted to the Hospital by physicians, some of whom will be Limited Partners. The Limited Partners therefore may receive a greater amount of distributions if physicians admit a greater number of patients to the Hospital. Individual investors share in the Partnership's cash flow only in proportion to their respective investments in the Partnership and not in accordance with the number of referrals or admissions each makes. Arguably, therefore, the investors' sharing of Partnership profits would not be a prohibited kickback or rebate. The Third Circuit United States Court of Appeals has recently held that the fraud and abuse rules are violated if one purpose (as opposed to a primary or sole purpose) of a payment to a provider is to induce referrals. U.S. versus Greber, 760 F. 2d 68 (1985). The Greber case involved the payment of fees for alleged professional services. Although the Greber holding (i.e., the one purpose test) casts an extremely wide net, its application to the present facts is not clear. Although as stated above, the present arrangement, which involves the allocation of cash flow on the basis of ownership interests held, arguably is not objectionable on these grounds, it is clear that as the number of referrals and admissions increase, revenues and, potentially, available cash flow will increase. It is not inconceivable, therefore, that the Partnership's activities may be held to violate the anti-fraud and abuse rules and subject the Partnership and the Partners to criminal and civil sanctions. The federal government has announced a policy of scrutinizing and evaluating joint ventures among healthcare providers under the fraud and abuse rules, and this area of the law is in a state of rapid development and change. Because of the changing state of the law and the lack of clear authority, it is not possible to give a more precise analysis of the application of the fraud and abuse provisions to the Partnership. The hospital's limited partnership arrangement is also probably contrary to the Code of Ethics of the American College of Physicians. It states: The physician should avoid any business arrangement that might, because of personal gain, influence his decision in patient care. . . In the case of personal conflicts, the moral edict is clear, the physician must avoid any personal commercial conflicts of interest that might compromise his loyalty in treatment of patients. Collusion with nursing homes, pharmacists, or colleagues for personal financial gain is morally reprehensible. For a physician to own shares in a drug company or in a hospital in which he practices does not constitute an unethical behavior of itself, but it does make him vulnerable to the accusation that his actions are influenced by such ownership. The safest course would be to avoid any such potentially compromising situation. Unfortunately, the application here has the direct effect of promoting compromising situations of this type. Moreover, this type of arrangement has been the subject of a "special fraud alert" from the Office of the Inspector General of the U. S. Department of Health and Human Services. One of the factors that the Inspector General looks to is "whether investors are chosen because they are in a position to make referrals." Under the prospectus for the Plantation General limited partnership, only medical staff can become limited partners and "physicians expected to make a large number of referrals may be offered greater investment opportunity in the joint venture than those anticipated to make fewer referrals." (Tr. 520) Moreover, "investors may be required to divest their ownership interest if they cease to practice in the service area, for example, if they move, become disabled, or retire." (Id) While it is understandable that the owner of the hospital may find the limited partnership to be an attractive means to bond physicians to its profit motivation, this set-up creates inherent conflicts of interest which have serious implications for quality of care. This innovation should not be condoned through certificate of need approval. Availability of health manpower and the extent to which the proposed services will be accessible to all residents of the District. Section 381.705(1)(h), Florida Statutes. An applicant must demonstrate that there is adequate health manpower to meet the staffing needs of the project. There is a current nursing shortage nationally, and recent graduates from nursing school do not posses the training necessary to perform in an open heart operating room or critical care after surgery. One of the means Plantation proposes to fill its nursing positions is to use agency nurses, nurses provided by pool services from temporary placement agencies. (Tr. 70, Plantation's proposed finding 31). While such nurses may be valuable in other parts of the hospital, these sort of temporary nurses should not be used in an open heart program. Hospitals in general and open heart surgery programs in particular suffer an acute shortage of qualified nursing staff. Florida Medical Center has found it necessary to establish its own training program because it cannot find adequately trained nurses in Southeast Florida, including Dade, Broward, and Palm Beach Counties. Even North Ridge Hospital, which has a reputation for high staff retention, has a nursing turn-over rate of 20 to 25%. When Delray Hospital in Palm Beach County opened its open heart surgery program its program was under substantial pressure because of its high nursing turn-over rate, its inability to find nurses to cover a 24 hour period of time and nurse "burn out" from excessive overtime. The Broward County nursing shortage contributes substantially to increased health care costs because of the marketing and monetary incentives related to recruiting and retaining nurses. New open heart programs must raid nurses from competing programs, which exerts a upward pressure on nurse salaries. If the Plantation program were to be approved, the existing open heart programs would probably lose nurses, which has an adverse impact on the present system. None of the foregoing should be construed as a reason to deny nurses the economic advantages which arise from a nursing shortage. The issue is whether, taken as a whole, the benefits of the application justifies the upward pressure on health care costs implicit in the approval of an additional program when there is additional capacity in current providers. On balance here, there is inadequate reason to do so. Immediate and long term financial feasibility. Section 381.705(1)(i), Florida Statutes. Many of the elements of financial feasibility are not in dispute. The parties have stipulated that Healthtrust, the parent corporation for Plantation General, has access to $600,000 and will make those funds available if this application is approved. They also stipulated that if one operating room and one pump are adequate and appropriate, the $300,000 in equipment cost shown in Table 3 of the application adequately covers necessary equipment costs; that the 2,229 gross square feet to be renovated, as shown in the line drawing in the application, is adequate for creating the room shown in the drawing,(i.e., one operating room, one recovery room, a pump room, an observation room, a sub-sterile storage area, a scrub area, and a nurses station), and the renovations can be accomplished for $299,970. The parties also stipulated that Plantation General's bad debt projections, policy adjustments and contractual adjustments contained in is pro forma are reasonable if the gross revenue projection is accurate. The salary projections per full- time equivalent found on Table 11 for staff are reasonable but the parties did not agree that the number of positions or the distribution of staff is appropriate. The perfusionist charge is reasonable, and the depreciation cost is correctly stated in the application. The projections of the percentage of utilization by payor class found in the application is reasonable. The areas of contention are the long and short term feasibility of the project based upon Plantation's projected charges, and the accuracy of Plantation's projected expenses. Plantation projects it will perform 184 open heart surgeries in its first year of operation and 312 in the second year. The anticipated average charges are $34,860 in the year beginning July, 1990 and $36,603 in the year beginning July, 1991. These charges were calculated by an outside consultant who has no control over the actual charges which the hospital may establish if the program is implemented. The average charge was predicated upon an examination of Florida Health Care Cost Containment Board data pertaining to the DRGs for open heart surgery reported by the five Broward open heart providers during the third quarter of 1986. The charges ranged from a low of $29,063 at North Ridge to a high of $39,208 at Hollywood Memorial. The projection of average charges is inherently imprecise, but is useful to analyze whether, if Plantation charged patients an amount within the range of the average actual charges within the district, the project would be financially feasible. Plantation does not guarantee that its charges will be no more than the average charges. Its total income will vary based upon the mix of cases and the types of patients it serves. Based on the anticipated charges, Plantation calculated the incremental cost associated with the project. The incremental revenue to the hospital (that is, the revenue generated by the facility with the open heart surgery program as opposed to revenue that will be realized without the program) should be $6,414,240 in the first year and as much as $11,420,136 in the second year. This calculation is necessary in order to determine whether costs would exceed the likely charges, which would clearly affect the financial feasibility of the project. Plantation projected that these costs and deductions from revenue would be $2,919,293 the first year and $5,286,554 in the second year. It is quite likely that Plantation would perform 184 surgeries during the first year and it is reasonable to assume it could achieve the projected 312 surgeries in the second year. Plantation's average charges as set forth in the application may be low. Plantation General's charges are, on balance, about 20% higher than the charges at North Ridge. This would mean that the average charge for Plantation General's first year of operation would be $42,708 rather than $34,860. It might have been better if Plantation General had developed a charge comparison taking into account the cost per adjusted admission by using the case mix index published by the Florida Health Care Cost Containment Board. The failure to use that adjustment is not that significant given the inherent "softness" in the projection of patient charges. Plantation General's projected charges found in Finding 42 are reasonable. What is much more significant is the questionable nature of Plantation General's expenses. The Intervenors have argued that the applicant's cost projections fail to include costs associated with non-revenue producing Departments, such as pharmacy, laboratory, X-ray, nuclear medicine, respiratory therapy, EKG, cardiac catheterization and pathology, dietary and medical records. In essence, the Intervenors claim that the only expenses which are acknowledged by Plantation General are incremental costs from instituting the open heart program, but not the true cost. Plantation General presented the testimony of Mr. Tharpe, who prepared the cost analysis. He testified that he included the cost of supplies, laboratory and all other ancillary areas that provide services to patients by taking the projected income from the open heart surgery program, and comparing it to the projected income of the entire hospital. The actual 1988 hospital revenues were inflated by 5% a year to estimate the hospital's 1990-91 revenue. Open heart revenues would then constitute about 7% of total hospital revenues. He used this percentage to estimate the cost that would be associated with using non-revenue generating departments. This 7% ratio was not applied to fixed overhead cost such as the mortgage costs or the cost of hospital administration, because those costs would be incurred whether or not Plantation operated an open heart program. Neither did he apply the 7% ratio to other cost centers such as the obstetrics or pediatrics departments. In this way, Mr. Tharpe claimed he allocated the cost for all routine and ancillary areas which would provide services to open heart patients. This analysis is unpersuasive. Followed it to its logical conclusion, no new program would ever have to account for its share of the ongoing cost of the hospital imbedded in fixed overhead, such as mortgage, administration, power, or interest charges. It provides a convenient excuse for the hospital to understate expenses and thereby make a new service look more profitable, and therefore more likely to be financially viable in both the short and long terms. A better way to perform cost analysis is to use a step-down cost analysis. This procedure allocates overhead of non-revenue departments to revenue departments to get fully costed figures for delivering services within each hospital department. This step-down cost analysis is a generally accepted accounting procedure and is one required by Medicare. The statistical basis of step-down cost analysis avoids the inherent oversimplification in the assumption that costs are linear, i.e., that all costs and charges have the same relationship to each other within the hospital. Without necessarily accepting Mr. Newman's projection that the fully allocated cost of open heart surgery at Plantation General would be $22,800 per case and not $12,800 per case, the is persuasive that the expense projections of Plantation General are unrealistic, and understated. It is not possible, based on the record made, to determine what the actual expense would be. Due to this failure of proof, it is therefore impossible to determine whether the project is feasible in the long or short term. While open heart surgery is often a very profitable service, in the absence of persuasive evidence on the cost of providing open heart surgery services, it would be inappropriate to assume that the project would be sufficiently profitable that it would be financially feasible in the short or long terms. Needs and circumstances of facilities providing a substantial portion of their services to persons not residing in the service area. Section 381.705(1)(k), Florida Statutes. The prehearing stipulation states that this criteria is an issue, but it really is not. Although other hospitals such as North Ridge and Florida Medical Center provide services to patients from Palm Beach County, the effect of the project on them is not relevant under this criteria. This criteria focuses on the effect of the establishment of a new service at Plantation General on other providers located outside District X, Broward County. There is no proof that it will have any such effect. Probable impact of the proposed project on the cost of providing the service, including the effect on competition. Section 381.705(1)(l), Florida Statutes. The introduction of another provider of open heart surgery will provide the potential for additional price and non-price competition among providers of open heart surgery services. The major purchasers are really not the individuals who have surgery, but the managed care plans, such as HMOs and PPOs, which negotiate with hospitals on behalf of their subscribers. Plantation General currently has contracts with about 25 managed care plans and receives about 30% of its revenue from those plans. This is an indication that the market regards Plantation as a competitive provider. On the other hand, Florida Medical Center, which is its closest competitor geographically, is not actively seeking managed care contracts and has not added any for the last eighteen months. The addition of Plantation General would be consistent with the statutory directive to foster increased competition among health care providers. The Hearing Officer also accepts Dr. Zaretsky's testimony that even if all 184 surgeries which Plantation General projects it will perform during its first year were drawn from Florida Medical Center or, in the alternative, from North Ridge, neither hospital would suffer such a significant loss of revenue which should weigh against the approval of Plantation General's open heart surgery program. The analysis does not end there, however. Plantation General is likely to enter the market for open heart surgery with a substantial market share, a share equal to the number of surgeries it now refers out to existing providers. In that case, Florida Medical Center's number of open heart surgeries will fall below the 350 per year quality standard during both the first and second year of Plantation General's new program. Florida Medical Center will only stay above the 350 surgery standard if it increases its market share substantially, or if Plantation fails to meet its own market share projections. Both are unlikely. Based upon the Department's Rule 10- 5.011(1)(f)11b: No additional open heart surgery programs shall be approved which would reduce the volume of exis heart surgery facilities below 350 o procedures annually for adults . . . . Plantation General's program therefore conflicts with this portion of the Department's rule. Costs and methods of construction. Section 381.705(m), Florida Statutes. Based on the stipulation of the parties, the proposed renovations represent conventional construction methods that are not unreasonable. Neither the cost nor the methods of construction for the renovation of the 2,229 gross square feet have been put in issue. The costs are, however, understated to the extent that they do not provide for adequate construction, i.e., the need for a second operating room. See, Findings 31 and 32, above. Applicants past and proposed provision of services to Medicaid and indigents clients. Section 381.705(1)(n), Florida Statutes. According to the stipulation of the parties, the extent of Plantation General's commitment to make open heart surgery available to Medicaid or medically indigent neither enhances nor detracts from its project. (Stipulation at paragraph 25). Less costly, more efficient alternatives. Section 381.705(2)(a), Florida Statutes. There is no alternative to open heart surgery when it is medically indicated. It is more efficient to deny Plantation General's application and let existing providers absorb whatever increase there may be in the population seeking open heart surgeries. This is especially significant because the proposal would drop Florida Medical Center below the 350 surgeries per year and because Broward General is not currently operating with an existing current volume of 350 adult open heart surgeries per year. See, Rule 10- 5.011(1)(f)11.a.(I), b., Florida Administrative Code. Appropriateness and the efficiency of the existing facilities. Section 381.795(2)(b), Florida Statutes. The existing open heart surgery programs in Broward County have the capacity to perform additional open heart surgeries. See, Findings 20-22 above. The expansion of those facilities, especially in view of Broward General's failure to meet the 350 surgery minimum volume requirement of Rule 10- 5.011(f)11.a.(I), Florida Administrative Code, weighs against approval of the application. The denial of Plantation's application may have an effect on Broward General's number of surgeries, for a limitation on the number of providers should have the effect of directing more surgeries to Broward General. This assumption is inherent in the rule. Alternative to new construction. Section 381.705(2)(c), Florida Statutes. As with the preceding paragraph, the expansion of existing services such as that of Broward General is an alternative to the capital expenditures and related labor costs incident to the opening of an open heart surgery program at Plantation General. Problems facing patients in the absence of this proposal Section 381.705(2)(d), Florida Statutes. There is no evidence of any problem of geographic access, and no evidence that the opening of this program will improve, in any substantial degree, financial access to underserved populations, nor is there evidence of a need for additional programs because the existing programs are at capacity. That, from time to time, Florida Medical Center is unable to admit patients who doctors at Plantation General would like to transfer there does not show that there is a problem obtaining open heart surgery in the service district. Florida Medical Center is not the only other provider of open heart surgery. The problem which patients having catheterization at Plantation General face if they need open heart surgery is inherent in Plantation General's decision to establish the cardiac catheterization program when it did not also have approval for open heart surgery, and cannot be used to bootstrap the present application. Rule Criteria for Evaluating Certificate of Need Applications. Need. Rule 10-5.011(1)(f)2, 8, and 11, Florida Administrative Code. The rule on open heart surgery states, in part that: The department will not normally approve applications for new open heart surgery programs unless the conditions of sub-paragraphs 8. and 11. below, are met. There is no persuasive proof that the situation in Broward County is abnormal, due to an unavailability or inaccessibility to open heart surgery services. There is no over-crowding at existing providers, or some quality of care problem with an existing provider which causes potential patients to shun a program. Neither is there a monopoly in the district which should be broken up to provide consumers of health care choice and generate competition. The only circumstance which might be characterized as abnormal is the recognition that Broward General has had its program for a substantial time but has not yet achieved an annual volume of 200 open heart procedures, the volume which is the ordinary minimum for a quality program. See Rule 10-5.011(1)(f)5d., Florida Administrative Code . There is no testimony that the care offered by Broward General is inadequate, or that it is somehow inaccessible, which accounts for the low number of procedures. The rule provides a mathematical calculation for the need for additional open heart providers in a service area. Rule 10-5.011(1)(f)8., Florida Administrative Code. It calculates a base period: The twelve-month period beginning 14 months prior to the filing of the hospital's letter of intent. This is the period July 1, 1987, through June 30, 1988. During the base period, 2,146 open heart surgeries were performed in Broward County. (See, Finding 14.) The population of the county at the mid-point of this period, January 1, 1988, was 1,198,243 persons. This results in a use rate in Broward County of 179.1 open heart surgeries per 100,000 population. Based upon an anticipated opening of services in July 1990, the county population at that time is projected to be 1,247,226 persons. Multiplying the use rate by the projected population yields a need for 2,233 open heart surgeries in Broward County in 1990. This number is then divided by 350 procedures per facility to assess the number of facilities needed; there is a need for 6.4 open heart programs and there are presently five open heart providers. According to the formula in sub- subparagraph 8 one additional provider may be approved. This need assessment, however, is not controlling. Other portions of the rule place limits on the need for additional programs, even when the need calculation in subparagraph 8 supports adding a provider. Rule 10-5.011(1)(f)11, Florida Administrative Code, states in pertinent part: There shall be no additional open heart surgery programs established unless: The service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year..., b. No additional open heart surgery program shall be approved which would reduce the volume of open heart surgery facilities below 350 open heart procedures annually.... The text of the rule requires "each" provider to operate at 350 cases per year before another program is approved. There is no mention of any averaging of the total number of cases under sub-subparagraph 11a in determining whether the requirement is met. Averaging the number of open heart surgeries in each program makes little sense in the context of the entire rule. There would be no need for both sub-subparagraphs 11a(I) and b, for if there is a need in the district, each existing and approved open heart surgery program in a district must be handling 350 procedures on average. The 350 surgery standard in the rule was adopted based upon the National Health Planning Guidelines issued in March, 1978. These guidelines approved recommendations of the Intersociety Commission on Heath Disease Resources, which state: In order to prevent duplication of costly resources which are not fully utilized, the opening of new units should be contingent upon existing units operating and continuing to operate at a level of least 350 procedures per year. Those Guidelines also state that additional open heart surgery services should not be permitted unless existing services are operating at, and will continue to operate at a minimum of 350 surgeries per year. Sub-paragraph 11 of the rule is clear; each provider must operate at a level of 350 cases annually before another applicant will be approved. Plantation General's application fails in two respects: Broward General is currently providing less that 350 surgeries per year, and if Plantation is approved, both Broward General and Florida Medical Center will fall below the 350 standard. Plantation General has failed to prove that any circumstances at Broward General are so abnormal that the "not normal" fail-safe provision of Rule 10-5.011(f)2., Florida Administrative Code, should come into play. Mr. Nelson, the health planner for Plantation General attempted to show that the opening of the program at Plantation should not cause the annual number of surgeries done at Florida Medical Center to fall below 350. That testimony was not as credible as the testimony of Ms. Lamb, or especially the testimony of Dr. Luke. Mr. Nelson's analysis assumed that the open heart surgery use rate would continue to increase at the same rate that it had increased in the past. This is not a reasonable assumption. It is likely that the use rate in Broward County will decline, not increase, for a number of reasons, including the prevention of heart disease through wellness trends, the increased use of alternative therapy such as angioplasties, and the affect that utilization reviews and cost containment measures have had on the number of open heart surgery. Moreover, Broward County has a higher use rate than the state average, which is also substantially higher than the use rate in Palm Beach County, although the populations of both counties are similar. The primary reason for Broward's high use rate has been that until recently Palm Beach County residents had to come to Broward County hospitals for open heart surgery. The opening of open heart surgery programs in Palm Beach County will continue to depress the Broward County use rate. Taken as a whole, the need methodology found in the rule, consisting of the need determination in Rule 10-5.011(1)(f)8, and the further cutoff provisions found in sub-subparagraphs 11a and b show that there is no need for an additional open heart surgery program in Broward County. Service availability. Rule 10-5.011(1)(f)3, Florida Administrative Code. By use of a single operating room, Plantation General's proposed program is not capable of providing 500 open heart operations per year, as required by Rule 10-5.011(1)(f)3d, Florida Administrative Code. Theoretically the program could serve two cases per day, five days a week for 52 weeks a year, and thus handle a total of 520 cases. This ignores, however, the necessity to leave the single operating room available for open heart backup when angioplasty procedures are going on. The hospital projects and should achieve a substantial volume of angioplasty if the open heart program is approved. (See, Finding 26, above.) Even Plantation General, in its proposed recommended order, acknowledged "that it is most unlikely that Plantation could actually do 500 cases per year in a one operating room open heart program." (Proposed Finding 66.) Plantation General argues, however, that it is only necessary that the room have "the capacity to do that many [500] cases." Id. If Plantation had proposed to use the room solely for open heart surgeries, without also having to make its operating room available for its projected volume of angioplasty, Plantation General's argument might prevail. Because Plantation General does propose a substantial volume of angioplasties, the backup time necessary for those cases must be taken into account. The proposal it has made does not meet the rule requirement that its program be capable of providing 500 surgeries per year. Service accessibility. Rule 10-5.011(1)(f)4, Florida Administrative Code. The rule requires that "open heart surgery shall be available to all person in need." Rule 10-5.011(1)(f)4d, Florida Administrative Code. The level of commitment to indigent care in Plantation General's application neither enhances nor detracts from its application. This has been stipulated by all parties. Travel time for surgery is not a problem in Broward County, and the service would meet the requirement for hours of operation. Rule 10- 5.011(1)(f)4a, and b, Florida Administrative Code. The single operating room with a single heart-lung oxygenator pump means that emergency procedures cannot be done within a maximum of 2 hours waiting time. An open heart operation takes more than 5 hours, an angioplasty takes 3 hours or more. Once the operating suite is committed to one of those procedures, no emergency procedure can be performed within 2 hours. The proposal fails to meet Rule 10-5.011(1)(f)4c, Florida Administrative Code. Service quality. Rule 10-5.011(1)(f)5, Florida Administrative Code. The application meets the requirements of Rule 10-5.011(1)(f)5a that the hospital be accredited by the Joint Commission on the Accreditation of Hospitals. It has not met the requirement of Rule 10-5.011(1)(f)5b that "any applicant proposing to establish an open heart surgery program must document that adequate numbers of properly trained personnel will be available to perform in the following capacities...." The application only states that the necessary personnel will be available (Application, at 21-22), but does not reveal how Plantation General proposes to staff its program, especially with experienced nurses. Similarly, another subportion of the rule on service quality requires that "any hospital proposing or operating an open heart surgical program shall have a written plan specifying projected caseloads and projected space, support, equipment and supply needs for the open heart surgical procedures and patients." Rule 10-5.011(1)(f)5e, Florida Administrative Code. No such plan was included in its application; instead Planation proposes to draft its plan following the approval of its certificate of need. (Application at 22). This is improper, for the adequacy of the plan cannot be analyzed as the application is being considered. This is especially significant in terms of a plan for operating the program with a single heart-lung oxygenator pump. How the hospital expects to operate the program with no second pump for emergencies, or for use while the first pump is under ordinary maintenance is a significant deficiency. The application therefore fails to meet this portion of the rule. Cost effectiveness. Rule 10-5.011(1)(f)6, Florida Administrative Code. It is likely that the charges made by Plantation General will be in line with those from other competitive providers of open heart surgery in the Broward County area. Market forces would prevent Plantation from charging more than the going rate. There is insufficient evidence, based on Plantation General's present charge structure, to find that its charges would be appreciably below the cost of other providers. There is no undertaking in its application to charge no more than the $34,860 per case found in Table 8 of its application. (Application page 71). The application meets Rule 10- 5.011(1)(f)6b, Florida Administrative Code. Consistency with state and local health plans. Rule 10-5.011(1)(f)7, Florida Administrative Code. The plan is consistent with the state and local health plans. See, Finding 16, above.
Recommendation It is RECOMMENDED that the application of Plantation General for certificate of need No. 5736 to implement an open heart surgery program in HRS District X be denied. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of June, 1990. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 1990. APPENDIX Rulings on findings proposed by the Petitioner, Plantation General Hospital. 1. Adopted in Finding of Fact 1. 2. Adopted in Finding of Fact 3. 3. Adopted in Finding of Fact 4. 4. Adopted in Finding of Fact 2. 5. Adopted in Finding of Fact 7. 6. Adopted in Finding of Fact 8. 7. Adopted in Finding of Fact 9. 8. Adopted in Finding of Fact 12. 9. Adopted in Finding of Fact 14, with a correction for the number of procedures at Memorial Hospital. To the extent necessary, adopted in Findings of Fact 12 and 13. Adopted in Finding of Fact 15. Adopted in Finding of Fact 67. Adopted in Finding of Fact 15. Rejected as subordinate to other findings. Adopted in Finding of Fact 16. Adopted in Finding of Fact 17. Rejected for the reasons stated in Findings of Fact 18 and 19. Discussed in Findings of Fact 20 through 23. Rejected because there is no service availability problem and the economic access of Plantation would add as minimal. Generally adopted in Finding of Fact 24. Rejected as argument. Rejected for the reasons stated in Finding of Fact 32. Rejected, the proposal to have only one heart-lung pump is a serious deficiency, especially due to the failure to have developed as part of the application the written plan required by Rule 10-5.011(1)(f)5d, Florida Administrative Code. To the extent necessary, discussed in Finding of Fact 34. Rejected for the reasons stated in Findings of Fact 37 and 38. Rejected for the reasons stated in Findings of Fact 37 and 38. The testimony of Ms. Levine that staff could be hired without substantial difficulty is rejected. Rejected as unnecessary. Rejected as unnecessary, the prior application is not at issue. It is true and no competing service would be required to shut down its operations do to the inability to hire skilled nurses. Otherwise rejected for the reasons found in Findings of Fact 37 and 38. Rejected, the salaries are reasonable, but the new program is likely to raid other programs and cause an upward pressure on salaries as explained in Finding of Fact 39. To the extent necessary, discussed in Finding of Fact 37, especially as related to hiring recent nursing graduates or using agency nurses. Rejected as unnecessary, see Finding of Fact 39. Adopted in Finding of Fact 15. Rejected as unnecessary. Sentences 1 and 2 adopted in Finding of Fact 40. Dr. Lukes' testimony with respect to intending to spend 5 million dollars on the open heart program is not persuasive. Adopted in Finding of Fact 40. (As amended), generally adopted in Findings of Fact 42 and 44. The 184 surgeries is adopted in Finding of Fact 42; Plantation's evidence with respect to likely charges is accepted in Findings of Fact 42 and 46. The Intervenors' argument has been accepted, see Findings of Fact 47 and 48. Rejected for the reasons stated in Finding of Fact 48. Rejected as unnecessary. Rejected for the reasons stated in Finding of Fact 48. Rejected for the reasons stated in Finding of Fact 48. Discussed in Finding of Fact 48, but rejected. Rejected as unnecessary. Rejected because the question is not whether the intervenors proved that the proposed program is not financially feasible. The question is whether Plantation General proved that the program is financially feasible, and its proof is not persuasive. Rejected for the reasons stated in Finding of Fact 49. Accepted in Finding of Fact 50. Adopted in Finding of Fact 50. Rejected as unnecessary. Adopted in Finding of Fact 50. Generally accepted in Finding of Fact 50. Rejected; the testimony of Mr. Knapp has not been accepted on Doctor Zaretsky's cost analysis. Rejected, see Finding of Fact 35. Rejected as unnecessary. Adopted in Finding of Fact 52. To the extent necessary, covered in Finding of Fact 53. Sentence 1, adopted in Finding of Fact 54. The remainder rejected as unnecessary. Discussed in Finding of Fact 54. Discussed in Findings of Fact 20 through 22 and 55 and 56. Adopted in Finding of Fact 57. Rejected because there is insufficient proof patients would face serious problems in obtaining open heart surgery if Plantation's program is not approved. See Finding of Fact 19. Not an issue. Rejected as unnecessary. Rejected as unnecessary. Rejected for the reasons stated in Finding of Fact 64. Adopted in Finding of Fact 17. Rejected for the reasons stated in Finding of Fact 66. Rejected as cumulative. Rejected for the reasons stated in Finding of Fact 67, although Plantation would exceed 200 cases per year within 3 years of instituting service. Rejected, see Findings of Fact 20-23. Adopted as modified in Finding of Fact 68. Adopted in Finding of Fact 69. Adopted in Finding of Fact 60. Adopted in Finding of Fact 14, final sentence rejected as unnecessary. The averaging technique is rejected, see Finding of Fact 61. Rejected for the reasons stated in Finding of Fact It is not clear what factors were used by Hollywood Memorial to justify its open heart program. It is a major indigent care provider, which Plantation General is not. Rejected, see Findings of Fact 56 and 63. Rejected for the reasons stated in Finding of Fact 63. Rejected for the reasons stated in Finding of Fact Dr. Luke's testimony about the reduction in use rates was persuasive. Rejected as unnecessary. Rejected, it is not likely that the use rate in Broward County will continue to grow, or that a use rate for western Broward County should be separately calculated or analyzed. Rejected for the reasons stated in Finding of Fact 63. Rejected for the reasons stated in Finding of Fact 63. Rejected because the drop below 350 is significant according to the text of the rule and is not entitled to more than "slight" weight; other factors also weigh against the application. Rejected as unnecessary. Rulings of findings proposed by North Ridge General Hospital. 1-3. Rejected as unnecessary. Adopted in Finding of Fact 1. Adopted in Finding of Fact 1. Adopted in Finding of Fact 1. Adopted throughout the Findings of Fact. Adopted in the preliminary statement. Rejected as unnecessary. Rejected as a restatement of the rule. Rejected as a restatement of the rule. Rejected as a restatement of the rule. Rejected as a conclusion of law. Adopted in Finding of Fact 60. Adopted in Finding of Fact 60. Rejected as a statement of argument. Rejected as a statement of argument.' Rejected as unnecessary, see also Finding of Fact 63. Rejected as unnecessary. Rejected as inconsistent with the Department's current view of law. Rejected as unnecessary. Adopted in Finding of Fact 62. Rejected as unnecessary. The projection of 184 cases is adopted in Finding of Fact 42. The use rate is discussed in Finding of Fact 63. Rejected as unnecessary. Rejected as unnecessary, see Finding of Fact 63. The testimony of Dr. Luke on the point was the most persuasive. Rejected as unnecessary. Rejected, see Finding of Fact 60. Rejected as unnecessary. Discussed in Finding of Fact 63. 31-56. Generally discussed in Finding of Fact 60 as it relates to the proper calculation of need under the rule. See also Finding of Fact 51 concerning Florida Medical Center falling below 350 surgeries. Discussed in Finding of Fact 15. Discussed in Finding of Fact 12. Rejected as unnecessary. Discussed in Finding of Fact 64. Generally adopted in Findings of Fact 20 through 22. Adopted in Findings of Fact 10 and 23. Adopted in Finding of Fact 21. Adopted in Finding of Fact 22. Adopted in Finding of Fact 23. Stipulated by the parties. Adopted in Finding of Fact 17. The quality of care was stipulated by the parties. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Adopted in Finding of Fact 3. 75-90. Rejected as unnecessary. The question of demand is resolved in Finding of Fact 19. While cardiologists at the hospital may wish to provide angioplasty, which requires open heart surgery, that desire is not relevant. See Finding of Fact 18. Similarly, the testimony of Dr. Honderick that a facility which offers cardiac catheterization should have the ability to render surgical intervention in case of a complication is not relevant. Plantation General knew when it establishes a catheterization lab, without open heart approval, that such problems would occur. The hospital cannot bootstrap these problems into a justification for open heart surgery. They were problems that the hospital knowingly assumed. 91-98. Addressed in Findings of Fact 26 through 31. 99 Adopted in Finding of Fact 32. 100. Rejected as unnecessary. 101. Adopted in Finding of Fact 33. 102. Adopted in Finding of Fact 25. 103. Adopted in Finding of Fact 67. 104. Rejected as unnecessary. 105. Addressed in Finding of Fact 66. 106. Addressed in Findings of Fact 37 and 38. 107. Addressed in Finding of Fact 31. 108-111. Adopted in Finding of Fact 38. 112. Adopted as modified in Finding of Fact 37. 113. Adopted as modified in Finding of Fact 37. 114. Adopted in Finding of Fact 42 and 43. 115. Adopted in Finding of Fact 42 and 43. 116. Adopted in Finding of Fact 44. 117. Adopted in Finding of Fact 44. 118. Rejected as unnecessary. 119. Rejected as unnecessary. 120. Adopted as modified in Finding of Fact 46. 121-131. Discussed in Findings of Fact 46 and 50. 132. Adopted in Finding of Fact 59. 133. Discussed in Finding of Fact 59. 134. Discussed in Finding of Fact 59. 135. Rejected as unnecessary. 136. Addressed in Finding of Fact 59. Rulings on findings proposed by Florida Medical Center. Covered in preliminary statement. Covered in Finding of Fact 12. Covered in Finding of Fact 1 Discussed in Finding of Fact 12. Rejected as unnecessary. Adopted in Findings of Fact 17 and 18. To the extent appropriate, discussed in Findings of Fact 19 and 21. Covered in Finding of Fact 19. Adopted in Finding of Fact 23. 10-13. Discussed, to the extent appropriate, in Finding of Fact 46. Rejected because although true, the magnitude of the income resulting from those DRGs was not explained sufficiently. The matter of charges is more significant in determining financial feasibility than efficiency here. Implicit in Findings of Fact 44 and 46. Implicit in Finding of Fact 23. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17, but the second sentence is rejected as unnecessary in view of the stipulation. Generally adopted in Findings of Fact 14, 32 and 64. Adopted in Findings of Fact 18 and 23. Implicit in Finding of Fact 23. Adopted in Finding of Fact 23. Adopted in Findings of Fact 6 and 35. Adopted in Finding of Fact 35. Adopted in Finding of Fact 35. Adopted in Finding of Fact 33. Rejected as unnecessary. Adopted in Findings of Fact 37 and 38. Adopted in Finding of Fact 48. Adopted in Finding of Fact 42. Rejected as unnecessary. The legal expense would be minimal. Adopted in Finding of Fact 48. Generally adopted in Finding of Fact 48. Adopted in Finding of Fact 48. Discussed in Finding of Fact 48. Adopted in Finding of Fact 48. Rejected as unnecessary. Adopted in Finding of Fact 51. Subordinate to Finding of Fact 63. Adopted in Finding of Fact 51. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. It is stipulated that Florida Medical Center has standing. Rejected as unnecessary. Adopted in Finding of Fact 17. Addressed in Finding of Fact 58. Adopted in Finding of Fact 49. Adopted in Finding of Fact 49. Adopted in Finding of Fact 49. Discussed in Finding of Fact 59. Discussed in Finding of Fact 64. Adopted in Finding of Fact 17. Adopted in Finding of Fact 67. Adopted in Finding of Fact 67. Discussed in Finding of Fact 60. The division by 350 is implicit in the structure of the rule to determine the number of programs. The use rate proposed by Mr. Nelson has been rejected. The appropriate calculation is found at Finding of Fact 60. Adopted in Finding of Fact 63. Adopted in Finding of Fact 63. Adopted in Finding of Fact 63. Adopted in Finding of Fact 60. Adopted in Finding of Fact 61. Rejected as irrelevant. Adopted in Findings of Fact 60 and 63. COPIES FURNISHED: Jay Adams, Esquire 1519 Big Sky Way Tallahassee, FL 32301 Richard C. Bellak, Esquire FOWLER, WHITE, GILLEN, BOGGS, VILLAREAL & BANKER, P.A. 101 North Monroe Street Suite 910 Tallahassee, FL 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, FL 32308 Eric B. Tilton, Esquire 214B East Virginia Street Tallahassee, FL 32301 Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LAFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, FL 32302 Jack M. Skelding, Esquire PARKER, SKELDING, LABASKY & CORRY 318 North Monroe Street Post Office Box 669 Tallahassee, FL 32302 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Petitioner, St. Mary's, and Intervenor, BRCH contend that Rule 10- 5.011(1)(f), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority for the reasons more specifically set forth in St. Mary's Amended Petition for Administrative Determination of the Invalidity of a Rule. Respondent, HRS, and Intervenors, JFK, PBGMC, and Florida Hospital, contend that Rule 10-5.011(1)(f), Florida Administrative Code, constitutes a valid exercise of delegated legislative authority. BACKGROUND AND PROCEDURE Petitioner, St. Mary's, presented the oral testimony of Philip Rond, W. Eugene Nelson-Michael L. Schwartz, and James McElreath. Petitioner submitted 9 exhibits at formal hearing, 8 of which were admitted in evidence. Pursuant to a stipulation among the parties, St. Mary's subsequently had admitted an after- filed deposition of Frank R. Sloan. Intervenor BRCH had admitted in evidence 1 exhibit but called no witnesses. Respondent HRS presented the oral testimony of Elfie Stamm and Reid Jaffe. Respondent HRS had 4 exhibits admitted in evidence. At formal hearing, Intervenors JFK and PBGMC presented the oral testimony of Mark Richardson which was also adopted by HRS as its own. Pursuant to a stipulation among the parties, JFK and PBGMC subsequently had admitted an after- filed deposition of Harold B. Luft which was also adopted by HRS. Official recognition of JFK's Petition in DOAH Case No. 86-4368 was granted. PBGMC had 1 exhibit admitted in evidence at formal hearing. Intervenor Florida Hospital, submitted no exhibits and adopted the testimony of HRS' witnesses. The Hearing Officer received two documents into evidence as Hearing Officer Exhibits, the Prehearing Stipulation between the parties in this proceeding and a copy of Rule 10-5.011(1)(f), Florida Administrative Code. Official recognition was taken of the Final Order dated July 27, 1987, in St. Francis Careunit v. Department of Health and Rehabilitative Services, et al., DOAH Case No. 84-2918. Subsequent to the filing of the transcript herein, and pursuant to time waivers and stipulations among the parties, St. Mary's and BRCH filed their joint proposed final order; JFK and PBGMC filed their joint proposed final order; and HRS and Florida Hospital filed individual respective proposed final orders. The parties' respective proposed findings of fact are ruled upon in the Appendix to this Final Order, pursuant to Section 120.59(2), Florida Statutes. Additionally HRS' Motion to Strike Portions of the Joint Proposed Findings of Fact of St. Mary's and Intervenor BRCH, and JFK's Motion to Strike are ruled upon within this Final Order and its Appendix.
Findings Of Fact St. Mary's is an existing general acute care hospital in HRS Service District 9, West Palm Beach, Florida. St. Mary's has pending before the Division of Administrative Hearings DOAH Case No. 86-4368 concerning its certificate of need (CON) application for an open heart surgery program at St. Mary's which was preliminarily denied by HRS (CON Action No. 4551). Rule 10- 5.011(1)(f), Florida Administrative Code, was utilized by HRS in evaluating St. Mary's CON application and was relied upon by HRS in its decision to deny CON Action No. 4551. Pursuant to that HRS review, there is no numerical need for the St. Mary's proposed program, based upon HRS' application of the quantitative need methodology contained in the Rule. St. Mary's is substantially affected by Rule 10-5.011(1)(f), Florida Administrative Code, and consequently has standing to seek administrative determination of the validity of said rule through this present cause. BRCH is an existing general acute care hospital in HRS Service District 9, Boca Raton Florida. BRCH has pending before HRS a CON application for an open heart surgery program at BRCH (CON Application No. 5194) which is currently being reviewed by HRS in accordance with Rule 10-5.011(1)(f), Florida Administrative Code. BRCH is substantially affected by Rule 10-5.011(1)(f), Florida Administrative Code, and consequently has standing to seek administrative determination of the validity of said rule through this present cause. JFK is an existing general acute care hospital in HRS Service District 9, Lake Worth, Florida, which has in place its open heart surgery program. JFK's open heart surgery program opened and closed in 1986. On the date of formal hearing, JFK had scheduled to reopen its open heart surgery program in August, 1987. The program is subject to regulation pursuant to Sections 381.493-499, Florida Statutes, (1985), and regulations promulgated thereunder, including Rule 10-5.011(1)(f), Florida Administrative Code. JFK is an Intervenor in opposition to St. Mary's application in DOAH Case No. 86-4368 alleging that due to the service area and medical staff overlaps between St. Mary's and JFK, there will be adverse staffing, economic, availability, and quality impacts upon JFK. PBGMC is an existing general acute care hospital in HRS Service District 9, Palm Beach Gardens, Florida, which has in place an open heart surgery program. Its program is likewise subject to regulation pursuant to Sections 381.493-499, Florida Statutes (1985), and regulations promulgated thereunder, including Rule 10-5.011(1)(f), Florida Administrative Code. PBGMC is an Intervenor in opposition to St. Mary's application in DOAH Case No. 86- 4368 alleging that due to the service area and medical staff overlaps between St. Mary's and PBGMC, there will be adverse staffing, economic, availability and quality impacts upon PBGMC. Florida Hospital is an existing general acute care hospital in Service District 7, Orlando Florida, which has in place an open heart surgery program. It is subject to regulation pursuant to Sections 381.493-499, Florida Statutes (1985), and regulations promulgated thereunder, including Section 10- 5.011(1)(f), Florida Administrative Code. It may be inferred that a determination of invalidity of the Rule wall impact upon Florida Hospital if, as a result thereof CONs are granted for other open heart surgery programs in that District, but there is no direct evidence to that effect. No direct threat of revocation of Florida Hospital's existing CON or of economic or other impact of this rule challenge upon Florida Hospital was demonstrated by Florida Hospital at formal hearing. Respondent, HRS, is responsible for the administration of Sections 381.493-499, Florida Statutes, (the CON statute) and Chapter 10-5, Florida Administrative Code, (the CON rules). The initial development of the Rule was undertaken in 1982 and 1983 in a manner consistent with HRS internal policy. HRS reviewed the relevant literature relating to open heart surgery programs and services. Included among the literature reviewed were the National Guidelines for Health Planning (National Guidelines or Guidelines) and the standards for review of applications for certificates of need (CON) for open heart surgery services proposed by several Health Systems Agencies. At the time those standards were developed, the Health Systems Agencies were responsible for the first level of review in the state certificate of need process. Originally, the companion to the open-heart surgery rule, was Rule 10- 5.011(15), now codified as Rule 10-5.011(1)(e), Florida Administrative Code, which rule sets forth criteria for cardiac catheterization lab CON applications. Considerably more emphasis was accorded the development of the companion rule initially, but even expert witnesses for Petitioner's view acknowledge that the rule promulgation process relative to the adoption of the open heart surgery rule was thorough, rational, and essentially non-remarkable in the scope of promulgation of numerous CON rules drafted and implemented for the first time during a period in which HRS was also developing other rules dealing with a broad range of services and facilities to comply with new legislation eliminating Health Systems Agencies and requiring HRS to adopt uniform methodologies to be used in the CON program. Subsequent to its review of the literature, HRS formed a work group to assist in the development of the Rule. HRS prepared a draft of the proposed Ruled which was sent to over fifty experts in the field of cardiology. HRS received extensive comments on the draft rule. The final proposed Rule was published in the Florida Administrative Weekly. A public hearing on the proposed Rule was held in December, 1982, during which extensive public comment was received. The public comments were reviewed by and discussed among the HRS' health planning staff and administration. Upon consideration of all the input received, the final draft of the initial rule abandoned a proposal to rely on 1979 utilization data and substituted 1981 data. Additionally, provision was made to allow for consideration within the Rule's need formula of approved, but not yet operational, open heart surgery programs. The Rule was then filed for adoption and went into effect February 14, 1983. Because it was deemed prudent, and because the National Guidelines provided for it, HRS intended, at the time the initial open heart surgery rule was promulgated, to revisit the components of the Rule every 2-3 years. The Rule was next amended in 1986. At that time, in response to public comment, "Uc" of Subparagraph 8 of the Rule, which prescribes the base period to be used in the calculation of a service area use rate, was substantially revised. In its initial form, element "Uc" was based on the 1981 service area actual use rate. As amended, "Uc" measures the actual use rate in the service area for a 12 month period beginning 14 months prior to the letter of intent deadline for the batching cycle at issue, or the most recent use rate available to HRS. There have been no other substantial amendments which impinge upon the instant Rule challenge. Among other allegations, Petitioner asserts that because the Rule is silent as to which or however many exceptional circumstances would have to exist in order to justify approval of a CON application for an open heart surgery program in the absence of numerical needs the Rule is arbitrary and capricious. The evidence and applicable case law do not support such a premise. The Rule provides that HRS will consider applications in the context of applicable statutory and rule criteria. See 10-5.011(1)(f)2. The Rule further provides that HRS will "not normally" approve applications for new open heart surgery programs unless the conditions of subparagraphs 8 and 11 of the Rule are met. Also 10-5.011(1)(f)2. The very nature of "not normal" circumstances is that all possible "not normal" circumstances cannot be enumerated within a rule because in the attempt, some exceptionalities would inevitably be excluded. Of the four applications proposing new open heart surgery programs which have been approved in the recent past, three were approved under "not normal" circumstances, that is, where one or both provisions of Subparagraphs 8 and 11 were not met. The applicable state agency action reports (SAARS) which reflect HRS' preliminary position on CON applications, demonstrate that HRS routinely considers all relevant statutory and regulatory criteria in its review of open heart surgery program CON applications. There is no competent substantial evidence to show that HRS' evaluation of applications proposing new open heart surgery programs are prohibited by the Rule from entailing a balanced consideration of the statutory and regulatory criteria relevant to CON review. As a corollary of the foregoing allegation, it is alleged that because the Rule does not specifically address what has come to be known in CON practice as "the in-migration/out-migration" phenomenon, while at least one other CON rule does specifically address this phenomenon, a balanced consideration of all statutory criteria is frustrated, thereby resulting in understating the need for open heart surgery programs in one District/service area while enabling unnecessary, costly duplication of programs within other Districts/service areas. The use rate (discussed infra) purports to capture that in- and out- migration which can be standardized within the 12 month base period. At hearing, it was tenuously demonstrated that an unmeasured in-/out-migration phenomenon may exist within 2 out of 11 HRS Districts, but the degree to which it exists, if at all, is purely speculative. Even if these two Districts clearly possessed extraordinary timeframe, geographical, or transportation uniqueness, these access abnormalities would not justify declaring the Rule invalid. Rather, in the event the use rate for some reason does not measure them, these exceptionalities would be just the sort of "not normal" aberration for which it would be appropriate to resort to balancing of all statutory and rule criteria. Petitioner also contends that because this Rule does not define "service area" as the respective HRS Service District, it leaves each applicant free to designate, virtually at will, its own service area. Apparently, the initial Rule drafters intended that the service area be defined in the open heart surgery Rule as the HRS Service District. In finalizing Section (1)(e)(its companion cardiac catheterization lab rate rule), this definition was indeed included. However, in the open heart surgery rule, it was omitted. No witness recommended or even seriously considered that any service area less than the relevant HRS District should be designated, and the evidence is unrefuted and substantial that District lines have always been uniformly applied by HRS in interpreting the open heart surgery Rule. This interpretation is consistent with the agency's application of similarly silent rules. Petitioner alleges that because there is no Rule requirement or uniform manner for hospitals to report their open heart surgery utilization data to Local Health Councils or to HRS, the Rule is arbitrary and capricious. Authorized HRS representatives and others testified that data for the most current 12-month period, with a 2 month lag time are the most appropriate data to use. Testimony by St. Mary's experts that the data necessary to derive the rule methodology is not available, was directly refuted by evidence from authorized HRS representatives and others that HRS is able to collect all necessary data even though some councils report at different intervals from each other, and even though some hospitals report in "cases," others in "procedures" and one in "minutes." Because of these procedures of reporting, it may be necessary to make certain mathematical conversions or interpretations in preparing an agency SAAR or in presenting evidentiary proof in a Section 120.57 hearing, but even if one accepts that it is difficult to collect and interpret the necessary data, that concept does not support the conclusion that the Rule itself is arbitrary, capricious, or otherwise fatally flawed. Subparagraph 8 of the Rule defines Year X as the year in which the proposed open heart surgery program would initiate service but no more than two years into the future. St. Mary's contentions with regard to this provision are that the triggerpoint cannot be determined and that by allowing applicants in the same batching cycle to elect varying dates of initiating service, similarly batched applicants may select different horizons within the two year outside limit and therefore those two applicants could not be comparatively reviewed. It was shown that in the last batching cycle all applications were reviewed from the same trigger date and that HRS' implementation of the CON rules is guided by legal precedent. HRS' shifting of trigger dates in past batches is accounted for by shifting legal precedents. Therefore, assuming applicants in the same batch may unilaterally select different planning horizons within the traditional two year range permissible under the Rule, that is not sufficient to invalidate the Rule as arbitrary and capricious. The Rule establishes a need formula. Entitlement of applicants to "comparative review" is set forth in other statutory, ruled and case law authority. Applicants in the same batching cycle who elect significantly different horizon dates under the Rule probably ought not to be comparatively reviewed, but that problem is to be addressed within the context of "all statutory and rule criteria" both at the agency level in the case of initial review, and, when necessary, in the case of litigation before the Division of Administrative Hearings, by appropriate motion. The remainder of Petitioner's challenge addresses, in one form or another, the Rule's numerical need formula. The Rule establishes three thresholds which apply to utilization of open heart surgery programs. Subsection 3.d. requires that each program shall be able to provide 500 open heart operations per year." Each program is required to provide a minimum of 200 adult open heart procedures annually within 3 years of the initiation of service, with no additional programs to be approved in a service area until each existing program is operating at a minimum of 350 adult open heart cases. Subparagraphs 8 and 11 are the cornerstones of the numerical need formula provided in the Rule. Specifically, Subparagraph 11 of the Rule provides: There shall be no additional open heart surgery programs established unless; The service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year; and, The conditions specified in Sub- subparagraph 5.d., above, will be met by the proposed program. b. No additional open heart surgery programs shall be approved which would reduce the volume of existing open heart surgery facilities below 350 open heart procedures annually for adults and 130 pediatric heart procedures annually, 75 of which are open heart. The standard found at Subparagraph 11 of the Ruled which provides that there should be no additional open heart surgery units initiated in a service area unless each existing and approved unit is operating at and is expected to continue to operate at 350 adult open heart surgery cases per year or 130 pediatric open heart cases per year, is based upon a substantially similar standard enunciated in the National Guidelines published in 1978 and in effect at the time the Rule was initially promulgated. The National Guidelines were developed by the Federal Department of Health Education and Welfare (HEW) pursuant to an extensive process of public consultation, including receipt of recommendations and comments for Health Systems Agencies (HSAs), State Health Planning and Development Agencies (SHPDAs) Statewide Health Coordinating Councils, associations representing various health care providers, and the National Council on Health Planning and Development. The federal process of promulgation encompassed over two years of consultation, public notices, public meetings, and related activities. There were strong incentives to SHPDAs to develop local standards consistent with the National Guidelines and the National Guidelines contain a provision which permitted HSAs and SHPDAs pursuant to detailed local analyses, to deviate from the standards contained in the National Guidelines. The Florida Rule deviates from the National Guidelines in that it does not require facilities which offer cardiac catheterization services to also offer open heart surgery service. Florida's rationale supporting the 350 standard in its Rule is that of the National Guidelines which assumes that each facility can provide an average of seven operations a weeks a schedule HEW judged to be feasible in most institutions which provide open heart surgery services. As a matter of health planning policy, HEW established the 350 standard in an effort to prevent duplication of costly services which are not fully utilized, both as to facility resources and manpower. This goal is reiterated in the 1985 Florida State Health Plan. Reasonableness of the 350 case requirement is supported by testimony regarding the purposes behind the hours of operation standards portion of the Rule. See 10-5.011(1)(f)4.b. That subparagraph mandates that open heart surgery programs be available for procedures 8 hours per days 5 days per weeks for a total of 40 available hours of surgery per week, and capable of rapid mobilization of the surgical and medical support team for emergencies 24 hours per day, 7 days per week. Since it is estimated that each open heart procedure requires an average of 4 hours of operating room time, including cleanup, and operations go forward 50 weeks per year, then each program can, over time, attain the goal of 500 annual open heart operations which is set in Subsection 3.b. Considering both elective and unscheduled services, HRS arrived at a 75 percent of maximum as a reasonable utilization figure, and Petitioner has in no way refuted the reasonableness of these hours of operation requirements or of HRS' 75 percent figure for reasonable utilization. The 350 threshold figure is primarily intended to ensure an appropriate utilization level of every open heart surgery unit. In fact, the minimum quality standard is set forth in Subparagraph 5 of the Rule as "200" and is supported in reason and logic upon the facts set forth, infra. The 350 figure here is intended to result in greater efficiency which results in economic benefits to the hospital which may ultimately be passed on to patients. I accept Dr. Luft's expert opinion and analysis that the economic benefits of a 350 threshold are derived primarily from clinical economies of scale which result from improved proficiencies in the provision of service rather than solely in the classic economy of scale of a greater division of fixed costs. One clinical economy of scale demonstrated by Dr. Luft is that shorter average lengths of hospital stay result from high volume facilities. The shorter lengths of stay translate into patient or third party payor dollars saved. Admittedly, the 350 standard also secondarily encompasses consideration of the relationship of the volume of open heart surgery services and patient mortality, thus peripherally impinging on the volume of a 200 minimum threshold for quality of care purposes. Except for one study by Dr. Sloan, the evidence consistently supports existence of a negative relationship between volume and outcome, e.g., facilities performing higher volumes of open heart surgery have lower mortality rates. Obvious empirical problems inherent in Dr. Sloan's study impair its credibility. In light of his deposition testimony concerning how his several studies were conducted and how empirical data was converted by him for use in those studies, and due to his superior education, training, and experience, I find more credible Dr. Luft's determination that hospitals which perform low volumes of open heart surgery, particularly with respect to coronary artery bypass graft surgery, have substantially higher mortality rates than hospitals performing higher volumes of such surgery. Moreover, those areas of analysis in which the opinions of these two health care economic experts, Dr. Luft and Dr. Sloan, are consistent with one another and with the other literature and experts in the field whom they each cite as accepted and relied upon by them, strongly suggest that Dr. Sloan's unusual conclusion that low volume hospitals more often fit his unique categorization of "low mortality" should not be relied upon for purposes of formulating, drafting, and promulgating standard rules. The 350 standard does not appear to have impeded either competition or quality of care. There is also no competent substantial evidence to establish that there are too few open heart surgery programs in Florida at this time. At present, no District/Service Area has fewer than two open heart surgery programs, and 8 of the 11 Districts have 3 or more programs. Although many individual programs fall below the 350 thresholds on average, open heart surgery programs in operation in Florida perform close to 350 cases per year apiece. Between 1985 and 1986 the percentage of Florida programs performing 350 or more cases annually climbed from 24 percent to 35 percent. Petitioner never directly attacked the 200 procedure standard for quality, however, some evidence was presented to show that a lesser figure could still uphold quality considerations. This evidence was neither substantial nor credible. In lieu of the 350 utilization threshold, a variety of possible optimal threshold numbers were suggested by Petitioner's expert witnesses, among them 130 (the same utilization figure as for pediatric cases), 150, and 200 (the same figure as presently used to insure adult quality of care). Even if the highest of these suggested figures were selected as a utilization standard, that is, 200 cases per year substituted for the 350 utilization standards a minimum additional 31 open heart surgery programs would be "needed" on a statewide basis. This would nearly double the current number. Assuming there would emerge therefrom a normal distribution of programs around the substituted 200 standard, there could be the result that half the State's programs would then be operating below 200 and half above 200, so that half the programs would operate below the 200 quality of care standard now in effect. Even assuming arguendo that Petitioner's expert, Mr. Schwartz, is correct that 72 percent of current programs meet or exceed the 200 procedure levels and that that 72 percent would remain constant, more than one quarter of the state's programs would be below the 200 quality of care level. This is clearly not a desirable health planning goal. Such a proliferation of straight numbers of programs would doubtless impact adversely on all existing approved providers' utilization, concomitantly forcing up individual consumer costs. The testimony is more credible that the improvement curve "flattens out" anywhere from 333 to 350, but even if one were to accept St. Mary's witnesses position that the improvement curve "bottoms out" (that is, utilization and quality optimums meet) at 200 open heart surgeries, there is evidence that there is still some minimal improvement in outcome (quality) in operations performed in hospitals exceeding the 200 figure. The 350 standard reduces the number of institutions over which a given number of procedures is spread and in general will result in higher volume per hospital, reducing the likelihood that outcomes would be worse than they might be otherwise. To the extent that witnesses support the position that the 350 figure is not reasonably or rationally related to the CON statutes, is arbitrary, or is unduly restrictive of the initiation of new open heart surgery programs, their testimony is unpersuasive in light of the foregoing determinations with regard to the hours of operation standards, the National Guidelines, and the statutory goal to avoid proliferation of such programs at the expense of efficiency, economy, and quality. Subsection 8 of the Rule provides as follows: Need Determination. The need for open heart surgery programs in a service area shall be determined by computing the projected number of open heart surgical procedures in the service area. The following formula shall be used in this determination: Where: N = Number of open heart procedures projected for Year X; U = Actual use rate (number of procedures per hundred thousand population) in the service area for the 12 month period beginning 14 months prior to the Letter of Intent deadline for the batching cycle. P = Projected population in the service area in Year X; and, Year X = The year in which the proposed open heart surgery program would initiate service, but not more than two years into the future. Subparagraph 8 of the Rule provides a formula by which numerical need for open heart surgery programs within a service area may be calculated. The use rate therein is based upon the number of procedures per 100,000 population in the District/Service Area for the 12 month period beginning 14 months prior to the letter of intent deadline for the applicant. If a District does not have 12 months' experience, the statewide use rate is used. This use rate is based upon the most recent utilization data available to HRS. The data necessary to calculate the use rate is accessible and available to HRS as set out supra. The base period employed in the calculation of the use rate is appropriate for use in the numerical need methodology. It provides the most current picture of utilization of open heart surgery services within each District/Service Area which the agency has been able to devise. The Rule's base period essentially provides what health planners describe as a "realistic" or "rolling" use rate. Such a component permits consideration of facility number increases and volume fluctuations within facilities within the District/Service Area. Increased number of facilities and volume increases and decreases within specific facilities are quickly reflected by such a use rate and may be quickly considered in projecting need for the future. Such reality based use rates are customarily employed by health planners in projecting need for new open heart surgery services. The use rate minimally approaches the differences in population utilization of open heart surgery facilities occurring across age differential groupings. Although there is some evidence that the use rate formula contained in the Rule is not optimal in providing accessibility where there occasionally is clustering of "aged aged" population centers or clustering of heart surgery optimal age groups, the evidence in favor of such a rolling use rate establishes that as a statewide rule component, it is reasonable, not arbitrary, and not capricious. No witness offered a more reasonable substitute base period and the agency is not required to promulgate an optimal one, merely a reasonable one. St. Mary's and BRCH's witnesses suggestion that the Rule is ambiguous for a discernible number need methodology is not substantiated by credible competent evidence, and is generally rejected. Ms. Stamm, testifying for Respondent, had trouble with applying basic arithmetic under stress but not with the methodology. Mr. Schwartz, on behalf of the Rule's opponents, had some difficulty in determining whether the 200 or 350 standard was the appropriate figure for need determination. No other witness experienced Mr. Schwartz' confusion. When called to work Subparagraph 8 calculations, all witnesses were in agreement as to the mechanics of the Rule. No witness, including those who attacked the Rule as facially inconsistent due to the Rule's use of undefined terms of "programs," "procedures," and "cases" and/or those who complained about difficulty of obtaining raw data for the base time period had any difficulty in applying the Rule's numerical need formula, and indeed, Mr. Rond testified that HRS' interpretation of the numerical need formula was the most straightforward interpretation (TR-115) and the way he would logically do it. (TR-98-100) Each witness who was asked to use the Rule's formula in order to determine numerical need, consistently offered the following approach: First Derive Nx, as provided in Subparagraph 8. (Nx is the number of open heart procedures projected for year X). Second: Divide Nx by 350 (from Subparagraph 11) to obtain the gross projected need. Third, subtract from the gross projected needs the numbers of existing and approved programs within the applicable district so as to obtain the net need. The Rule's provision for subtraction of approved as well as for subtraction of operating programs from gross need so as to determine net need was investigated and adopted in the rational approach to rule promulgation. This is an accepted health planning component utilized in numerous CON rules. For these reasons and for all of the foregoing reasons related to the value of retaining 350 utilization and 200 quality thresholds, this provision for subtracting approved facilities from the gross need is found neither arbitrary nor capricious. The evidence presented by St. Mary's and BRCH is insufficient to demonstrate that HRS has not, subject to evolving legal precedent, consistently used the formula's interpretation set forth in Finding of Fact 33, at least as modulated by universally accepted common mathematical principles such as rounding results to the nearest whole number and considering "not normal" circumstances in light of all statutory and rule criteria on a case by case basis. In any case, if the agency misapplies its own Rule, applicants have recourse to a Section 120.57 proceeding and misapplication is not cause to invalidate the rule applied. I also reject as speculative and not credible St. Mary's allegation that a "sinister" conspiracy among existing and authorized providers within a given District may unnaturally reduce a single facility below the 350 threshold in order to thwart new program applications. Mr. Rond and Mr. Schwartz also promoted the premise that this result might occur unintentionally as well. HRS has not interpreted the Rule in such a peculiar manner and has approved new programs in districts where individual existing programs were not performing at the 350 level. I specifically reject as not credible the testimony of the St. Mary's and BRCH's witnesses professing concern that persons applying the Rule may be confused about how to work the formula and whether or not the pediatric population within a service area or the 130 pediatric procedures are to be subtracted at some point. Px is defined in the Rule to mean "the projected population in the service area in Year X." The Rule's language is plain and unambiguous. Nothing in the language of the Rule suggests the "projected population in the service area" is intended to exclude the pediatric population. Petitioner offered evidence that in certain instances HRS has applied Px to include the pediatric population. This, on its face, is an erroneous application of the Rule but without more, will not invalidate the Rule itself. Should HRS fail to implement the Rule according to the plain meaning of its languages an affected party may contest that agency action in a Section 120.57 hearing. In the case of former HRS employees concerned with drafting, promulgating amending and/or applying the Rule over a period of several years, their credibility is impaired by their never attempting to correct the alleged flaws and by their expressed perception of the necessity for a rule challenge as a strategic litigation move in anticipation of St. Mary's contested CON action.
The Issue Whether the Certificate of Need application (CON 9239) of Galencare, Inc., d/b/a Brandon Regional Hospital ("Brandon") to establish an open heart surgery program at its hospital facility in Hillsborough County should be granted?
Findings Of Fact District 6 District 6 is one of eleven health service planning districts in Florida set up by the "Health Facility and Services Development Act," Sections 408.031-408.045, Florida Statutes. See Section 408.031, Florida Statutes. The district is comprised of five counties: Hillsborough, Manatee, Polk, Hardee, and Highlands. Section 408.032(5), Florida Statutes. Of the five counties, three have providers of adult open heart surgery services: Hillsborough with three providers, Manatee with two, and Polk with one. There are in District 6 at present, therefore, a total of six existing providers. Existing Providers Hillsborough County The three providers of open heart surgery services ("OHS") in Hillsborough County are Florida Health Sciences Center, Inc., d/b/a Tampa General Hospital ("Tampa General"), St. Joseph's Hospital, Inc. ("St. Joseph's"), and University Community Hospital, Inc., d/b/a University Community Hospital ("UCH"). For the most part, Interstate 75 runs in a northerly and southerly direction dividing Hillsborough County roughly in half. If the interstate is considered to be a line dividing the eastern half of the county from the western, all three existing providers are in the western half of the county within the incorporated area of the county's major population center, the City of Tampa. Tampa General Opened approximately a century ago, Tampa General has been at its present location in the City of Tampa on Davis Island at the north end of Tampa Bay since 1927. The mission of Tampa General is three-fold. First, it provides a range of care (from simple to complex) for the west central region of the state. Second, it supports both the teaching and research activities of the University of South Florida College of Medicine. Finally and perhaps most importantly, it serves as the "health care safety net" for the people of Hillsborough County. Evidence of its status as the safety net for those its serves is its Case Mix Index for Medicare patients: 2.01. At such a level, "the case mix at Tampa General is one of the highest in the nation in Medicare population." (Tr. 2452). In keeping with its mission of being the county's health care safety net, Tampa General is a full-service acute care hospital. It also provides services unique to the county and the Tampa Bay area: a Level I trauma center, a regional burn center and adult solid organ transplant programs. Tampa General is licensed for 877 beds. Of these, 723 are for acute care, 31 are designated skilled nursing beds, 59 are comprehensive rehabilitation beds, 22 are psychiatry beds, and 42 are neonatal intensive care beds (18 Level II and 24 Level III). Of the 723 acute care beds, 160 are set aside for cardiac care, although they may be occupied from time-to-time by non-cardiac care patients. Tampa General is a statutory teaching hospital. It has an affiliation with the University of South Florida College of Medicine. It offers 13 residency programs, serving approximately 200 medical residents. Tampa General offers diagnostic and interventional cardiac catheterization services in four laboratories dedicated to such services. It has four operating rooms dedicated to open heart surgery. The range of open heart surgery services provided by Tampa General includes heart transplants. Care of the open heart patient immediately after surgery is in a dedicated cardiovascular intensive care unit of 18 beds. Following stay in the intensive care unit, the patient is cared for in either a 10-bed intermediate care unit or a 30- bed telemetry unit. Tampa General's full-service open heart surgery program provides high quality of care. St. Joseph's Founded by the Franciscan Sisters of Allegheny, New York, St. Joseph's is an acute care hospital located on Martin Luther King Boulevard in an "inner city kind of area" (Tr. 1586) of the City of Tampa near the geographic center of Hillsborough County. On the hospital campus sit three separate buildings: the main hospital, consisting of 559 beds; across the street, St. Joseph's Women's Hospital, a 197-bed facility dedicated to the care of women; and, opened in 1998, Tampa Children's Hospital, a 120-bed free-standing facility that offers pediatric services and Level II and Level III neonatal intensive care services. In addition to the women's and pediatric facilities, and consistent with the full-service nature of the hospital, St. Joseph's provides behavioral health and oncology services, and most pertinent to this proceeding, open heart surgery and related cardiovascular services. Designated as a Level 2 trauma center, St. Joseph's has a large and active emergency department. There were 90,211 visits to the Emergency Room in 1999, alone. Of the patients admitted annually, fifty-five percent are admitted through the Emergency Room. The formal mission of St. Joseph's organization is to take care of and improve the health of the community it serves. Another aspect of the mission passed down from its religious founders is to take care of the "marginalized, . . . the people that in many senses cannot take care of themselves, [those to whom] society has . . . closed [its] eyes . . .". (Tr. 1584). In keeping with its mission, it is St. Joseph's policy to provide care to anyone who seeks its hospital services without regard to ability to pay. In 1999, the hospital provided $33 million in charity care, as that term is defined by AHCA. In total, St. Joseph's provided $121 million in unfunded care during the same year. Not surprisingly, St. Joseph's is also a disproportionate Medicaid provider. The only hospital in the district that provides both adult and pediatric open heart surgery services, St. Joseph's has three dedicated OHS surgical suites, a 14-bed unit dedicated to cardiovascular intensive care for its adult OHS patients, a 12-bed coronary care unit and 86 progressive care beds, all with telemetry capability. St. Joseph's provides high quality of care in its OHS. UCH University Community Hospital, Inc., is a private, not-for-profit corporation. It operates two hospital facilities: the main hospital ("UCH") a 431-bed hospital on Fletcher Avenue in north Tampa, and a second 120-bed hospital in Carrollwood. UCH is accredited by the JCAHO "with commendation," the highest rating available. It provides patient care regardless of ability to pay. UCH's cardiac surgery program is called the "Pepin Heart & Vascular Institute," after Art Pepin, "a 14-year heart transplant recipient [and] . . . the oldest heart transplant recipient in the nation alive today." (Tr. 2841). A Temple Terrace resident, Mr. Pepin also helped to fund the start of the institute. Its service area for tertiary services, including OHS, includes all of Hillsborough County, and extends into south Pasco County and Polk County. The Pepin Institute has excellent facilities and equipment. It has three dedicated OHS operating suites, three fully-equipped "state-of-the-art" cardiac catheterization laboratories equipped with special PTCA or angioplasty devices, and several cardiology care units specifically for OHS/PTCA services. Immediately following surgery, OHS patients go to a dedicated 8-bed cardiovascular intensive care unit. From there patients proceed to a dedicated 20-bed progressive care unit ("PCU"), comprised of all private rooms. There is also a 24-bed PCU dedicated to PTCA patients. There is another 22-bed interventional unit that serves as an overflow unit for patients receiving PTCA or cardiac catheterization. UCH has a 22-bed medical cardiology unit for chest pain observation, congestive heart failure, and other cardiac disorders. Staffing these units requires about 110 experienced, full-time employees. UCH has a special "chest pain" Emergency Room with specially-trained cardiac nurses and defined protocols for the treatment of chest pain and heart attacks. UCH offers a free van service for its UCH patients and their families that operates around the clock. As in the case of the other two existing providers of OHS services in Hillsborough Counties, UCH provides a full range of cardiovascular services at high quality. Manatee County The two existing providers of adult open heart surgery services in Manatee County are Manatee Memorial Hospital, Inc., and Blake Medical Center, Inc. Neither are parties in this proceeding. Although Manatee Memorial filed a petition for formal administrative hearing seeking to overturn the preliminary decision of the Agency, the petition was withdrawn before the case reached hearing. Polk County The existing provider of adult open heart surgery services in Polk County is Lakeland Regional Medical Center, Inc. ("Lakeland"). Licensed for 851 beds, Lakeland is a large, not-for- profit, tertiary regional hospital. In 1999, Lakeland admitted approximately 30,000 patients. In fiscal 1999, there were about 105,000 visits to Lakeland's Emergency Room. Lakeland provides a wide range of acute care services, including OHS and diagnostic and therapeutic cardiac catheterization. It draws its OHS patients from the Lakeland urban area, the rest of Polk County, eastern Hillsborough County (particularly from Plant City), and some of the surrounding counties. Lakeland has a high quality OHS program that provides high quality of care to its patients. It has two dedicated OHS surgical suites and a third surgical suite equipped and ready for OHS procedures on an as-needed basis. Its volume for the last few years has been relatively flat. Lakeland offers interventional radiology services, a trauma center, a high-risk obstetrics service, oncology, neonatal intensive care, pediatric intensive care, radiation therapy, alcohol and chemical dependency, and behavioral sciences services. Lakeland treats all patients without regard to their ability to pay, and provides a substantial amount of charity care, amounting in fiscal year 1999 to $20 million. The Applicant Brandon Regional Hospital ("Brandon") is a 255-bed hospital located in Brandon, Florida, an unincorporated area of Hillsborough County east of Interstate 75. Included among Brandon's 255 beds are 218 acute care beds, 15 hospital-based skilled nursing unit beds, 14 tertiary Level II neonatal intensive care unit ("NICU") beds, and 8 tertiary Level III NICU beds. Brandon offers a wide array of medical specialties and services to its patients including cardiology; internal medicine; critical care medicine; family practice; nephrology; pulmonary medicine; oncology/hematology; infectious disease; neurology; psychiatry; endocrinology; gastroenterology; physical medicine; rehabilitation; radiation oncology; pathology; respiratory therapy; and anesthesiology. Brandon operates a mature cardiology program which includes inpatient diagnostic cardiac catheterization, outpatient diagnostic cardiac catheterization, electrocardiography, stress testing, and echocardiography. The Brandon medical staff includes 22 Board-certified cardiologists who practice both interventional and invasive cardiology. Board certification is a prerequisite to maintaining cardiology staff privileges at Brandon. Brandon's inpatient diagnostic cardiac catheterization program was initiated in 1989 and has performed in excess of 800 inpatient diagnostic cardiac catheterization procedures per year since 1996. Brandon's daily census has increased from 159 to 187 for the period 1997 to 1999 commensurate with the burgeoning population growth in Brandon's primary service area. Brandon's Emergency Room is the third busiest in Hillsborough County and has more visits than Tampa General's Emergency Room. From 1997- 1999, Brandon's Emergency Room visits increased from 43,000 to 53,000 per year and at the time of hearing were expected to increase an additional 5-6 percent during the year 2000. Brandon has also recently expanded many services to accommodate the growing health care needs of the Brandon community. For example, Brandon doubled the square footage of its Emergency Room and added 17 treatment rooms. It has also implemented an outpatient diagnostic and rehabilitation center, increased the number of labor, delivery and recovery suites, and created a high-risk ante-partum observation unit. Brandon was recently approved for 5 additional tertiary Level II NICU beds and 3 additional tertiary Level III NICU beds which increased Brandon's Level II/III NICU bed complement to 22 beds. Brandon is a Level 5 hospital within HCA's internal ranking system, which is the company's highest facility level in terms of service, revenue, and patient service area population. Brandon has been ranked as one of the Nation's top 100 hospitals by HCIA/Mercer, Inc., based on Brandon's clinical and financial performance. The Proposal On September 15, 1999, Brandon submitted to AHCA CON Application 9239, its third application for an open heart surgery program in the past few years. (CON 9085 and 9169, the two earlier applications, were both denied.) The second of the three, CON 9169, sought approval on the basis of the same two "not normal" circumstances alleged by Brandon to justify approval in this proceeding. CON 9239 addresses the Agency's January 2002 planning horizon. Brandon proposes to construct two dedicated cardiovascular operating rooms ("CV-OR"), a six-bed dedicated cardiovascular intensive care unit ("CVICU"), a pump room and sterile prep room all located in close proximity on Brandon's first floor. The costs, methods of construction, and design of Brandon's proposed CV-OR, CVICU, pump room, and sterile prep room are reasonable. As a condition of CON approval, Brandon will contribute $100,000 per year for five years to the Hillsborough County Health Care Program for use in providing health care to the homeless, indigent, and other needy residents of Hillsborough County. The administration at Brandon is committed to establishing an adult open heart surgery program. The proposal is supported by the medical and nursing staff. It is also supported by the Brandon community. The Brandon Community in East Hillsborough County Brandon, Florida, is a large unincorporated community in Hillsborough County, east of Interstate 75. The Brandon area is one of the fastest growing in the state. In the last ten years alone, the area's population has increased from approximately 90,000 to 160,000. An incorporated Brandon municipality (depending on the boundaries of the incorporation) has the potential to be the eighth largest city in Florida. The Brandon community's population is projected to further increase by at least 50,000 over the next five to ten years. Brandon Regional Hospital's primary service area not only encompasses the Brandon community, but further extends throughout Hillsborough County to a populous of nearly 285,000 persons. The population of Brandon's primary service area is projected to increase to 309,000 by the year 2004, of which approximately 32,000 are anticipated to be over the age of 65, making Brandon's population "young" relative to much of the rest of the State. The community of Brandon has attracted several new large housing developments which are likely to accelerate its projected growth. According to the Hillsborough County City- County Planning Commission, six of the eleven largest subdivisions of single-family homes permitted in 1998 are located nearby. For example, the infrastructure is in place for an 8,000-acre housing development east of Brandon which consists of 7,500 homes and is projected to bring in 30,000 people over the next 5-10 years. Two other large housing developments will bring an additional 5,000-10,000 persons to the Brandon area. The community of Brandon is also an attractive area for relocating businesses. Recent additions to the Brandon area include, among others, CitiGroup Corporation, Atlantic Lucent Technologies, Household Finance, Ford Motor Credit, and Progressive Insurance. CitiGroup Corporation alone supplemented the area's population with approximately 5,000 persons. The community of Brandon has experienced growth in the development of health care facilities with 5 new assisted living facilities and one additional assisted living facility under construction. The average age of the residents of these facilities is much higher than of the Brandon area as a whole. Existing Providers' Distance from Brandon's PSA Brandon's primary service area ("PSA") is comprised of 12 zip code areas "in and around Brandon, essentially eastern Hillsborough County." (Tr. 1071). Using the center of each zip code in Brandon's primary service area as the location for each resident of the zip code area, the residents of Brandon's PSA are an average of 15 miles from Tampa General, 16.4 miles from St. Joseph's, 17.3 miles from UCH and 24.6 miles from Lakeland Regional Medical Center. In contrast, they are only 7.7 miles from Brandon Regional Hospital. Using the same methodology, the residents of Brandon's PSA are an average of more than 40 miles from Blake Medical Center (44.9 miles) and Manatee Memorial (41 miles). Numeric Need Publication Rule 59C-1.033, Florida Administrative Code (the "Open Heart Surgery Program Rule" or the "Rule") specifies a methodology for determining numeric need for new open heart surgery programs in health planning districts. The methodology is set forth in section (7) of the Rule. Part of the methodology is a formula. See subsection (b) of Section (7) of the Rule. Using the formula, the Agency calculated numeric need in the District for the January 2002 Planning Horizon. The calculation yielded a result of 3.27 additional programs needed to serve the District by January 1, 2002. But calculation of numeric need under the formula is not all that is entailed in the complete methodology for determining numeric need. Numeric need is also determined by taking other factors into consideration. The Agency is to determine net need based on the formula "[p]rovided that the provisions of paragraphs (7)(a) and (7) (c) do not apply." Rule 59C-1.033(b), Florida Administrative Code. Paragraph (7)(a) states, "[a] new adult open heart surgery program shall not normally be approved in the district" if the following condition (among others) exists: 2. One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; . . . Rule 59C-1.033(7)(a), Florida Administrative Code. Both Blake Medical Center and Manatee Memorial Hospital in Manatee County were operational and performed less that 350 adult open heart surgery operations in the qualifying time periods described by subparagraph (7)(a)2., of the Rule. (Blake reported 221 open heart admissions for the 12-month period ending March 31, 1999; Manatee Memorial for the same period reported 319). Because of the sub-350 volume of the two providers, the Rule's methodology yielded a numeric need of "0" new open heart surgery programs in District 6 for the January 2002 Planning Horizon. In other words, the numeric need of 3.27 determined by calculation pursuant to the formula prior to consideration of the programs described in (7)(a)2.1, was "zeroed out" by operation of the Rule. Accordingly, a numeric need of zero for the district in the applicable planning horizon was published on behalf of the Agency in the January 29, 1999, issue of the Florida Administrative Weekly. No Impact on Manatee County Providers In 1998, only one resident of Brandon's PSA received an open heart surgery procedure in Manatee County. For the same period only two residents from Brandon's PSA received an angioplasty procedure in Manatee County. These three residents received the services at Manatee Memorial. Of the two Manatee County programs, Manatee Memorial consistently has a higher volume of open heart surgery cases and according to the latest data available at the time of hearing has "hit the mark" (Tr. 1546) of 350 procedures annually. Very few residents from other District 6 counties receive cardiac services in Manatee County. Similarly, very few Manatee county residents migrate from Manatee County to another District 6 hospital to receive cardiac services. In 1998, only 19 of a total 1,209 combined open heart and angioplasty procedures performed at either Blake or Manatee Memorial originated in the other District 6 counties and only two were from the Brandon area. Among the 6,739 Manatee County residents discharged from a Florida hospital in calendar year 1998 following any cardiovascular procedure (MDC-5), only 58(0.9 percent) utilized one of the other providers in District 6, and none were discharged from Brandon. Among the 643 open heart surgeries performed on Manatee County residents in 1998, only 17 cases were seen at one of the District 6 open heart programs outside of Manatee County. There is, therefore, practically no patient exchange between Manatee County and the remainder of the District. In sum, there is virtually no cardiac patient overlap between Manatee County and Brandon's primary service area. The development of an open heart surgery program at Brandon will have no appreciable or meaningful impact on the Manatee County providers. CON 9169 In CON 9169, Brandon applied for an open heart surgery program on the basis of special circumstances due to no impact on low volume providers in Manatee County. The application was denied by AHCA. The State Agency Action Report ("SAAR") on CON 9169, dated June 17, 1999, in a section of the SAAR denominated "Special Circumstances," found the application to demonstrate "that a program at Brandon would not impact the two Manatee hospitals . . .". (UCH Ex. No. 6, p. 5). The "Special Circumstances" section of the SAAR on CON 9169, however, does not conclude that the lack of impact constitutes special circumstances. In follow-up to the finding of the application's demonstration of no impact to the Manatee County, the SAAR turned to impact on the non-Manatee County providers in District The SAAR on CON 9169 states, "it is apparent that a new program in Brandon would impact existing providers [those in Hillsborough and Polk Counties] in the absence of significant open heart surgery growth." Id. In reference to Brandon's argument in support of special circumstances based on the lack of impact to the Manatee County providers, the CON 9169 SAAR states: [T]he applicant notes the open heart need formula should be applied to District 6 excluding Manatee County, which would result in the need for several programs. This argument ignores the provision of the rule that specifies that the need cannot exceed one. (UCH No. 6, p. 7). The Special Circumstances Section of the SAAR on CON 9169 does not deal directly with whether lack of impact to the Manatee County providers is a special circumstance justifying one additional program. Instead, the Agency disposes of Brandon's argument in the "Summary" section of the SAAR. There AHCA found Brandon's special circumstances argument to fail because "no impact on low volume providers" is not among those special circumstances traditionally or previously recognized in case law and by the Agency: To demonstrate need under special circumstances, the applicant should demonstrate one or more of the following reasons: access problems to open heart surgery; capacity limits of existing providers; denial of access based on payment source or lack thereof; patients are seeking care outside the district for service; improvement of care to underserved population groups; and/or cost savings to the consumer. The applicant did not provide any documentation in support of these reasons. (UCH No. 6, p. 29). Following reference to the Agency's publication of zero need in District 6, moreover, the SAAR reiterated that [t]he implementation of another program in Hillsborough County is expected to significantly [a]ffect existing programs, in particular Tampa General Hospital, an important indigent care provider. (Id.) Typical "not normal circumstances" that support approval of a new program were described at hearing by one health planner as consisting of a significant "gap" in the current health care delivery system of that service. Typical Not Normal Circumstances Just as in CON 9169, none of the typical "not normal" circumstances" recognized in case law and with which the Agency has previous experience are present in this case. The six existing OHS programs in District 6 have unused capacity, are available, and are adequate to meet the projected OHS demand in District 6, in Hillsborough County ("County"), and in Brandon's proposed primary service area ("PSA"). All three County OHS providers are less than 17 miles from Brandon. There are, therefore, no major service geographic gaps in the availability of OHS services. Existing providers in District 6 have unused capacity to meet OHS projected demand in January 2002. OHS volume for District 6 will increase by only 179 surgeries. This is modest growth, and can easily be absorbed by the existing providers. In fact, existing OHS providers have previously handled more volume than what is projected for 2002. In 1995, 3,313 OHS procedures were generated at the six OHS programs. Yet, only 3,245 procedures are projected for 2002. The demand in 1995 was greater than what is projected for 2002. Neither population growth nor demographic characteristics of Brandon's PSA demonstrate that existing programs cannot meet demand. The greatest users of OHS services are the elderly. In 1999, the percentage in District 6 was similar to the Florida average; 18.25 percent for District 6, 18.38 percent for the state. The elderly percentage in Hillsborough County was less: 13.21 percent. The elderly component in Brandon's PSA was less still: 10.44 percent. In 2004, about 18.5 percent of Florida and District 6 residents are projected to be elderly. In contrast, only 10.5 percent of PSA residents are expected to be elderly. Brandon's PSA is "one of the younger defined population segments that you could find in the State of Florida" (Tr. 2892) and likely to remain so. Brandon's PSA will experience limited growth in OHS volume. Between 1999 - 2002, OHS volume will grow by only 36. The annual growth thereafter is only 13 surgeries. This is "very modest" growth and is among the "lowest numbers" of incremental growth in the State. Existing OHS providers can easily absorb this minimal growth. Brandon's PSA, is not an underserved area . . . there is excellent access to existing providers and . . . the market in this service area is already quite competitive. There is not a single competitor that dominates. In fact, the four existing providers [in Hillsborough and Polk Counties] compete quite vigorously. (Tr. 2897). Existing OHS programs in District 6 provide very good quality of care. The surgeons at the programs are excellent. Dr. Gandhi, testifying in support of Brandon's application, testified that he was very comfortable in referring his patients for OHS services to St. Joseph and Tampa General, having, in fact, been comfortable with his father having had OHS at Tampa General. Likewise, Dr. Vijay and his group, also supporters of the Brandon application, split time between Bayonet Point and Tampa General. Dr. Vijay is very proud to be associated with the OHS program at Tampa General. Lakeland also operates a high quality OHS program. In its application, Brandon did not challenge the quality of care at the existing OHS programs in District 6. Nor did Brandon at hearing advance as reasons for supporting its application, capacity constraints, inability of existing providers to absorb incremental growth in OHS volume or failure of existing providers to meet the needs of the residents of Brandon's primary service area. The Agency, in its preliminary decision on the application, agreed that typical "not normal" circumstances in this case are not present. Included among these circumstances are those related to lack of "geographic access." The Agency's OHS Rule includes a geographic access standard of two hours. It is undisputed that all District 6 residents have access to OHS services at multiple OHS providers in the District and outside the District within two hours. The travel time from Brandon to UCH or Tampa General, moreover, is usually less than 30 minutes anytime during the day, including peak travel time. Travel time from Brandon to St. Joseph's is about 30 minutes. There are times, however, when travel time exceeds 30 minutes. There have been incidents when traffic congestion has prevented emergency transport of Brandon patients suffering myocardial infarcts from reaching nearby open heart surgery providers within the 30 minutes by ground ambulance. Delays in travel are not a problem in most OHS cases. In the great majority, procedures are elective and scheduled in advance. OHS procedures are routinely scheduled days, if not weeks, after determining that the procedure is necessary. This high percentage of elective procedures is attributed to better management of patients, better technology, and improved stabilizing medications. The advent of drugs such as thrombolytic therapy, calcium channel blockers, beta blockers, and anti-platelet medications have vastly improved stabilization of patients who present at Emergency Rooms with myocardial infarctions. In its application, Brandon did not raise outmigration as a not-normal circumstance to support its proposal and with good reason. Hillsborough County residents generally do not leave District 6 for OHS. In fact, over 96 percent of County residents receive OHS services at a District 6 provider. Lack of out-migration shows two significant facts: (a) existing OHS programs are perceived to be reasonably accessible; and (2) County residents are satisfied with the quality of OHS services they receive in the County. This 96 percent retention rate is even more impressive considering there are many OHS programs and options available to County residents within a two-hour travel time. In contrast, there are two low-volume OHS providers in Manatee County, one of them being Blake. Unlike Hillsborough County residents, only 78 percent of Manatee County residents remain in District 6 for OHS services. Such outmigration shows that these residents prefer to bypass closer programs, and travel further distances, to receive OHS services at high-volume facility in District 8, which they regard as offering a higher quality of service. In its Application, Brandon does not raise economic access as a "not normal" circumstance. In fact, Brandon concedes that the demand for OHS services by Medicaid and indigent patients is very limited because Brandon's PSA is an affluent area. Brandon does not "condition" its application on serving a specific number or percentage of Medicaid or indigent patients. There are no financial barriers to accessing OHS services in District 6. All OHS providers in Hillsborough County and LRMC provide services to Medicaid and indigent patients, as needed. Approving Brandon is not needed to improve service or care to Medicaid or indigent patient populations. Tampa General is the "safety net" provider for health care services to all County residents. Tampa General is an OHS provider geographically accessible to Brandon's PSA. Tampa General actively services the PSA now for OHS. Brandon did not demonstrate cost savings to the patient population of its PSA if it were approved. Approving Brandon is not needed to improve cost savings to the patient population. Brandon based its OHS and PTCA charges on the average charge for PSA residents who are serviced at the existing OHS providers. While that approach is acceptable, Brandon does not propose a charge structure which is uniquely advantageous for patients. Restated, patients would not financially benefit if Brandon were approved. Tertiary Service Open Heart Surgery is defined as a tertiary service by rule. A "tertiary health service" is defined in Section 408.032(17), Florida Statutes, as follows: health service, which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service. As a tertiary service, OHS is necessarily a referral service. Most hospitals, lacking OHS capability, transfer their patients to providers of the service. One might expect providers of open heart surgery in Florida in light of OHS' status as a tertiary service to be limited to regional centers of excellence. The reality of the six hospitals that provide open heart surgery services in District 6 defies this health-planning expectation. While each of the six provides OHS services of high quality, they are not "regional" centers since all are in the same health planning district. Rather than each being a regional center, the six together comprise more localized providers that are dispersed throughout a region, quite the opposite of a center for an entire region. Brandon's Allegations of Special Circumstances. Brandon presents two special circumstances for approval of its application. The first is that consideration of the low-volume Manatee County providers should not operate to "zero out" the numeric need calculated by the formula. The second relates to transfers and occasional problems with transfers for Brandon patients in need of emergency open heart services. "Time is Muscle" Lack of blood flow to the heart during a myocardial infarction ("MI") results in loss of myocardium (heart muscle). The longer the blood flow is disrupted or diminished, the more myocardium is lost. The more myocardium lost, the more likely the patient will die or, should the patient survive, suffer severe reduction in quality of life. The key to good patient outcome when a patient is experiencing an acute MI is prompt evaluation and rapid treatment upon presentation at the hospital. Restoration of blood flow to the heart (revascularization) is the goal of the treating physician once it is recognized that a patient is suffering an MI. If revascularization is not commenced within 2 hours of the onset of an acute MI, an MI patient's potential for recovery is greatly diminished. The need for prompt revascularization for a patient suffering an MI is summed up in the phrase "time is muscle," a phrase accepted as a maxim by cardiologists and cardiothoracic surgeons. Recent advances in modern medicine and technology have improved the ability to stabilize and treat patients with acute MIs and other cardiac traumas. The three primary treatment modalities available to a patient suffering from an MI are: 1) thrombolytics; 2) angioplasty and stent placement; and, 3) open heart surgery. Because of the advancement of the effectiveness of thrombolytics, thrombolytic therapy has become the standard of care for treating MIs. Thrombolytic therapy is the administration of medication to dissolve blood clots. Administered intravenously, thrombolytic medication begins working within minutes to dissolve the clot causing the acute MI and therefore halt the damage done by an MI to myocardium. The protocols to administer thrombolysis are similar among hospitals. If a patient presents with chest pain and the E.R. physician identifies evidence of an active heart attack, thrombolysis is normally administered. If the E.R. physician is uncertain, a cardiologist is quickly contacted to evaluate the patient. Achieving good outcomes in cases of myocardial infarctions requires prompt consultation with the patient, competent clinical assessment, and quick administration of appropriate treatment. The ability to timely evaluate patient conditions for MI, and timely administer thrombolytic therapy, is measured and evaluated nationally by the National Registry of Myocardial Infarction. The National Registry makes the measurement according to a standard known as "door-to-needle" time. This standard measures the time between the patient's presentation at the E.R. and the time the patient is initially administered thrombolytic medication by injection intravenously. Patients often begin to respond to thrombolysis within 10-15 minutes. Consistent with the maxim, "time is muscle," the shorter the door-to-needle time, the better the chance of the patient's successful recovery. The effectiveness of thrombolysis continues to increase. For example, the advent of a drug called Reapro blocks platelet activity, and has increased the efficacy rate of thrombolysis to at least 85 percent. As one would expect, then, thrombolytic therapy is the primary method of revascularization available to patients at Brandon. Due to the lack of open heart surgery backup, moreover, Brandon is precluded by Agency rule from offering angioplasty in all but the most extreme cases: those in which it is determined that a patient will not survive a transfer. While Brandon has protocols, authority, and equipment to perform angioplasty when a patient is not expected to survive a transfer, physicians are reluctant to perform angioplasty without open heart backup because of complications that can develop that require open heart surgery. Angioplasty, therefore, is not usually a treatment modality available to the MI patient at Brandon. Although the care of choice for MI treatment, thrombolytics are not always effective. To the knowledge of the cardiologists who testified in this proceeding, there is not published data on the percentage of patients for whom thrombolytics are not effective. But from the cardiologists who offered their opinions on the percentage in the proceeding, it can be safely found that the percentage is at least 10 percent. Thrombolytics are not ordered for these patients because they are inappropriate in the patients' individual cases. Among the contraindications for thrombolytics are bleeding disorders, recent surgery, high blood pressure, and gastrointestinal bleeding. Of the patients ineligible for thrombolytics, a subset, approximately half, are also ineligible for angioplasty. The other half are eligible for angioplasty. Under the most conservative projections, then at least 1 in 20 patients suffering an MI would benefit from timely angioplasty intervention for which open heart surgery back-up is required in all but the rarest of cases. In 1997, 351 people presented to Brandon's Emergency Room suffering from an acute MI. In 1998, the number of MIs increased to 427. In 1999, 428 patients presented to Brandon's Emergency Room suffering from an acute MI. At least 120 (10 percent) of the total 1206 MI patients presenting to Brandon's Emergency Room from 1997 to 1999 would have been ineligible for thrombolytics as a means of revascularization. Of these, half would have been ineligible for angioplasty while the other half would have been eligible. Sixty, therefore, is the minimum number of patients from 1997 to 1999 who would have benefited from angioplasty at Brandon using the most conservative estimate. Transfers of Emergency Patients Those patients who presented at Brandon's Emergency Room with acute MI and who could not be stabilized with thrombolytic therapy had to be transferred to one of the nearby providers of open heart surgery. In 1998, Brandon transferred an additional 190 patients who did not receive a diagnostic catheterization procedure at Brandon for either angioplasty or open heart surgery. For the first 9 months of 1999, 114 such transfers were made. Thus, in 1998 alone, Brandon transferred a total of 516 cardiac patients to existing providers for the provision of angioplasty or open heart surgery, more than any other provider in the District. In 1999, Brandon made 497 such transfers. Not all of these were emergency transfers, of course. But in the three years between 1997 and 1999 at least 60 patients were in need of emergency transfers who would benefit from angioplasty with open heart backup. Of those Brandon patients determined to be in need of urgent angioplasty or open heart surgery, all must be transferred to existing providers either by ambulance or by helicopter. Ambulance transfer is accomplished through ambulances maintained by the Hillsborough County Fire Department. Due to the cardiac patient's acuity level, ambulance transfer of such patients necessitates the use of ambulances equipped with Advanced Life Support Systems (ALS) in order to monitor the patient's heart functions and to treat the patient should the patient's condition deteriorate. Hillsborough County operates 18 ambulances. All have ALS capability. Patients with less serious medical problems are sometimes transported by private ambulances equipped with Basic Life Support Systems (BLS) that lack the equipment to appropriately care for the cardiac patient. But, private ambulances are not an option to transport critically ill cardiac patients because they are only equipped with BLS capability. Private ambulances, moreover, do not make interfacility transports of cardiac patients between Hillsborough County hospitals. There are many demands on the ambulance transfer system in Hillsborough County. Hillsborough County's 18 ALS ambulances cover in excess of 960 square miles. Of these 18 ambulances, only three routinely operate within the Brandon area. Hillsborough County ambulances respond to 911 calls before requests for interfacility transfers of cardiac patients and are extremely busy responding to automobile accidents, especially when it rains. As a result, Hillsborough County ambulances are not always available on a timely basis when needed to perform an interfacility transfer of a cardiac patient. At times, due to inordinate delay caused by traffic congestion, inter-facility ambulance transport, even if the ambulance is appropriately equipped, is not an option for cardiac patients urgently in need of angioplasty or open heart surgery. It has happened, for example, that an ambulance has appeared at the hospital 8 hours after a request for transport. Some cardiac surgeons will not utilize ground transport as a means of transporting urgent open heart and angioplasty cases. Expeditious helicopter transport in Hillsborough County is available as an alternative to ground transport. But, it too, from time-to-time, is problematic for patients in urgent need of angioplasty or open heart surgery. Tampa General operates two helicopters through AeroMed, only one of which is located in Hillsborough County. AeroMed's two helicopters are not exclusively devoted to cardiac patients. They are also utilized for the transfer of emergency medical and trauma patients, further taxing the availability of AeroMed helicopters to transfer patients in need of immediate open heart surgery or angioplasty. BayCare operates the only other helicopter transport service serving Hillsborough County. BayCare maintains several helicopters, only one of which is located in Hillsborough County at St. Joseph's. BayCare helicopters are not equipped with intra-aortic balloon pump capability, thereby limiting their use in transporting the more complicated cardiac patients. Helicopter transport is not only a traumatic experience for the patient, but time consuming. Once a request has been made by Brandon to transport a patient in need of urgent intervention, it routinely takes two and a half hours, with instances of up to four hours, to effectuate a helicopter transfer. At the patient's beside, AeroMed personnel must remove the patient's existing monitors, IVS, and drips, and refit the patient with AeroMed's equipment in preparation for flight. In more complicated cases requiring the use of an intra-aortic balloon pump, the patient's balloon pump placed at Brandon must be removed and substituted with the balloon pump utilized by AeroMed. Further delays may be experienced at the receiving facility. The national average of the time from presentation to commencement of the procedure is reported to be two hours. In most instances at UCH, it is probably 90 minutes although "[t]here are of course instances where it would be much faster . . .". (Tr. 3212). On the other hand, there are additional delays from time-to-time. "[P]erhaps the longest circumstance would be when all the labs are full . . . or . . . even worse . . . if all the staff has just left for the day and they are almost home, to then turn them around and bring them all back." (Id.) Specific Cases Involving Transfers Delays in the transfer process were detailed at hearing by Brandon cardiologists with regard to specific Brandon patients. In cases in which "time is muscle," delay is critical except for one subset of such cases: that in which, no matter what procedure is available and no matter how timely that procedure can be provided, the patient cannot be saved. Craig Randall Martin, M.D., Board-certified in Internal Medicine and Cardiovascular Disease, and an expert in cardiology, wrote to AHCA in support of the application by detailing two "examples of patients who were in an extreme situation that required emergent, immediate intervention . . . [intervention that could not be provided] at Brandon Hospital." (Tr. 408). One of these concerned a man in his early sixties who was a patient at Brandon the night and morning of October 13 and 14, 1998. It represents one of the rare cases in which an emergency angioplasty was performed at Brandon even though the hospital does not have open heart backup. The patient had presented to the Emergency Room at approximately 11:00 p.m., on October 13 with complaints of chest pain. Although the patient had a history of prior infarctions, PTCA procedures, and onset diabetes, was obese, a smoker and had suffered a stroke, initial evaluation, including EKG and blood tests, did not reveal an MI. The patient was observed and treated for what was probably angina. With the subsiding of the chest pain, he was appropriately admitted at 2:30 a.m. to a non- intensive cardiac telemetry bed in the hospital. At 3:00 a.m., he was observed to be stable. A few hours or so later, the patient developed severe chest pain. The telemetry unit indicated a very slow heart rate. Transferred to the intensive care unit, his blood pressure was observed to be very low. Aware of the seriousness of the patient's condition, hospital personnel called Dr. Martin. Dr. Martin arrived on the scene and determined the patient to be in cardiogenic shock, an extreme situation. In such a state, a patient has a survival rate of 15 to 20 percent, unless revascularization occurs promptly. If revascularization is timely, the survival rate doubles to 40 percent. Coincident with the cardiogenic shock, the patient was suffering a complete heart block with a number of blood clots in the right coronary artery. The patient's condition, to say the least, was grave. Dr. Martin described the action taken at Brandon: . . . I immediately called in the cardiac catheterization team and moved the patient to the catheterization laboratory. * * * Somewhere around 7:30 in the morning, I put a temporary pacemaker in, performed a diagnostic catheterization that showed that one of his arteries was completely clotted. He, even with the pacemaker giving him an adequate heart rate, and even with the use of intravenous medication for his blood pressure, . . . was still in cardiogenic shock. * * * And I placed an intra-aortic balloon pump . . ., a special pump that fits in the aorta and pumps in synchrony with the heart and supports the blood pressure and circulation of the muscle. That still did not alleviate the situation . . . an excellent indication to do a salvage angioplasty on this patient. I performed the angioplasty. It was not completely successful. The patient had a respiratory arrest. He required intubation, required to be put on a ventilator for support. And it became apparent to me that I did not have the means to save this patient at [Brandon]. I put a call to the . . . cardiac surgeon of choice . . . . [Because the surgeon was on vacation], [h]is associate [who happened to be in the operating room at UCH] called me back immediately . . . and said ["]Yes, I'll take your patient. Send him to me immediately, I will postpone my current case in order to take care of your patient.["] At that point, we called for helicopter transport, and there were great delays in obtaining [the] transport. The patient was finally transferred to University Community Hospital, had surgery, was unsuccessful and died later that afternoon. (Tr. 409-412). By great delays in the transport, Dr. Martin referred to inability to obtain prompt helicopter transport. University Community Hospital, the receiving hospital, was not able to find a helicopter. Dr. Martin, therefore, requested Tampa General (a third hospital uninvolved from the point of being either the transferring or the receiving hospital) to send one of its two helicopters to transfer the patient from Brandon to UCH. Dr. Martin described Tampa General's response: They balked. And I did not know they balked until an hour later. And I promptly called them back, got that person on the telephone, we had a heated discussion. And after that person checked with their supervisor, the helicopter was finally sent. There was at least an hour-and-a-half delay in obtaining a helicopter transport on this patient that particular morning that was unnecessary. And that is critical when you have a patient in this condition. (Tr. 413, emphasis supplied.) In the case of this patient, however, the delay in the transport from Brandon to the UCH cardiovascular surgery table, in all likelihood, was not critical to outcome. During the emergency angioplasty procedure at Brandon, some of the clot causing the infarction was dislodged. It moved so as to create a "no-flow state down the right coronary artery. In other words, . . ., it cut off[] the microcirculation . . . [so that] there is no place for the blood . . . to get out of the artery. And that's a devastating, deadly problem." (Tr. 2721). This "embolization, an unfortunate happenstance [at times] with angioplasty", id., probably sealed the patient's fate, that is, death. It is very likely that the patient with or without surgery, timely or not, would not have survived cardiogenic shock, complete heart block, and the circumstance of no circulation in the right coronary artery that occurred during the angioplasty procedure. Adithy Kumar Gandhi, M.D., is Board-certified in Internal Medicine and Cardiology. Employed by the Brandon Cardiology Group, a three-member group in Brandon, Dr. Gandhi was accepted as an expert in the field of cardiology in this proceeding. Dr. Gandhi testified about two patients in whose cases delays occurred in transferring them to St. Joseph’s. He also testified about a third case in which it took two hours to transfer the patient by helicopter to Tampa General. The first case involves an elderly woman. She had multiple-risk factors for coronary disease including a family history of cardiac disease and a personal history of “chest pain.” (Tr. 2299). The patient presented at Brandon’s Emergency Room on March 17, 1999 at around 2:30 p.m. Seen by the E.R. physician about 30 minutes later, she was placed in a monitored telemetry bed. She was determined to be stable. During the next two days, despite family and personal history pointing to a potentially serious situation, the patient refused to submit to cardiac catheterization at Brandon as recommended by Dr. Gandhi. She maintained her refusal despite results from a stress test that showed abnormal left ventricular systolic function. Finally, on March 20, after a meeting with family members and Dr. Gandhi, the patient consented to the cath procedure. The procedure was scheduled for March 22. During the procedure, it was discovered that a major artery of the heart was 80 percent blocked. This condition is known as the “widow-maker,” because the prognosis for the patient is so poor. Dr. Gandhi determined that “the patient needed open heart surgery and . . . to be transferred immediately to a tertiary hospital.” (Tr. 2305-6). He described that action he took to obtain an immediate transfer as follows: I talked to the surgeon up at St. Joseph’s and I informed him I have had difficulties transferring patients to St. Joseph’s the same day. [I asked him to] do me a favor and transfer the patient out of Brandon Hospital as soon as possible by helicopter. The surgeon promised me that he would take care of that. (Tr. 2261). The assurance, however, failed. The patient was not transferred that day. That night, while still at Brandon, complications developed for the patient. The complications demanded that an intra-aortic balloon pump be inserted in order to increase the blood flow to the heart. After Dr. Gandhi’s partner inserted the pump, he, too, contacted the surgeon at St. Joseph’s to arrange an immediate transfer for open heart surgery. But the patient was not transferred until early the next morning. Dr. Gandhi’s frustration at the delay for this critically ill patient in need of immediate open heart surgery is evident from the following testimony: So the patient had approximately 18 hours of delay of getting to the hospital with bypass capabilities even though the surgeon knew that she had a widow-maker, he had promised me that he would make those transfer arrangements, even though St. Joseph’s Hospital knew that the patient needed to be transferred, even though I was promised that the patient would be at a tertiary hospital for bypass capabilities. (Tr. 2262). Rod Randall, M.D., is a cardiologist whose practice is primarily at St. Joseph’s. He had active privileges at Brandon until 1998 when he “switched to courtesy privileges,” (Tr. 1735) at Brandon. He reviewed the medical records of the first patient about whom Dr. Gandhi testified. A review of the patient’s medical records disclosed no adverse outcome due to the patient’s transfer. To the contrary, the patient was reasonably stable at the time of transfer. Nonetheless, it would have been in the patient’s best interest to have been transferred prior to the catheterization procedure at Brandon. As Dr. Randall explained, [W]e typically cath people that we feel are going to have a probability of coronary artery disease. That is, you don’t tend to cath someone that [for whom] you don’t expect to find disease . . . . If you are going to cath this patient, [who] is in a higher risk category being an elderly female with . . . diminished injection fraction . . . why put the patient through two procedures. I would have to do a diagnostic catheterization at one center and do some type of intervention at another center. So, I would opt to transfer that patient to a tertiary care center and do the diagnostic catheterization there. (Tr. 1764, 1765). Furthermore, regardless of what procedure had been performed, the significant left main blockage that existed prior to the patient’s presentation at Brandon E.R. meant that the likely outcome would be death. The second of the patients Dr. Gandhi transferred to St. Joseph’s was a 74-year-old woman. Dr. Gandhi performed “a heart catheterization at 5:00 on Friday.” (Tr. 2267). The cath revealed a 90 percent blockage of the major artery of the heart, another widow-maker. Again, Dr. Gandhi recommended bypass surgery and contacted a surgeon at St. Joseph’s. The transfer, however, was not immediate. “Finally, at approximately 11:00 the patient went to St. Joseph’s Hospital. That night she was operated on . . . ”. (Tr. 2267). If Brandon had had open heart surgery capability, “[t]hat would have increased her chances of survival.” No competent evidence was admitted that showed the outcome, however, and as Dr. Randall pointed out, the medical records of the patient do not reveal the outcome. The patient who was transferred to Tampa General (the third of Dr. Ghandhi's patients) had presented at Brandon’s ER on February 15, 2000. Fifty-six years old and a heavy smoker with a family history of heart disease, she complained of severe chest pain. She received thrombolysis and was stabilized. She had presented with a myocardial infarction but it was complicated by congestive heart failure. After waiting three days for the myocardial infarction to subside, Dr. Gandhi performed cardiac catheterization. The patient “was surviving on only one blood vessel in the heart, the other two vessels were 100 percent blocked. She arrested on the table.” (Tr. 2271). After Dr. Gandhi revived her, he made arrangements for her transfer by helicopter. The transfer was done by helicopter for two reasons: traffic problems and because she had an intra-aortic balloon pump and there are a limited number of ambulances with intra- aortic balloon pump maintenance capability. If Brandon had had the ability to conduct open heart surgery, the patient would have had a better likelihood of successful outcome: “the surgeon would have taken the patient straight to the operating room. That patient would not have had a second arrest as she did at Tampa General.” (Tr. 2273). Marc Bloom, M.D., is a cardiothoracic surgeon. He performs open-heart surgery at UCH, where he is the chief of cardiac surgery. He reviewed the records of this 54-year-old woman. The records reflect that, in fact, upon presentation at Brandon’s E.R., the patient’s heart failure was very serious: She had an echocardiogram done that . . . showed a 20 percent ejection fraction . . . I mean when you talk severe, this would be classified as a severe cardiac compromise with this 20 percent ejection fraction. (Tr. 2712). Once stabilized, the patient should have been transferred for cardiac catheterization to a hospital with open- heart surgery instead of having cardiac cath at Brandon. It is true that delay in the transfer once arrangements were made was a problem. The greater problem for the patient, however, was in her management at Brandon. It was very likely that open heart surgery would be required in her case. She should have been transferred prior to the catheterization as soon as became known the degree to which her heart was compromised, that is, once the results of the echocardiogram were known. Adam J. Cohen, M.D., is a cardiologist with Diagnostic Consultative Cardiology, a group located in Brandon that provides cardiology services in Hillsborough County. Dr. Cohen provided evidence of five patients who presented at Brandon and whose treatments were delayed because of the need for a transfer. The first of these patients was a 76-year old male who presented to Brandon’s ER on April 6, 1999. Dr. Cohen considered him to be suffering “a complicated myocardial infarction.” (Brandon Ex. 45, p. 43) Cardiac catheterization conducted by Dr. Cohen showed “severe multi-vessel coronary disease, cardiogenic shock, severely impaired [left ventricular] function for which an intra-aortic balloon pump was placed . . .”. (Id.) During the placement of the pump, the patient stopped breathing and lost pulse. He was intubated and stabilized. A helicopter transfer was requested. There was only one helicopter equipped to conduct the transfer. Unfortunately, “the same day . . . there was a mass casualty event within the City of Tampa when the Gannet Power Plant blew up . . .”. (Brandon Ex. 45, p. 44). An appropriate helicopter could not be secured. Dr. Cohen did not learn of the unavailability of helicopter transport for an hour after the request was made. Eventually, the patient was transferred by ambulance to UCH. There, he received angioplasty and “stenting of the right coronary artery times two.” (Id., at p. 47.) After a slow recovery, he was discharged on April 19. In light of the patient’s complex cardiac condition, he received a good outcome. This patient is an example of another patient who should have been transferred sooner from Brandon since Brandon does not have open heart surgery capability. The second of Dr. Cohen’s patients presented at Brandon’s E.R. at 10:30 p.m. on June 14, 1999. He was 64 years old with no risk factors for coronary disease other than high blood pressure. He was evaluated and diagnosed with “a large and acute myocardial infarction” Two hours later, the therapy was considered a failure because there was no evidence that the area of the heart that was blocked had been reperfused. Dr. Cohen recommended transfer to UCH for a salvage angioplasty. The call for a helicopter was made at 12:58 a.m. (early the morning of June 15) and the helicopter arrived 40 minutes later. At UCH, the patient received angioplasty procedure and stenting of two coronary arteries. He suffered “[m]oderately impaired heart function, which is reflective of myocardial damage.” (Brandon Ex. 45, p. 58). If salvage angioplasty with open heart backup had been available at Brandon, the patient would have received it much more quickly and timely. Whether the damage done to the patient’s heart during the episode could have been avoided by prompt angioplasty at Brandon is something Dr. Cohen did not know. As he put it, “I will never know, nor will anyone else know.” (Brandon Ex. 45, p. 60). The patient later developed cardiogenic shock and repeated ventricular tachycardia, requiring numerous medical interventions. Because of the interventions and mechanical trauma, he required surgery for repair of his right femoral artery. The patient recently showed an injection fraction of 45 percent below the minimum for normal of 50 percent. The third patient was a 51-year-old male who had undergone bypass surgery 19 years earlier. After persistent recurrent anginal symptoms with shortness of breath and diaphoresis, he presented at Brandon’s E.R. at 1:00 p.m. complaining of heavy chest pain. Thrombolytic therapy was commenced. Dr. Cohen described what followed: [H]he had an episode of heart block, ventricular fibrillation, losing consciousness, for which he received ACLS efforts, being defibrillated, shocked, times three, numerous medications, to convert him to sinus rhythm. He was placed on IV anti- arrhythmics consisting of amiodarone. The repeat EKG showed a worsening of progression of his EKG changes one hour after the initiation of the TPA. Based on that information, his clinical scenario and his previous history, I advised him to be transferred to University Hospital for a salvage angioplasty. (Brandon Ex. 45, p. 62). Transfer was requested at 1:55 p.m. The patient departed Brandon by helicopter at 2:20 p.m. The patient received the angioplasty at UCH. Asked how the patient would have benefited from angioplasty at Brandon without having to have been transferred, Dr. Cohen answered: In a more timely fashion, he would have received an angioplasty to the culprit lesion involved. There would have been much less occlusive time of that artery and thereby, by inference, there would have been greater salvage of myocardium that had been at risk. (Brandon Ex. 45, p. 65). The patient, having had bypass surgery in his early thirties, had a reduced life expectancy and impaired heart function before his presentation at Brandon in June of 1999. The time taken for the transfer of the patient to UCH was not inordinate. The transfer was accomplished with relative and expected dispatch. Nonetheless, the delay between realization at Brandon of the need for a salvage angioplasty and actual receipt of the procedure after a transfer to UCH increased the potential for lost myocardium. The lack of open heart services at Brandon resulted in reduced life expectancy for a patient whose life expectancy already had been diminished by the early onset of heart disease. The fourth patient of Dr. Cohen’s presented to Brandon’s E.R. at 8:30, the morning of August 29, 1999. A fifty-four-year-old male, he had been having chest pain for a month and had ignored it. An EKG showed a complete heart block with atrial fibrillation and change consistent with acute myocardial infarction. Thrombolytic therapy was administered. He continued to have symptoms including increased episodes of ventricular arrhythmias. He required dopamine for blood pressure support due to his clinical instability and the lack of effectiveness of the thrombolytics. The patient refused a transfer and catheterization at first. Ultimately, he was convinced to undergo an angioplasty. The patient was transferred by helicopter to UCH. The patient was having a “giant ventricular infarct . . . a very difficult situation to take care of . . . and the majority of [such] patients succumb to [the] disease . . .”. (Tr. 2703). The cardiologist was unable to open the blockage via angioplasty. Dr. Bloom was called in but the patient refused surgical intervention. After interaction with his family the patient consented. Dr. Bloom conducted open heart surgery. The patient had a difficult post-operative course with arrythmias because “[h]e had so much dead heart in his right ventricle . . .”. (Id.) The patient received an excellent outcome in that he was seen in Dr. Bloom’s office with 40 percent injection fraction. Dr. Bloom “was just amazed to see him back in the office . . . and amazed that this man is alive.” (Tr. 2704). Most of the delay in receiving treatment was due to the patient’s reluctance to undergo angioplasty and then open heart surgery. The fifth patient of Dr. Cohen’s presented at Brandon’s E.R. on March 22, 2000. He was 44 years old with no prior cardiac history but with numerous risk factors. He had a sudden onset of chest discomfort. Lab values showed an elevation consistent with myocardial injury. He also had an abnormal EKG. Dr. Cohen performed a cardiac cath on March 23, 2000. The procedure showed a totally occluded left anterior descending artery, one of the three major arteries serving the heart. Had open heart capability been available at Brandon, he would have undergone angioplasty and stenting immediately. As it was, the patient had to be transferred to UCH. A transfer was requested at 10:25 that morning and the patient left Brandon’s cath lab at 11:53. Daniel D. Lorch, M.D., is a specialist in pulmonary medicine who was accepted as an expert in internal medicine, pulmonary medicine and critical care medicine, consistent with his practice in a “five-man pulmonary internal medicine critical care group.” (Brandon Ex. 42, p. 4). Dr. Lorch produced medical records for one patient that he testified about during his deposition. The patient had presented to Brandon’s E.R. with an MI. He was transferred to UCH by helicopter for care. Dr. Lorch supports Brandon’s application. As he put it during his deposition: [Brandon] is an extremely busy community hospital and we are in a very rapidly growing area. The hospital is quite busy and we have a large number of cardiac patients here and it is not infrequently that a situation comes up where there are acute cardiac events that need to be transferred out. (Brandon Ex. 42, p. 20). Transfers Following Diagnostic Cardiac Catheterization Brandon transfers a high number cardiac patients for the provision of angioplasty or open heart surgery in addition to those transferred under emergency conditions. In 1996, Brandon performed 828 diagnostic cardiac catheterization procedures. Of this number, 170 patients were transferred to existing providers for open heart surgery and 170 patients for angioplasty. In 1997, Brandon performed 863 diagnostic catheterizations of which 180 were transferred for open heart surgery and 159 for angioplasty. During 1998, 165 patients were transferred for open heart surgery and 161 for angioplasty out of 816 diagnostic catheterization procedures. For the first nine months of 1999, Brandon performed 639 diagnostic catheterizations of which 102 were transferred to existing providers for open heart surgery and 112 for angioplasty. A significant number of patients are transferred from Brandon for open heart surgery services. These transfers are consistent with the norm in Florida. After all, open heart surgery is a tertiary service. Patients are routinely transferred from most Florida hospitals to tertiary hospitals for OHS and PCTA. The large majority of Florida hospitals do not have OHS programs; yet, these hospitals receive patients who need OHS or PTCA. Transfers, although the norm, are not without consequence for some patients who are candidates for OHS or PCTA. If Brandon had open heart and angioplasty capability, many of the 1220 patients determined to be in need of angioplasty or open heart surgery following a diagnostic catheterization procedure at Brandon could have received these procedures at Brandon, thereby avoiding the inevitable delay and stress occasioned by transfer. Moreover, diagnostic catheterizations and angioplasties are often performed sequentially. Therefore, Brandon patients determined to be in need of angioplasty following a diagnostic catheterization would have had access to immediate angioplasty during the same procedure thus reducing the likelihood of a less than optimal outcome as the result of an additional delay for transfer. Adverse Impact on Existing Providers Competition There is active competition and available patient choices now in Brandon's PSA. As described, there are many OHS programs currently accessible to and substantially serving Brandon's PSA. There is substantial competition now among OHS providers so as to provide choices to PSA residents. There are no financial benefits or cost savings accruing to the patient population if Brandon is approved. Brandon does not propose lower charges than the existing OHS providers. Balanced Budget Act The Balanced Budget Act of 1997 has had a profound negative financial impact on hospitals throughout the country. The Act resulted in a significant reduction in the amount of Medicare payments made to hospitals for services rendered to Medicare recipients. During the first five years of the Act's implementation, Florida hospitals will experience a $3.6 billion reduction in Medicare revenues. Lakeland will receive $17 million less, St.Joseph's will receive $44 million less, and Tampa General will receive $53 million less. The impact of the Act has placed most hospitals in vulnerable financial positions. It has seriously affected the bottom line of all hospitals. Large urban teaching hospitals, such as TGH, have felt the greatest negative impact, due to the Act's impact on disproportionate share reimbursement and graduate medical education payment. The Act's impact upon Petitioners render them materially more vulnerable to the loss of OHS/PTCA revenues to Brandon than they would have been in the absence of the Act. Adverse Impact on Tampa General Tampa General is the "safety net provider" for Hillsborough County. Tampa General is a Medicaid disproportionate share provider. In fiscal year 1999, the hospital provided $58 million in charity care, as that term is defined by AHCA. Tampa General plays a unique, essential role in Hillsborough County and throughout West Central Florida in terms of provision of health care. Its regional role is of particular importance with respect to Level I trauma services, provision of burn care, specialized Level III neonatal and perinatal intensive care services, and adult organ transplant services. These services are not available elsewhere in western or central Florida. In fiscal year 1999, Tampa General experienced a net loss of $12.6 million in providing the services referenced above. It is obligated under contract with the State of Florida to continue to provide those services. Tampa General is a statutory teaching hospital. In fiscal year 1999, it provided unfunded graduate medical education in the amount of $19 million. Since 1998, Tampa General has consistently experienced losses resulting from its operations, as follows: FY 1998-$29 million, FY 1999-$27 million; FY 2000 (5 months)-$10 million. The hospital’s financial condition is not the result of material mismanagement. Rather, its financial condition is a function of its substantial provision of charity and Medicaid services, the impact of the Act, reduced managed care revenues, and significant increases in expense. Tampa General’s essential role in the community and its distressed financial condition have not gone unnoticed. The Greater Tampa Chamber of Commerce established in February of 2000 an Emergency Task Force to assess the hospital's role in the community, and the need for supplemental funding to enable it to maintain its financial viability. Tampa General requires supplemental funding on a continuing basis in order to begin to restore it to a position of financial stability, while continuing to provide essential community services, indigent care, and graduate medical education. It will require ongoing supplemental funding of $20- 25 million annually to avoid triggering the default provision under its bond covenants. As of the close of hearing, the 2000 session of the Florida Legislature had adjourned. The Legislature appropriated approximately $22.9 million for Tampa General. It is, of course, uncertain as to what funding, if any, the Legislature will appropriate to the hospital in future years, as the terms which constitute the appropriations must be revisited by the Legislature on an annual basis. Tampa General has prepared internal financial projections for its fiscal years 2000-2002. It projects annual operating losses, as follows: FY 2000-$20.1 million; FY 2001- $20.6 million; FY 2002-$31.9 million. While its projections anticipate certain "strategic initiatives" that will enhance its financial condition, including continued supplemental legislative funding, the success and/or availability of those initiatives are not "guaranteed" to be successful. If the Brandon program is approved, Tampa General will lose 93 OHS cases and 107 angioplasty cases during Brandon's second year of operation. That loss of cases will result in a $1.4 million annual reduction in TGH's net income, a material adverse impact given Tampa General’s financial condition. OHS services provide a positive contribution to Tampa General's financial operations. Those services constitute a core piece of Tampa General's business. The anticipated loss of income resulting from Brandon's program pose a threat to the hospital’s ability to provide essential community services. Adverse Impact on UCH UCH operated at a financial break-even in its fiscal year 1999. In the first five months of its fiscal year 2000, the hospital has experienced a small loss. This financial distress is primarily attributed to less Medicare reimbursement due to the Act and less reimbursement from managed care. UCH's reimbursement for OHS services provides a good example of the financial challenges facing hospitals. In 1999, UCH's net income per OHS case was reduced 33 percent from 1998. Also in 1999, UCH received OHS reimbursement of only 32 percent of its charges. UCH would be substantially and adversely impacted by approval of Brandon's proposal. As described, UCH currently is a substantial provider of OHS and angioplasty services to residents of Brandon's PSA. There are many cardiologists on staff at Brandon who also actively practice at UCH. UCH is very accessible from Brandon's PSA. UCH reasonably projects to lose the following volumes in the first three years of operation of the proposed program: a loss of 78-93 OHS procedures, a loss of 24-39 balloon angioplasties, and a loss of 97-115 stent angioplasties. Converting this volume loss to financial terms, UCH will suffer the following financial losses as a direct and immediate result of Brandon being approved: about $1.1 million in the first year, and about $1.2 million in the second year, and about $1.3 million in the third year. As stated, UCH is currently operating at about a financial break-even point. The impact of the Balanced Budget Act, reduced managed care reimbursement, and UCH's commitment to serve all patients regardless of ability to pay has a profound negative financial impact on UCH. A recurring loss of more than $1 million dollars per year due to Brandon's new program will cause substantial and adverse impact on UCH. Adverse Impact on St. Joseph’s If Brandon's application is approved, St. Joseph’s will lose 47 OHS cases and 105 PTCA cases during Brandon's second year. That loss of cases will result in a $732,000 annual reduction in SJH's net income. That loss represents a material impact to SJH. Between 1997 and 2000, St. Joseph’s has experienced a pattern of significant deterioration in its financial performance. Its net revenue per adjusted admission had been reduced by 12 percent, while its costs have increased significantly. St. Joseph's net income from operations has deteriorated as follows: FYE 6/30/97-$31 million; FYE 12/31/98- $24 million; FYE 12/31/99-$13.8 million. A net operating income of $13.8 million is not much money relative to St Joseph's size, the age of its physical plant, and its need for capital to maintain and improve its facilities in order to remain competitive. St. Joseph’s offers a number of health care services to the community for which it does not receive reimbursement. Unreimbursed services include providing hospital admissions and services to patients of a free clinic staffed by volunteer members of SJH's medical staff, free immunization programs to low-income children, and a parish nurse program, among others. St. Joseph’s evaluates such programs annually to determine whether it has the financial resources to continue to offer them. During the past two years, the hospital has been forced to eliminate two of its free community programs, due to its deteriorating financial condition. St. Joseph’s anticipates that it will have to eliminate additional unreimbursed community services if it experiences an annual reduction in net income of $730,000. Adverse Impact to LRMC The approval of Brandon will have an impact on Lakeland. Lakeland will suffer a financial loss of about $253,000 annually. This projection is based on calculated contribution margins of OHS and PTCA/stent procedures performed at the hospital. A loss of $253,000 per year is a material loss at Lakeland, particularly in light of its slim operating margin and the very substantial losses it has experienced and will continue to experience as a result of the Balanced Budget Act of 1997. In addition to the projected loss of OHS and other procedures based upon Brandon's application, Lakeland may experience additional lost cases from areas such as Bartow and Mulberry from which it draws patients to its open heart/cardiology program. Lakeland will also suffer material adverse impacts to its OHS program due to the negative effect of Brandon's program on its ability to recruit and retain nurses and other highly skilled employees needed to staff its program. The approval of Brandon will also result in higher costs at existing providers such as Lakeland as they seek to compete for a limited pool of experienced people by responding to sign-on bonuses and by reliance on extensive temporary nursing agencies and pools. Nursing Staff/Recruitment The staffing patterns and salaries for Brandon's projected 40.1 full-time equivalent employees to staff its open heart surgery program are reasonable and appropriate. Filling the positions will not be without some difficulty. There is a shortage for skilled nursing and other personnel needed for OHS programs nationally, in Florida and in District 6. The shortage has been felt in Hillsborough County. For example, it has become increasingly difficult to fill vacancies that occur in critical nursing positions in the coronary intensive care unit and in telemetry units at Tampa General. Tampa General's expenses for nursing positions have "increased tremendously." (Tr. 2622). To keep its program going, the hospital has hired "travelers . . . short-term employment, registered nurses that come from different agencies, . . . with [the hospital] a minimum of 12 weeks." (Tr. 2622). In fact, all hospitals in the Tampa Bay area utilize pool staff and contract staff to fill vacancies that appear from time-to- time. Use of contract staff has not diminished quality of care at the hospitals, although "they would not be assigned to the sickest patients." (Tr. 2176). Another technique for dealing with the shortage is to have existing full-time staff work overtime at overtime pay rates. St. Joseph's and Lakeland have done so. As a result, they have substantially exceeded their budgeted salary expenses in recent months. It will be difficult for Brandon to hire surgical RNs, other open heart surgery personnel and critical care nurses necessary to staff its OHS program. The difficulty, however, is not insurmountable. To meet the difficulty, Brandon will move members of its present staff with cardiac and open heart experience into its open heart program. It will also train some existing personnel in conjunction with the staff and personnel at Bayonet Point. In addition to drawing on the existing pool of nurses, Brandon can utilize HCA's internal nationwide staffing data base to transfer staff from other HCA facilities to staff Brandon's open heart program. Approximately 18 percent of the nurses hired at Brandon already come from other HCA facilities. The nursing shortage has been in existence for about a decade. During this time, other open heart programs have come on line and have been able to staff the programs adequately. Lakeland, in District 6, has demonstrated its ability to recruit and train open heart surgery personnel. Brandon, itself, has been successful, despite the on- going shortage, in appropriately staffing its recent additions of tertiary level NICU beds, an expanded Emergency Room, labor and delivery and recovery suites, and new high-risk, ante-partum observation unit. Brandon has begun to offer sign-on bonuses to compete for experienced nurses. Several employees who staff the Lakeland, UCH and Tampa General programs live in Brandon. These bonuses are temptations for them to leave the programs for Brandon. Other highly skilled, experienced individuals who already work at existing programs may be lost to Brandon's program as well simply as the natural result of the addition of a new program. In the end, Brandon will be able to staff its program, but it will make it more difficult for all of the programs in Hillsborough County and for Lakeland to meet their staffing needs as well as producing a financial impact on existing providers. Financial Feasibility Short-Term Brandon needs $4.2 million to fund implementation of the program. Its parent corporation, HCA will provide financing of up to $4.5 million for implementation. The $4.2 million in start-up costs projected by Brandon does not include the cost of a second cath lab or the costs to upgrade the equipment in the existing cath lab. Itemization of the funds necessary for improvement of the existing cath lab and the addition of the second cath lab were not included in Brandon's pro formas. It is the Agency's position that addition of a cath lab (and by inference, upgrade to an existing lab) requires only a letter of exemption as projects separate from an open heart surgery program even when proposed in support of the program. (See UCH No. 7, p. 83). The position is not inconsistent with cardiac catheterization programs as subject to requirements in law separate from those to which an open heart surgery program is subject. Brandon, through HCA, has the ability to fund the start-up costs of the project. It is financially feasible in the short-term. Long-Term Open heart surgery programs (inclusive of angioplasty and stent procedures, as well as other open heart surgery procedures) generally are very profitable. They are among the most profitable of programs conducted by hospitals. Brandon's projected charges for open heart, angioplasty, and stent procedures are based on the average charges to patients residing in Brandon's PSA inflated at 2 percent per year. The inflation rate is consistent with HCFA's August 1, 2000, Rule implementing a 2.3 percent Medicare reimbursement increase. Brandon's projected payor mix is reasonably based on the existing open heart, angioplasty, and stent patients within its PSA. Brandon also estimated conservatively that it would collect only 45 to 50 percent of its charges from third-party payors. To determine expenses, Brandon utilized Bayonet Point's accounting system. It provided a level of detail that could not be obtained otherwise. "For patients within Brandon's primary service area, . . . that information is not provided by existing providers in the area that's available for any public consumption." (Tr. 1002). While perhaps the most detailed data available, Bayonet Point data was far from an ideal model for Brandon. Bayonet Point performs about 1,500 OHS cases per year. It achieves economies of scale that will not be achievable at Brandon in the foreseeable future. There is a relationship between volume and cost efficiency. The higher the volume, the greater the cost efficiency. Brandon's volume is projected to be much lower than Bayonet Point's. To make up for the imperfection of use of Bayonet Point as an "expenses" proxy, Brandon's financial expert in opining that the project was feasible in the long-term, considered two factors with regard to expenses. First, it included its projected $1.8 million in salary expenses as a separate line item over and above the salary expenses contained in the Bayonet Point data. (This amounted to a "double" counting of salary expenses.) Second, it recognized HCA's ability to obtain competitive pricing with respect to equipment and services for its affiliated hospitals, Brandon being one of them. Brandon projected utilization of 249 and 279 cases in its second and third year of operations. These projections are reasonable. (See the testimony of Mr. Balsano on rebuttal and Brandon Ex. 74). Comparison of Agency Action in CONs 9169 and 9239 Brandon's application in this case, CON 9239, was filed within a six-month period of the filing of an earlier application, CON 9169. The Agency found the two applications to be similar. Indeed, the facts and circumstances at issue in the two applications other than the updating of the financial and volume numbers are similar. So is the argument made in favor of the applications. Yet, the first application was denied by the Agency while the second received preliminary approval. The difference in the Agency's action taken on the later application (the one with which this case is concerned), i.e., approval, versus the action taken on the earlier, denial, was explained by Scott Hopes, the Chief of the Bureau of Certificate of Need at the time the later application was considered: The [later] Brandon application . . ., which is what we're addressing here today, included more substantial information from providers, both cardiologists, internists, family practitioners and surgeons with specific case examples by patient age [and] other demographics, the diagnoses, outcomes, how delays impacted outcomes, what permanent impact those adverse outcomes left the patient in, where earlier . . . there weren't as many specifics. (Tr. 1536, 1537). A comparison of the application in CON 9169 and the record in this case bears out Mr. Hopes' assessment that there is a significant difference between the two applications. Comparison of the Agency Action with the District 9 Application During the same batching cycle in which CON 9239 was considered, five open heart surgery applications were considered from health care providers in District 9. Unlike Brandon's application, these were all denied. In the District 9 SAAR, the Agency found that transfers are an inherent part of OHS as a tertiary service. The Agency concluded that, "[O]pen heart surgery is a tertiary service and patients are routinely transferred between hospitals for this procedure." (UCH Ex. 7, pp. 51-54). In particular, the Agency recognized Boca Raton's claim that it had provided "extensive discussion of the quality implications of attempting to deal with cardiac emergencies through transfer to other facilities." (UCH Ex. 7, p. 52). Unlike the specific information referred to by Mr. Hopes in his testimony quoted, above, however, the foundation for Boca Raton's argument is a 1999 study published in the periodical Circulation, entitled "Relationship Between Delay in Performing Direct Coronary Angioplasty and Early Clinical Outcomes." (UCH Ex. 7, p. 21). This publication was cited by the Agency in its SAAR on the application in this case. Nonetheless, a fundamental difference remains between this case and the District 9 applications, including Boca Raton's. The application in this case is distinguished by the specific information to which Mr. Hopes alluded in his testimony, quoted above.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered granting the application of Galencare, Inc., d/b/a Brandon Regional Hospital for open heart surgery, CON 9239. DONE AND ENTERED this 30th day of March, 2001, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 2001. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Richard A. Patterson, Esquire Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 North Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 James C. Hauser, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 John H. Parker, Jr., Esquire Jonathan L. Rue, Esquire Sarah E. Evans, Esquire Parker, Hudson, Rainer & Dobbs 1500 Marquis Two Tower 285 Peachtree Center Avenue, Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact Galencare, Inc., d/b/a Northside Hospital ("Northside") and NME Hospitals, Inc., d/b/a Palms of Pasadena Hospital ("Palms") were litigants in administrative proceedings concerning the Agency For Health Care Administration's ("AHCA's") preliminary action on certificate of need applications. Northside moved to dismiss Palms' application based on defects in the corporate resolution. The resolution is as follows: RESOLVED, that the Corporation be and hereby is authorized to file a Letter of Intent and Certificate of Need Application for an adult open heart surgery program and the designation of three medical/surgical beds as a Coronary Intensive Care Unit as more specifically described by the proposed Letter of Intent attached hereto. RESOLVED, that the Corporation is hereby authorized to incur the expenditures necessary to accomplish the aforesaid proposed project. RESOLVED, that if the aforedescribed Certificate of Need is issued to the Corporation by the Agency for Health Care Administration, the Corporation shall accomplish the proposed project within the time allowed by law, and at or below the costs contained in the aforesaid Certificate of Need Application. RESOLVED, that the Corporation certifies that it shall appropriately license and immediately there- after operate the open heart surgery program. In its Motion, Northside claimed that the third and fourth clauses in the Resolution are defective, the third clause because it does not "certify" that the time and cost conditions will be met and the fourth for omitting "adult" to describe the proposed open heart surgery program. Northside relies on the language of the statute requiring that a resolution shall contain statements . . .authorizing the filing of the application described in the letter of intent; authorizing the applicant to incur the expenditures necessary to accomplish the proposed project; certifying that if issued a certificate, the applicant shall accomplish the proposed project within the time allowed by law and at or below the costs contained in the application; and certifying that the applicant shall license and operate the facility. Subsection 408.039(2)(c), Florida Statutes. Northside also relies on Rule 59C-1.008(1)(d), which is as follows: The resolution shall contain, verbatim, the requirements specified in paragraph 408.039 (2)(c), F.S., . . . Palms' filed the Motion For Sanctions against Northside on November 15, 1993, pursuant to Subsection 120.57(1)(b)5 for filing a frivolous motion for an improper purpose, needlessly increasing the cost of the litigation, with no legal basis. Northside's claims that the Resolution was defective were rejected in the Recommended Order of Dismissal of January 11, 1994, amended and corrected on January 26, 1994, and not discussed in AHCA's Final Order of March 15, 1994.
Findings Of Fact Petitioner's name and address are North Broward Hospital District d/b/a North Broward Medical Center, 201 E Sample Road, Pompano Beach, Florida 33604. The North Broward Hospital District is a Special Taxing District created by the Florida Legislature. It currently owns and operates three public, nonprofit hospitals in Broward County including Broward General Medical Center ("BGMC") and North Broward Medical Center Respondent, Department of Heath and Rehabilitative Services ("HRS"), is responsible for the administration of Section 381.493 through 381.499, Fla. Stat. ("the CON statute"), and Fla. Administrative Code Ch. 10-5 ("the CON rules"). Under the foregoing, authorities, HRS reviews applications for CONs to construct, purchase or otherwise implement certain new health care facilities and new institutional health care services, as defined by the CON statute. One of these new institutional health care services subject to HRS' review under the CON statute and CON rules is open-heart surgery service, as defined in Fla. Admin. Code Rule 10-5.11(16)(a). By formal application under the CON statute and CON rules which was deemed complete by HRS effective October 16, 1985, NBMC applied for a certificate of need ("CON") to institute an open-heart surgery service at 201 E. Sample Road, Pompano Beach, Florida 33604. Exhibit "A" is a true, correct, and authentic copy of NBMC's application for certificate of need for open-heart surgery. NBMC's application was denied by HRS by letter dated February 28, 1986, received by NBMC open March 10, 1986. Exhibit "B" is a true, correct, and authentic copy of said letter. Publication of the denial appears at Vol. 12; No. 11, Florida Administrative Weekly (March 14, 1986). HRS' basis for denying the application is contained in the "State Agency Action Report". Exhibit "C" is a true, correct, and authentic copy of HRS' State Agency Action Report pertaining to NBMC's application. NBMC has petitioned HRS for formal Section 120.57(1), Fla. Stat., administrative proceedings challenging the denial of its application for open- heart surgery. Exhibit "D" is a true, correct, and authentic copy of that petition. In its application, NBMC stated that one of its sister hospitals, BGMC, currently provided open-heart surgical services. NBMC proposed in its application to utilize the same open-heart surgical team at NBMC as was then practicing at BGMC. Applicants for CONs for open-heart surgery services must satisfy certain regulatory standards prescribed in CON Rule 10-5.11(16). These standards include: (k)1. There shall be no additional open- heart surgery programs established unless: The service volume of each existing and approved open-heart surgery program within the service area is operating at and is and expected to continue to operate at a minimum of 350 adult open-heart surgery cases per year or 130 pediatric heart cases per year; and The conditions specified in (e)4., above will be met by the proposed program. (E.S.) Rule 10-5.11(16)(e)4. provides in pertinent part as follows: There shall be a minimum of 200 adult open- heart procedures performed annually, within three years after initiation of service, an any institution in which open-heart surgery is performed for adults. (E.S.) Exhibit "E" is a true, correct, and authentic copy of CON Rule 10-5.11(16). 10. In 43 Fed. Reg. 13040, 13048 (March 28, 1978) (42 C.F.R. 121.207), the Secretary of the United States Department of Health and Human Services ("HHS") set forth the federal CON standards for open-heart surgery, as part of the National Guidelines for Health Planning. The National Guidelines for Health Planning are referenced in HRS's State Agency Action Report. Exhibit "F" is a true, correct, and authentic copy of that portion of the Nation Guidelines for Health Planning which pertain to the implementation of open-heart surgery services. The National Guidelines for Health Planning also provide that approval of new open-heart surgery services should be contingent upon existing units operating and continuing to operate at a level of at least 350 procedures per year. The National Guidelines for Health Planning further provide as follows: In some areas, open-heart surgical teams, including surgeons and specialized technologists, are utilizing more than one institution. For these institutions, the guidelines may be applied to the combined number of open-heart procedures performed by the surgical team where an adjustment is justifiable in line with Section 121.6(B) and promotes more cost effective use of available facilities and support personnel. In such cases, in order to maintain quality care a minimum of 75 open-heart procedures in any institution is advisable, which is consistent with recommendations of the American College of Surgeons. (E.S.) HRS' CON Rule 10-5.11(16); which contains the "350" standard, does not contain any comparable exception for institutions sharing open-heart surgical teams. NBMC's application for CON projects 200 open-heart surgeries by the end of the third year of operations and, when combined with BGMC's open-heart procedures satisfies the exception contained in the National Guidelines for Health Planning, as described above. There are no disputed issues of material fact that will require an evidentiary hearing in this matter. The parties therefore agree that the matter shall be submitted pursuant to legal memoranda and oral argument. The parties' legal memoranda will be due on June 17, 1986, and oral argument will be held on the scheduled hearing date of June 19, 1986. The parties agree to allow responses to the legal memoranda, which responses shall be submitted no later than June 26; 1986.
The Issue The issue in this case is whether Venice Hospital, Inc., (Venice) meets the statutory and rule criteria for a Certificate of Need (CON) to operate an open heart surgery program, and therefore, whether the Department of Health and Rehabilitative Services (Department) should approve its CON Application Number 5715.
Findings Of Fact The Parties 1. Venice is a 342 bed general hospital located in Venice, Florida, which is in south Sarasota County and is a part of the Department's Service District There are no subdistricts in District 8 for open heart surgery. The majority of patients served by Venice are from 50-55 years of age or older, and 22%-25% of patients admitted to Venice have a primary diagnosis of heart disease. If patients with heart disease as a secondary diagnosis are considered along with those who have this as their primary diagnosis, the total represents over 40% of all patients admitted at Venice. Of the cardiac catheterization patients treated at Venice in 1988, 78% were Medicare patients. Venice is a Medicaid provider, projecting 1.6% of its total revenue from Medicaid. It has a critical care center with 32 beds capable of invasive monitoring, multi-infusion of medications, pacemakers, Swans Ganz catheters, and care of post- catheterization patients. A separate 8-bed unit has been designated for use by open heart patients, with the same monitoring capability as the remainder of the unit. Memorial is an acute care hospital located in Sarasota, Florida, and is governed by the Sarasota County Public Hospital Board, which is elected to provide health care services to all residents of Sarasota County. It provides a full range of services, including an open heart surgery program, and is the largest provider of services to medically indigent and Medicaid patients in Sarasota County. Medical Center is a 208 bed not-for-profit hospital located in Punta Gorda, Florida, which has provided cardiac catheterization since 1985, and has been approved to initiate an open heart surgery program which is scheduled to open in late 1989. It has a 5% Medicaid payor mix. The primary service area for Medical Center is Charlotte County. Its secondary service area includes south Sarasota County. Both Memorial and Medical Center are also located in District 8, with Venice located between these facilities. Venice is approximately 35 miles to the north of Medical Center, and about 25 miles to the south of Memorial. There are two existing open heart programs in District 8, one at Memorial and the other at Southwest Regional Medical Center in Ft. Myers. In addition, there are two approved, but not yet operational, open heart programs, one at Medical Center and the other at Lee Memorial in Ft. Myers. The Department is the state agency which is responsible for administering Sections 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for Certificates of Need (CON) are filed, reviewed, and either granted or denied by the Department. The Application On or about September 27, 1988, Venice filed an application with the Department for a CON to implement an open heart surgery program at its hospital in Venice, Florida, with a capital expenditure of $665,500. This application was designated as CON Application Number 5715. The Department reviewed this application, and in October, 1988, forwarded an omissions letter to Venice. Venice responded to the omissions letter, and addressed not only the items noted by the Department in its omissions letter, but also provided additional materials, information, and corrections not requested in the omissions letter. Effective on November 14, 1988, the Department deemed Venice's application complete. A public hearing was held on this application at the request of Memorial on November 18, 1988. Thereafter, the Department reviewed and considered all material received from the applicant, as well as the information received at the public hearing, and prepared its State Agency Action Report (SAAR) noticing its intent to grant CON 5715. Memorial and Medical Center timely filed petitions to challenge the Department's notice of intent to issue this CON. Venice is relying upon its application which was deemed complete and reviewed by the Department in its SAAR, and not upon its original application that was filed prior to the omissions letter. Additionally, the applicant is not relying upon a "not normal circumstance" justification for its application, but rather urges that it meets the statutory and rule criteria for the issuance of this CON. The Department's CON Manual HRSM 235-1, dated October 1, 1988, is irrelevant to this proceeding since it has not been adopted by, or incorporated in, a rule, and was not applied in the batching cycle in which Venice's application was filed, or in the subsequent batch. It has not yet been applied to any hospital CON application. Therefore, the matters contained within this Manual concerning what is a permissible response to an omissions letter have not been considered. As part of its originally filed application, Venice included a document prepared by Ernst & Whinney entitled, "Audited Financial Statements and Other Financial Information, Venice Hospital, Inc., June 30, 1987." Through a clerical error in the copying process, page one of this twenty-four page document was omitted. At the time it filed its omissions response, Venice included this missing first page which is signed on behalf of Ernst & Whinney, and which states that the examinations contained therein were made in accordance with generally accepted auditing standards. It expresses the opinion that these financial statements present fairly the financial position of the applicant. An auditor's opinion letter is an essential part of the audited financial statement which must be included with the CON application. However, Venice provided this inadvertently missing page prior to its application being deemed complete. Thus, it was available to, and was reviewed by, the Department in the preparation of the SAAR on this application. Venice's application did raise concerns which it was seeking to address concerning availability and accessibility by addressing the current practice of transferring patients requiring open heart surgery to other facilities. Patient costs for such transport, as well as patient risk, inconvenience and comfort for the patient and family members, were all referenced in the application. Additionally, testimony at the public hearing held on November 18, 1988, which the Department considered in the preparation of its SAAR, dealt with concerns and problems arising from patient transport, including delay, risks to the patient from ambulance or helicopter transfers, and adverse effects which may occur on quality of care through this practice which is inconsistent with the concept of a continuum of care. The SAAR specifically notes that Venice contends its proposal will improve geographic access in its immediate service area, and that from July, 1987 through June, 1988, it transferred 144 of its cardiac patients from its facility for open heart surgery and an additional 125 were transferred for angioplasty procedures. The application did not specifically address or identify any adverse impact which its approval would have on existing providers. However, evidence on this issue is admissible at hearing since it is relevant to the issue of the standing of Memorial and Medical Center, and also because it is relevant to establish whether approval of this application would be consistent with statutory and rule review criteria, and provisions of the Local Health Plan that require assessment of any such impact. The SAAR notes that Venice did contend that approval of this CON will not affect the economy or quality of existing services in the District. Stipulations The parties stipulated that: The project is financially feasible in the short term; Venice has a record of providing quality care and this record is not an issue in this case; Other than for open heart services, other facilities are adequate and available to act as alternatives; The size and cost of construction for Venice's proposal are appropriate; Open heart surgery programs currently exist within a two hour drive time under average driving conditions for at least 90% of the District's population; The type and cost of equipment in the application are reasonable; If approved, Venice will provide the services required by Rule 10- 5.011(1)(f)3a and 3b, Florida Administrative Code, and does provide the services shown at paragraph 3c of said Rule. State Health Plan Objective 4.2 of the State Health Plan applicable to this application is to "maintain an average of 350 open heart surgery procedures per program in each district through 1990." (Emphasis Supplied.) The goal set forth in the State Plan relative to open heart surgery programs is to ensure the appropriate availability of such services at reasonable costs. Venice's application is not consistent with Objective 4.2. If Venice's application were to be approved, there would be five programs in the District. The number of procedures projected for 1990 is 1683, and if 1683 is divided by 5 programs, the result is an average of only 337 procedures per program. The two existing providers in District 8 are currently performing over 1600 procedures annually, and as is discussed below, it does not appear that Venice itself will be able to achieve an acceptable level of service at any time established by the record in this case. Approval of this application will also significantly and adversely impact the ability of the two approved programs to achieve an acceptable level of service. In the State Health Plan narrative, it is recognized that "quality of patient care is a primary concern in open heart surgery programs due to the potential consequences to the patient of poorly trained and/or skilled staff.11 In order to ensure quality, and in recognition of the relationship between the volume of open heart surgery procedures and quality, the State Plan references the Department's requirement, set forth by Rule, that a minimum of 200 adult procedures be performed within 3 years of initiation of an open heart program. The narrative also notes that a broad range of services must be provided to fulfill the requirements of an open heart surgery program. Venice's application is partially consistent with these narrative statements in the State Health Plan since the parties have stipulated that it has a record of providing quality care, and it offers a complete range of services with departments within the hospital where a broad range of diagnostic techniques and expertise are available. However, it was not established that a minimum of 200 adult open heart surgical procedures will be performed at Venice within three years of initiation of this program. Local Health Plan Even though an applicant does not include within its application every element in a Local Health Plan which is relevant to its application, the Department itself will look at the applicable Local Plan to determine if an application is consistent therewith. The applicable District 8 Health Plan recommends that "existing facilities should be afforded the opportunity for expansion before developing a new cardiac surgical center." However, if a numeric need for an additional program is shown, and if existing facilities do not seek to expand their existing programs to meet such need, an application for a new program would not be inconsistent with this portion of the Local Health Plan. Under the facts of this case where there are no competing applications from hospitals with existing open heart surgery programs, and where a numeric need for one additional program in District 8 is projected by the Department's need methodology, Venice's application is consistent with this recommendation. The Local Plan also recommends that preference be given to applications for new or expanded programs which clearly document the impact of the proposed new service on existing providers in the District and adjacent Districts. As found above, Venice did not specifically address any adverse impact its proposal would have on existing providers, and therefore, its application is not consistent with this recommendation. The Department's Need Methodology and the "35O Rule" Rule 10-5.011(1)(f)8, Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for additional open heart surgery programs It provides a formula by which the number of open heart procedures for the horizon year, in this case 1990, are to be estimated. Pursuant to the formula, there are projected to be 1683 open heart surgery procedures performed in 1990 in District 8. This number of projected procedures is then divided by 350 procedures in order to determine the number of programs which will be needed. See Rule l0-5.011(1)(f)11b. Using this methodology, the Department has identified the need for 4.8, rounded to 5, programs in the District in the horizon year. Since there are currently 2 existing and 2 approved programs in District 8, the Department and Venice have concluded that there is a projected numeric need for Venice's additional program in 1990. There is a direct relationship between the volume of open heart surgery procedures performed at a facility and the quality of care provided at such facility, with lower mortality rates generally at hospitals with higher volumes than those with low volumes. Therefore, in addition to its numeric need calculation, the Department has also developed a "350 standard" to address patient safety and quality of care concerns by ensuring that each existing and approved open heart surgery program achieves a volume sufficient to assure quality and efficiency prior to approval of a new program. Rule 10- 5.011(1)(f)11aI, Florida Administrative Code, prohibits the establishment of new open heart surgery programs unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart cases per year. Memorial and Medical Center urge an interpretation and application of the 350 standard in a manner which would require each existing and approved program to actually operate at the level of 350 cases per year. Since approved programs are not yet operational, and therefore cannot operate at the 350 level, they argue that the intent of this standard, as set forth in the above-cited Rule, is to preclude the approval of any additional programs while there are approved programs, or existing programs which are not meeting the 350 standard. To the contrary, the Department and Venice urge that the 350 standard be applied by averaging the actual number of cases at existing programs, and the number of cases which are reasonably projected to be performed at approved programs. Under this interpretation, as long as the average between cases which are performed at existing, and which are reasonably projected to be performed at approved programs exceeds 350, then the further approval of an additional program is not prohibited. Having considered the testimony and evidence presented by the parties, and in particular the testimony of Eugene Nelson and Elizabeth Dudek, which is found to be more credible, consistent, and reasonable than the testimony of Michael Carroll and Harold Luft, it is found that the Department's interpretation and application of the 350 standard is reasonable and consistent with the terms of Rule 10- 5.011(1)(f)11aI. It is also noted that if the interpretation urged by Memorial and Medical Center were to be followed, it is inexplicable how there could presently be two approved, but not operational, open heart programs in District 8. The Department has consistently applied this 350 standard since its adoption in 1983 by averaging caseloads at existing programs and reasonably projected caseloads for approved programs. To interpret this standard as urged by Memorial and Medical Center would impose a moratorium on new open heart surgery programs while there is an already approved, but not operational, program in a District, or while a newly operational program has not yet attained the 350 standard. There is no basis for this prohibitory interpretation which would not only reduce competition, but would also be inconsistent with sound health planning and the State Health Plan Objective 4.2, as discussed above. Quality of Care Venice is accredited by the Joint Commission on Accreditation of Health Care Facilities for special care units, and it has been stipulated that it has a record of providing quality care in its existing programs and departments. On average, hospitals performing greater than 200 open heart procedures per year have superior surgical outcomes than hospitals doing less than 200 procedures. Mortality rates are significantly lower at hospitals performing more than 200 procedures annually than at those performing less. It was established that there is a direct relationship between volume of open heart surgical procedures and quality of care at facilities with open heart surgery programs. Therefore, the existence of more open heart programs than are truly needed in an area may result in some existing programs not achieving sufficient volume to assure patient safety and quality of care. Certainly, not every hospital should have an open heart program, but as long as there is sufficient volume to assure quality, the competition among programs will encourage quality care, and result in an overall increase in the quality of care provided at all departments in a hospital with an open heart program. Rule 10-5.011(1)(f)5d, Florida Administrative Code, was adopted by the Department in order to set forth the minimum volume deemed necessary to assure quality of care, and provides, in part: There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. Although Venice urges that it will be able to meet this threshold level within three years, it failed to establish by competent substantial evidence that it would actually attract the patients necessary to perform either the number of open heart procedures projected in its application, or this minimum number of 200 procedures required by the Department to assure quality of care in its third year of operation, given the current pattern of physician referrals in the area, its market share in relation to those of Memorial and Medical Center, and actual utilization levels for the existing District 8 programs at Memorial and Southwest Regional Medical Center, as is more fully discussed below. Without the assurance of sufficient volume to meet the 200 procedure threshold established by the Department by Rule, the validity of which is not at issue in this case, Venice has failed to show that it will be able to achieve and maintain a patient volume in its proposed program which will assure quality of care in its proposed open heart surgery program. Availability and Access While the addition of the Venice program would obviously increase the availability of services in the District, open heart surgery services are already reasonably available in District 8, especially in view of there being two approved programs which will become operational before 1990, the horizon year in this case, in addition to the two existing programs. The two hour travel time standard is already being met in District 8, as stipulated to by the parties. Geographic accessibility will not be appreciably or significantly increased by this proposal since Venice's facility lies approximately midway between Memorial and Medical, which are sixty miles apart. There is significant excess capacity in existing and approved open heart surgery programs in District 8 during most of the year, especially at Memorial. Therefore, there is ready access to, and availability of open heart surgery services to patients in the District. Venice did not establish that approval of its application would enhance access to open heart surgery services for the medically indigent. Despite its assertion in its application that its program would be available to the underserved, there is no definite commitment to serve charity care patients as a percentage of total patient days or of total revenue. Venice has proposed to serve Medicaid patients at the level of 1.5% of total patient days, but Medicaid patients are currently receiving services through existing programs at substantially higher levels of commitment. The applicant has reserved the right to refuse non-emergency care to indigents. While it was established that unstable patients who have to be transferred from one hospital to another face increased risks, and that members of the medical staff at Venice feel that there are unacceptable delays in transferring patients who need open heart surgery from Venice to other facilities due to an asserted lack of available beds, it was not shown that such delays have actually jeopardized the safety of patients or resulted in a reduction in the quality of care received by patients to an unacceptable level. A delay in transferring a patient from one facility to another of from 6 to 8 hours is reasonable, and in line with experience nationally. The anecdotal evidence presented by Venice on this point was not competent and substantial, and in fact shows that the number of delays exceeding 8 hours has increased only slightly from 1986 to 1988, a condition that may be addressed in any event when the two approved programs become operational. Additionally, the applicant never formally shared any concerns about transfer delays with existing facilities in an effort to reduce such delays or to document extreme cases of delay. Transfer delays are exacerbated by seasonal increases in population in District 8, but there continues to be a reasonable likelihood that patient transfers can be accommodated, even during seasonal population increases, without adverse impacts to patient care. However, a large majority of open heart surgery cases are non- emergency that can be scheduled for surgery within 6 to 48 hours after diagnosis without any compromise in patient care. Emergency patients are given priority, and there are sufficient available beds to accommodate emergency patients, regardless of seasonal delays. Recent studies have shown that even emergency patients benefit from a delay of up to 24 hours in order to stabilize their condition rather than rushing them to surgery. In any event, such seasonal delays do not establish that there is a lack of available beds in District 8 which would require the approval of this application, especially with two approved programs already in the District which will become operational by 1990. Alternatives Considered Venice did not fully explore alternatives, including less costly alternatives, to a new program at its facility, such as a joint or shared program with an existing provider. In fact, a consultant retained by Venice recommended on September 8, 1988, that Venice pursue a joint program with Memorial, but Venice never approached Memorial to ascertain if its administrators or medical staff would be interested in such a joint effort, even though these two hospitals have previously cooperated in providing joint services in obstetrics, shared nursing services, and jointly provided emergency services to the Town of North Port. Memorial previously loaned Venice 24 nursing full time equivalent positions (FTE) to fully staff a 35 bed unit at Venice during a critical nursing shortage. There are existing or approved open heart surgery programs at Tampa General Hospital, Manatee Memorial Hospital in Bradenton, Memorial, Medical Center, and Southwest Regional Medical Center in Ft. Myers. In addition, there are additional approved programs at HCA Blake Memorial Hospital in Bradenton and at Lee Memorial in Ft. Myers. Venice did not consider these existing and approved programs as alternatives to its proposed new program. It was not established that Venice has attempted, or proposed to establish a joint open heart surgery program with any of these facilities, or to secure staff privileges for its cardiologists at Memorial, or any of these other hospitals. Regionalization of health care services for open heart surgery patients is being encouraged and reviewed by the Medicare program. Under this concept, primary care hospitals would treat common diagnoses and offer common treatments, while regional referral hospitals would provide specialized care and offer more complex services referred to as tertiary level services. Open heart surgery is a specialized, tertiary care service. Venice did not consider regionalization or establish why it would not be appropriate in District 8. Personnel Availability and Costs There has been a long-term shortage of nurses, particularly in intensive care and open heart surgery, which even Venice's expert in nursing administration recognized and acknowledged. This shortage is present in Sarasota County not merely for nursing staff, but also for technical support staff, and is particularly acute in operating room and critical care personnel. While Venice does have nursing staff with open heart surgery experience, it would have to recruit additional nurses to fully staff this new program. It is not always possible to fill open heart surgery or critical care nursing positions with trained personnel. Memorial presently has 32 registered nursing vacancies, including 5 open heart surgery and 3 open heart critical care RN positions, despite a full-time nurse recruiter and an aggressive recruiting program. Because of this critical shortage, Memorial has been forced to use "traveler" or temporary nurses in its open heart surgery unit. In contrast to Venice's lack of actual experience in attracting and training open heart surgery and critical care nurses, Memorial established that in Sarasota County, it takes 6 to 8 months and costs $15,000 to $16,000 to train open heart surgery nurses, and 6 to 8 weeks to- train open heart critical care nurses. Venice will compete with Memorial and Medical Center in attracting open heart surgery nursing and technical staff. There has been a recent instance of a nurse leaving Venice to join Memorial, being trained as an open heart surgery nurse at Memorial, and then leaving to return to Venice. With the limited pool of available, trained open heart surgery nurses, and in view of the two approved open heart surgery programs in District 8 which need to be staffed and become operational prior to 1990, the implementation of the Venice program will have an adverse impact on the ability of existing and approved programs to attract and maintain trained open heart surgery nursing and technical staff, and can reasonably be expected to increase personnel costs for these providers. Venice proposes to add two cardiovascular surgeons to its medical staff prior to opening its open heart surgery program, and to retain a consulting firm to assist in recruiting these physicians. However, the consulting firm contacted by Venice has not agreed to accept this recruiting assignment. Memorial has been trying to recruit an additional open heart surgeon for over a year, without success. Venice has been trying to recruit a neurosurgeon, neurologist or cardiologist for almost a year, without success. It is, therefore, reasonable to infer that Venice will have difficulty recruiting two cardiovascular surgeons in less that one year. The salaries and benefits in Venice's application are generally reasonable, including the proposed salary for a perfusionist, although it did slightly underproject open heart surgery nursing salaries. However, its estimate of the number of additional positions, or FTE, which would be required throughout the hospital to accommodate the workload resulting from an open heart surgery program is incomplete. For example, an additional 3.5 FTE that would be needed for the clinical lab and donor center is not reflected in the application, although the costs associated therewith are included. Venice does have a record of successfully staffing critical care services, such as its open heart catheterization and thoracic surgery programs, without attracting staff from other hospitals in the District. It does propose to have a training program for open heart surgery personnel, and has an affiliation with nurse training programs at four universities. Financial Feasibility In its application, Venice projects that it will perform 125 open heart surgery procedures in its first year of operation, 175 in its second year, and 211 in its third year of operation. However, it is specifically found that these projections are not reasonable, based upon the testimony and evidence received. The testimony and exhibits prepared by Mark Richardson and Michael Carroll, who were accepted as experts in health planning, as well as the testimony offered by Rick Knapp, an expert in health care finance, was more credible and persuasive than, and outweighs the testimony and exhibits prepared by Eugene Nelson, an expert in health care planning, Dr. Henry W. Zaretsky, an expert in health care economics and planning, and Michael Rolph, who was accepted as an expert in health care finance and accounting. Initially, Venice relies upon the Department's Rule for determining the numeric need for additional programs, discussed above, and divides the Department's number of projected procedures in District 8 (1683) by 350 to arrive at the need for an additional program in 1990 by rounding 4.8 up to 5. However, Venice has conducted no analysis of market share or physician referral patterns to test the reliability of this projected need. Thus, this projection of numeric need is made in a vacuum, without any reference to the actual number of procedures already being performed, or actual market shares and referral patterns which are critical to an understanding of patient and physician preferences which have existed, and are likely to continue to be experienced, in the future. Venice's administration and members of its medical staff consider Memorial's open heart surgery program to be excellent and convenient to Venice's patients. It is unlikely that all five of Venice's cardiologists will refer all of their open heart surgery patients to Venice, and in fact, a member of Venice's medical staff who supports this application testified that he would only refer about half of his patients to Venice. Since most open heart patients are referred, and since there is no apparent dissatisfaction with the quality of Memorial's program, existing market share and referral patterns would likely continue and should have been considered in any meaningful analysis presented by the applicant. For the July, 1990 horizon in District 8, the Department's numeric need methodology projects that there will be 1683 open heart surgery procedures. With referral patterns in place and two existing providers with operational and well regarded programs, it is unlikely that Venice will have an automatic, equal share of the District's pool of open heart patients, or even that it will perform the 125 procedures in its first year, and 175 procedures shown on its pro forma for the second year of operation. In fact, the two existing providers, Memorial and Southwest Regional Medical Center, already performed 1637 procedures in 1988, leaving fewer than 50 procedures projected through the Department's numeric need methodology for the two already approved programs and Venice, if it were to be approved. Memorial has been performing over 600 procedures per year from 1986 through 1988, and has the capacity to perform up to 1,000 procedures annually. Thus, the existing and approved programs have more than sufficient capacity to absorb growth in open heart surgery volumes which are being projected. A second method Venice uses to justify its projected number of open heart procedures is to quantify the population of Venice's service area, and then apply the Department's open heart surgery use rate to that population. This assumes that virtually all of Sarasota County's population growth will occur in the south county area, which is an inaccurate assumption, and also assumes that Venice will capture all of the open heart surgeries in its service area, which is unreasonable given existing market shares and referral patterns. Memorial presently has a 42% market share of District 8 open heart surgery patients. To perform 200 procedures in its third year of operation, Venice would have to capture an 83% market share, and there is no basis to find that it would be successful in attracting this unreasonably high market share in its primary service area. In fact, Venice projects that it will only achieve a 45% and 61% market share in the first and second year of operation, respectively. Applying these percentages, Venice will perform 99 procedures in its first year, not 125, and 140 in its second year, not 175. It must be noted that Venice's consultant, which had recommended that it explore a joint or shared program with Memorial, had projected market shares of only 29% in the first year, 35% in the second year, and 45% in year three. Using these figures, Venice would only perform 63 procedures in its first year of operation, 81 in the second year, and 102 in the third. Given this level of operation in its second year of operation (81 procedures), the Venice program would lose $334,000 in its second year, and therefore, not be financially feasible. The third method used by the applicant to support its projection of the number of procedures it will perform, which is the basis of its assertion of financial feasibility, is based upon its assessment of cardiac catheterization volumes and applies a conversion factor to determine the number of open heart surgery procedures that will result. This analysis again assumes that it would receive a 100% market share, and does not take into account referral patterns and satisfaction with existing programs. In addition, while the growth of Venice's cardiac cath volume has stabilized, and may even be decreasing, this analysis incorrectly uses a l5%-16% annual growth rate in cardiac caths through 1990, which is unrealistic and not supported by the record. Venice relies upon the expert testimony of Eugene Nelson to establish that the use rate for open heart surgery has been increasing since 1985, and will continue to increase. The use rate increased over 53% between 1985 and 1988, and Nelson projects a continued 15.3% annual increase in the use rate through 1991. Under his projections the use rate per 100,000 population will be 235.79 in 1990, and 257.97 in 1991. Nelson's projected continued annual increase in the use rate of over 15%, and the use rates he projects for 1990 and 1991, are unreasonable. He has ignored the fact that annual increases in the use rate have been steadily decreasing from 17.5% between 1985 and 1986, to 13% between 1987 and 1988, as testified to be all health planners, and as even he acknowledged. Applying this decrease in the annual use rate increase, it would be increasing only 9% in 1990, and this would result in a total of 2108 procedures that could be projected to be performed in 1990. With the two existing programs in District 8 already performing 1600 procedures, a figure that will reasonably grow by 1990, there will be less than 444 procedures for the two already approved programs and Venice, if it were to be approved. Given this fact, which is even acknowledged by Venice, it is unlikely that Venice will be able to reach its projected number of cases in its first two years of operation in order to achieve financial feasibility. As recognized by Harold Urschel, Jr., M.D., who was called by Venice as an expert in cardiovascular surgery and open heart surgery programs, for the next five years open heart surgery volumes nationally will be "stable", although they "probably" will go up some. Open heart use rates have plateaued on a national level, with an average national use rate of l80~per 100,000 population. This use rate compares favorably with the Department's current use rate of 183 for District 8, and further questions the reasonableness of Nelson's projected use rates of almost 236 and 258 in 1990 and 1991, respectively. These use rates have stabilized and shown a marked decrease in their rates of increase due to the development of acceptable alternatives to open heart surgery, and close review of the necessity of this treatment by third party payors. As testified to by Nelson, there is a danger that an excess of open heart surgery programs in an area will exacerbate an already stabilized or flattened use rate, and may cause it to decline. He cited both the Miami and Jacksonville areas as examples of Districts in which there appear to be an excess of programs, with a resulting decline in the District's use rate, and inability of a substantial number of programs to even achieve the requisite level of 200 procedures per year to maintain quality of care. When it comes to open heart surgery programs, more is not necessarily better and may actually result in less, according to Nelson. Even applying Nelson's inflated use rate of 236 per 100,000 population in 1990 to the Venice service area population, the applicant will not achieve its projected number of procedures when the market share of 29% in 1990 predicted by Venice's consultant is considered. Applying its consultant's projected market shares, Venice will realize only 81 procedures in the first year, 98 in year two, and 126 procedures in the third year. Since Venice's pro forma bases its assessment of financial feasibility upon its projections of 125 procedures in year one, and 175 in year two, and since the applicant has not established the reasonableness of these projections, the long- term financial feasibility of this project has not been shown. Further, Venice has also failed to establish that it can reasonably be expected to achieve the level of 200 procedures in its third year, and therefore, it has also failed to show that it can achieve that minimum level which the Department, by Rule, requires to ensure quality of care. In other respects, the assumptions used by Venice in its pro forma are reasonable, including its 2% inflation factor for income, bad debt, payor mix and utilization by class of pay, projected charges, expenses, and depreciation. Effect on Competition and Costs There will not be a significant difference between the charges proposed by Venice and the actual charges at Memorial. The applicant projects that 80% of its open heart surgery will be reimbursed through Medicare, which reimburses on a fixed fee basis to which hospital charges have no direct relevance. Therefore, there would be no appreciable impact on costs in the health care community if this application is approved. As previously discussed, there would be greater competition among existing and approved programs in District 8 for trained open heart surgery and critical care nurses, which are in short supply. While Venice has projected open heart surgery nurses' salaries at a somewhat unrealistically low level, it can reasonably be expected that greater competition for trained personnel who are in short supply will eventually result in higher salaries and health care costs. If this application is approved, the cost to transport patients who require open heart surgery from Venice to another facility would be eliminated. This would mean that patients could avoid a $235 to $250 ambulance charge for transfer to Memorial, a $450 charge for ambulance transport to Tampa General, or a $1,000 to $1,300 helicopter charge for transport to Tampa General Hospital. This savings is not significant when compared to total charges for open heart surgery procedures. Impact on Existing and Approved Programs As discussed above, approval of the Venice application will adversely affect the ability of existing providers to attract and retain trained open heart surgery and critical care RNs due to the already existing shortage of personnel to fill these positions, and the fact that two already approved programs will become operational prior to Venice's program, if it were to be approved. Although Memorial has the capacity to perform 1,000 open heart surgery procedures annually, Venice's expert, Eugene Nelson, projects that if the Venice program is approved, Memorial will experience only a 12% growth between 1988 to 1991, and will only perform 771 cases in 1991. Curiously, he then concludes that this represents no impact on Memorial. The proposed primary service area for the Venice program and Memorial's primary service area completely overlap, and they are, therefore, competing for the same open heart surgery patients. Venice has been referring 85%-87% of its patients who require open heart surgery to Memorial. If Venice had its own open heart surgery program, the need for transfer and referral would be obviated. In the second year of operation, Venice projects on its pro forma that it will perform 175 cases. Using its own projection of 85%, 149 to 150 of these cases would have been transferred to Memorial, but for the Venice program. If the more realistic number of 81 procedures in the second year of operation for the Venice program is used, 69 cases which would have otherwise been transferred to Memorial would stay at Venice. Rick Knapp, who was accepted as an expert in health care finance, provided a reasonable estimate of financial impact upon Memorial, given these projected losses in patient referrals. He concluded that Memorial would experience a net income reduction of approximately $1.4 million if Venice's projection of 175 cases in its second year is correct, and Memorial lost 149 to 150 referrals. Even Michael Rolph, who was called as an expert in health care finance by Venice, testified that Memorial would loose $2 million in net revenue if it lost 100 open heart surgery patients. If the more realistic figure of 81 cases in the second year were used, there would also be a net income loss for Memorial, but more importantly for purposes of this case, it was established through Knapp's testimony that Venice's program would lose $334,000, and not be financially feasible. It is, of course, recognized that Memorial would still experience a growth in its absolute number of open heart procedures due to population increases and increases in the use rate. However, any such increase in the absolute number of procedures performed at Memorial through growth does not obviate the fact that the total number of procedures it would have performed will be significantly reduced by the loss of referrals from Venice, if this application is approved. This is particularly noteworthy given its excess capacity. Memorial's most recent annual gross income was $160 million, with an operating margin (profit) of between $3.5 and $3.9 million. Therefore, losses which would result from the Venice program would not threaten the financial viability of Memorial, but would be significant in terms of its open heart surgery program. Jerry Sommerville, an expert in hospital finance, estimated that 9% of Medical Center's open heart surgery cases would come from the Venice area, which is included in Medical Center's secondary service area. If these cases are lost to Medical Center with the opening of the Venice program, Medical Center's projected 150 cases in 1990 would be reduced by 13.5, and in 1991 its projection of 200 cases would be reduced by 18. These reductions would result in a net revenue loss for Medical Center of $254,000 with a gross marginal loss of $62,800 in 1990, and a net revenue loss of $329,500 with a gross marginal loss of $95,200 in 1991. This represents a significant reduction in income for this open heart surgery program in its first years of operation. Medical Center's most recent annual profit margin was approximately $1 million.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order which: (l) Denies Memorial's Motion for Summary Adjudication; Dismisses Medical Center as a party due to a lack of standing; and Denies Venice's CON Application Number 5715. DONE AND ENTERED this 28th day of September, 1989 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1989. APPENDIX (DOAH CASE NOS. 89-1412 & 89-1413) Rulings on the Petitioners' Proposed Findings of Fact: Adopted in Finding 6. Adopted in Findings 6, 17. Adopted in Finding 6. Adopted in Finding 9. Adopted in Findings 6, 9. Rejected as a conclusion of law. 7-8. Adopted in Finding 1. Adopted and Rejected in part in Finding 12. Adopted in Finding 15; Rejected in Finding 16. Adopted in Finding 17. Rejected in Finding 41, as otherwise as irrelevant. Adopted and Rejected in part in Findings 41, 42. Rejected as irrelevant. 15-18. Adopted and Rejected in part in Finding 42. 19. Adopted in Finding 43. 20-21. Rejected in Finding 43. Adopted in Finding 38. Adopted and Rejected in Finding 53. Adopted and Rejected in Finding 57. Rejected in Finding 57. Rejected in Finding 55. Adopted and Rejected in Findings 55, 56. Adopted in Finding 57. Rejected in Finding 57. Adopted and Rejected in Finding 57. Rejected as irrelevant. Adopted in Findings 12, 20 and 39; Rejected in Findings 53, 55 and 56. Adopted in part in Finding 27, but otherwise Rejected as unnecessary. Rejected as irrelevant and unnecessary. Rejected in Finding 44. Adopted in Finding 44. Adopted in Finding 37; Rejected in Findings 38-47. Rejected in Finding 41. Rejected in Finding 25. Rejected as irrelevant and unnecessary. Rejected in Finding 26. Adopted in Finding 21. Adopted in Finding 43. Adopted in Finding 34, but otherwise rejected as unnecessary. Rejected in Finding 24. Adopted in Finding 6. Adopted in Finding 11. Adopted in Finding 35. Adopted and Rejected in part in Findings 34, 35. 50-54. Adopted in Finding 48. 55-61. Adopted in Finding 11. Adopted in Finding 1. Adopted in Finding 31. Adopted and Rejected in part in Finding 35. Adopted in Finding 36; Rejected in Finding 35 and otherwise as irrelevant and unnecessary. Adopted in Finding 36; Rejected in Finding 33. Adopted in Finding 35. Rejected as cumulative and unnecessary. Adopted in Finding 36. Adopted in Finding 31. Adopted in Finding 6. Rejected as unnecessary. 73-75. Rejected in Finding 27 and otherwise as irrelevant. Adopted in Finding 27. Adopted in Finding 22. Rejected in Finding 27 and otherwise as unnecessary. Adopted in Finding 51. 80-81. Rejected in Findings 28, 29. 82-85. Rejected in Finding 49 and otherwise as irrelevant. 86. Rejected as not based on competent substantial evidence. 87-94. Rejected in Finding 49 and otherwise as irrelevant. 95. Adopted in Finding 22. 96-97. Rejected as irrelevant and unnecessary, and simply a summation of and argument on the evidence. 98. Adopted in Finding 11; Rejected in Finding 24. Rulings on the Respondents' Proposed Findings of Fact: Adopted in Finding 1. Adopted in Finding 6. Adopted in Finding 2. Adopted in Finding 3. Adopted and Rejected in part in Finding 17. Adopted in Finding 17. 7-9. Adopted in Finding 18. 10. Adopted in Findings 18, 22. 11-12. Adopted in Finding 22. 13-14. Rejected in Finding 20. 15-17. Rejected as irrelevant and unnecessary. 18. Adopted in Finding 18. 19. Adopted in Finding 22; Rejected in Finding 20. 20. Adopted in Finding 30. 21. Adopted in part in Finding 13, but otherwise Rejected as irrelevant and unnecessary. 22-23. Adopted in Findings 15, 16. 24. Adopted in Findings 4, 25. 25. Adopted in Findings 25, 39. 26. Adopted in Finding 26. 27-34. Adopted in Finding 27. 35. Adopted in Findings 22, 23 and 24. 36. Adopted in Findings 28, 29. 37. Rejected as unnecessary. 38-43. Adopted in Findings 28, 29. 44. Adopted in Findings 31, 32. 45. Rejected as unnecessary. 46-49. Adopted in Finding 34. 50. Adopted in Finding 24. 51. Adopted in Findings 24, 37. 52-55. Adopted in Finding 38. 56. Adopted in Finding 39. 57-61. Adopted in Finding 40. 62-64. Adopted in Finding 41. 65-66. Adopted in Findings 42, 43. 67. Adopted in Finding 44. 68-69. Adopted in Finding 46. 70. Adopted in Finding 47. 71. Rejected in Finding 48. 72. Adopted in Finding 40. 73. Adopted in Finding 47. 74-75. Adopted in Finding 49. 76. Adopted in Findings 55, 57. 77. Adopted in Findings 50, 52. 78. Adopted in Findings 31, 50 and 52. 79-82. Adopted in Finding 32. 83. Adopted in Findings 33, 50 and 52. 84. Adopted in Finding 33. 85. Adopted in Finding 32. 86-87. Adopted in Findings 33, 50 and 52. 88. Adopted in Findings 28, 29. 89. Adopted in Findings 24 through 27. 90. Adopted in Finding 6. 91-92. Rejected in Finding 7. 93. Adopted and Rejected in Finding 8. 94. Rejected in Finding 14 and otherwise as unnecessary. 95. Adopted in Findings 15, 16. 96. Rejected in Findings 14, 15. 97-99. Adopted and Rejected in Findings 12, 13. 100. Rejected in Finding 9. 101. Adopted in Findings 6, 9. COPIES FURNISHED: Theodore C. Eastmoore, Esquire A. Lamar Matthews, Jr., Esquire P. O. Box 3258 Sarasota, FL 33577 Robert A. Weiss, Esquire The Perkins House 118 North Gadsden Street Tallahassee, FL 32301 Charles A. Stampelos, Esquire P. O. Box 2174 Tallahassee, FL 32316 Richard A. Patterson, Esquire Fort Knox Executive Center 2727 Mahan Drive Tallahassee, FL 32308 Kenneth F. Hoffman, Esquire P. O. Box 6507 Tallahassee, FL 32314 R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler, Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Whether any of the applications of Oak Hill Hospital, Citrus Memorial Hospital, or Brooksville Regional Hospital for adult open heart surgery programs should be granted?
Findings Of Fact District 3 Extended across the northern half of the state with a reach from central Florida to the Georgia line, District 3 is the largest in land area of the eleven health service planning districts created by the Florida Legislature. See Section 408.032(5), Florida Statutes. Sites of the three hospitals whose futures are at issue in this proceeding are in two of the sixteen District 3 counties: Citrus County and at the southern tip of the district, Hernando County. The three hospitals aspire to join the ranks of District 3's six existing providers of adult open heart surgery programs. Three of the existing providers are in Alachua County, all within the incorporated municipality of Gainesville: Shands at Alachua General Hospital, Shands at the University of Florida, and North Florida Regional Medical Center. Two of the existing providers are in Marion County: Munroe Regional Medical Center and Ocala Regional Medical Center. The sixth provider, opened in November of 1998 as the most recently approved by AHCA in the district, is in Lake County: the Leesburg Regional Medical Center. The CON status of the two Ocala providers is somewhat unusual. Located across the street from each other in downtown Ocala, they share virtually the same medical staff. Pursuant to a Stipulation and Settlement Agreement with the State of Florida, the two have offered adult open heart surgery services since 1987 under a single certificate of need issued for a joint program that reflects their proximity and identity of medical staff. The Agency's view of the arrangement has evolved over the years. It now holds the position that Munroe Regional and Ocala Regional operate independent programs. Accordingly, AHCA lists each as separate programs on its inventory of adult open heart services in District 3. Nonetheless, the two operate as a joint program pursuant to the Settlement Agreement and under state sanction reflected in the agreement, that is, they derive their authority to offer adult open heart surgery services from a single certificate of need. Other than a change of attitude by the Agency, there is nothing to detract from the status they have enjoyed since the agreement reached with the state in 1987: two hospitals operating a joint program under a single certificate of need. The three Gainesville providers all operated at an annual volume of less than 350 procedures during the reporting period that was most current at the time of the filing of the applications by the three competitors in this case. Those competitors are: Citrus Memorial, Oak Hill, and Brooksville Regional. Citrus Memorial, Oak Hill, Brooksville Regional Citrus Memorial Health Foundation, Inc., is a 171-bed, not-for-profit community hospital located in Inverness, Florida. HCA Health Services of Florida, Inc., d/b/a Oak Hill Hospital is a 204-bed hospital located in Oak Hill, Florida. Hernando HMA, Inc., d/b/a Brooksville Regional is a 91- bed hospital located in Brooksville, Florida. Hernando HMA, Inc. (the applicant for the program to be sited at Brooksville Regional) also operates a second campus under a single hospital license with Brooksville Regional. The 75-bed campus is in southern Hernando County in Spring Hill. Citrus and Hernando Counties Citrus Memorial is in Citrus County to the south of the cities of Gainesville and Ocala, the sites of five of the existing providers of adult open heart surgery in the district. Further south, Oak Hill and Brooksville Regional are in Hernando County. Although adjacent to each other along a boundary running east-west, the county line is a natural divide, north and south, with regard to service areas for open heart surgery. Substantially all Citrus County residents, including Citrus Memorial patients, receive open heart surgery and angioplasty services at one of the two Ocala providers to the north. In contrast, almost all Hernando County residents (94 percent) receive open heart services at Bayonet Point, a provider in Health Planning District 5 to the south of Hernando County. The neatness of this divide would be disrupted by the approval of the application of Brooksville Regional. Brooksville's application includes part of south Citrus County in its designated primary service area, an appropriate choice because of Brooksville Regional's location on Route 41 with good access to Citrus County. At present, however, the divide between north and south along the Citrus/Hernando boundary remains a Mason-Dixon line of open heart surgery service areas. During the year ended September 1999, for example, 408 Citrus County residents received open heart surgery in Florida. Of these, 85 percent received them in Ocala at one of the two providers there. During the same period, 618 Citrus County residents underwent angioplasty, with 89.7 percent of them going to the two Ocala providers. During the year ended March 1999, 698 Hernando County residents underwent open heart surgery at Florida Hospitals. Of the 663 residents of Oak Hill's primary service area, 94.3 percent received services at Bayonet Point in District 5. Similarly, of the 779 Oak Hill primary service area residents receiving angioplasty, 93.8 percent went south to Bayonet Point. Brooksville Regional projects that 10 percent of its OHS/angioplasty volume will be from Citrus County. Still, 90 percent of the volume is projected to be from Hernando County. Thus, even with the threat posed by Brooksville's application to the divide at the Citrus/Hernando boundary, the overwhelming percentage of Brooksville's patients will be from south of the Citrus-Hernando boundary. In sum, there is de minimis competition between would- be-provider Citrus Memorial and the providers to the north vis- a-vis would-be-providers Oak Hill and Brooksville Regional and the providers to the south in the arena of open heart surgery services needed by residents of the district. Bayonet Point Under the umbrella of HCA Health Services of Florida, Inc., Bayonet Point is a provider of open heart surgery services in Pasco County. Only thirty minutes by road from its sister HCA facility Oak Hill and 45 minutes from Brooksville Regional, Bayonet Point captures approximately 94 percent of the open heart surgery patients produced among the residents of Hernando County. Although its location is in a county that is only one county to the south of the two Hernando County hospitals, Bayonet Point is in a different health planning district. It is in District 5 on its northern edge. The residents of Hernando County who receive open heart surgery services at Bayonet Point, a premier provider of adult open heart surgery services in the state of Florida, are well served. Operating at far from capacity, the quality of its open heart program is excellent to the point of being outstanding. Position of the Parties re: "not normal" circumstances The Agency's Open Heart Surgery Rule, Rule 59C-1.033, Florida Administrative Code (the "Rule") establishes a need methodology and criteria applicable to review of certificate of need applications for the establishment of adult open heart surgery programs. The Rule also governs a hospital's ability to offer therapeutic cardiac catheterization interventional services (i.e., coronary angioplasty). Pursuant to Rule 50C- 1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of coronary angioplasty must be located within a hospital that provides open heart services. Applying the methodology of Rule 50C-1.033 (the "Rule"), AHCA determined that a "fixed need pool" of zero existed in District 3 for the July 2002 planning horizon. Calculation under the formula in the Rule produced a fixed need pool of one. Several District 3 programs, however, did not have an annual case volume of 350 or more procedures. The Rule's methodology requires that calculated numeric need be zeroed out whenever there are existing programs in a district with a sub- 350 annual volume. (See Section (7)(a)2., of the Rule.) As required, therefore, the Agency published a numeric need of zero for the applicable planning horizon. The determination of zero numeric need was not challenged and so became final. Their aspirations confronted with a numeric need of zero, Citrus Memorial, Oak Hill and Brooksville Regional, nonetheless, each filed applications seeking the establishment of adult open heart surgery programs. As evidenced by the Agency's initial decision to grant Citrus Memorial's application and by its change of position with regard to Oak Hill's application, the Agency is in agreement that "not normal" circumstances exist to justify granting the applications of both Citrus Memorial and Oak Hill. Thus, while the parties may differ as to the precise identification of those circumstances, all agree that there are circumstances that support the approval of at least one application (and perhaps two) for an adult open heart surgery in District 3 for the July 2002 planning horizon. It is undisputed that a new OHS program in Hernando County would have no effect on the three existing programs located in Gainesville that perform less than 350 procedures annually. This circumstance is a "not normal" circumstance, as previously found by the Agency. It allows an application's approval in the face of the Rule's dictate that the Agency will not normally approve an application when an existing provider falls below the 350 watermark. It is not, however, a circumstance that compels the award of a CON to any of the parties as in the case of "not normal" circumstances typically recognized by the Agency. (An example of such a circumstance would be an access problem for a specific population.) Rather, it is a circumstance that allows the Agency to overcome the zeroing-out effect of the Rule that demanded a fixed-need pool of zero. It is a circumstance that allows AHCA to award an adult open heart surgery CON to one of the Hernando County hospitals provided there is a demonstration of need. There are no typical "not normal" circumstances that support any of the applications. There are no geographic, economic or clinical access problems for the residents of the any of the primary service areas of the three applicants that rise to the level of "not normal" circumstances. Nor would granting the applications of any of the three support cost efficiencies. In the case of Oak Hill, moreover, granting its application would both reduce the operating efficiencies at Bayonet Point and increase the average operating cost per case at Bayonet Point. Approval of an application is not compelled by the "not normal" circumstance that exists in this case. The "not normal" circumstance simply clears the way for approval provided there is a demonstration of need. Stipulated Matters The parties stipulated that all applicants have a good record of providing quality of care and that all sections of the respective applications addressing that issue be admitted into evidence without further proof so as to establish record of quality of care. Accordingly, the parties stipulated that each application satisfies Section 408.035(1)(c) as to "the applicant's record in providing quality of care." The parties stipulated that, subject to proving their ability to generate the open heart surgery and angioplasty volumes projected in their respective applications, each applicant has the ability to provide adequate and reasonable quality of care for those proposed services. Accordingly, subject to the proof involving service volume levels, each application satisfies Section 408.035(1)(c) as the "ability of the applicant to provide quality of care . . .". The parties stipulated that all applicants have available and adequate resources, including health manpower, management personnel, and funds for capital and operating expenditures in order to implement and operate their proposed projects. Furthermore, they stipulated that all sections of their respective applications relating to those proposed projects and all sections of their respective applications relating to those issues were to be admitted into evidence without proof. Accordingly, all applications satisfy that portion of Section 408.035(1)(h), Florida Statutes (1999) related to the availability of resources. The parties stipulated that all applications satisfy, and no further proof is required to demonstrate, immediate financial feasibility as referenced in Section 408.035(1)(i), Florida Statutes (1999). The parties stipulated that the costs and methods of proposed construction, including schematic design, for each proposed project were not in dispute and were reasonable, and that all sections of each application related to those issues were to be admitted into evidence without further proof. (Stip., p.3.) Accordingly, each application satisfies Section 408.035(l)(m), Florida Statutes (1999). The parties stipulated that each application contained all documentation necessary to be deemed complete pursuant to the requirements of Section 408.037, except that Section 408.037(b)3. is still at issue regarding operational financial projections (including a detailed evaluation of the impact of the proposed project on the cost of other services provided by the applicant). The parties stipulated that each applicant satisfied all of the operational criteria set forth in the Rule (those operational criteria being encompassed in subsections 3, 4, and 5). Accordingly, it is undisputed that each applicant will have the support services, operational hours, open heart surgery team mobilization, accreditation, availability of health personnel necessary for the conduct of open heart surgery, and post- surgical follow-up care required by the Rule in order to operate an adult open heart surgery program. The Hernando County Hospitals Oak Hill Oak Hill is located on Highway 50, in the southern part of Hernando County, between the cities of Brooksville and Springhill. Oak Hill's licensed bed compliment includes 123 medical/surgical beds, 24 ICU beds, 50 telemetry beds, and 7 beds for obstetrics. Oak Hill provides an array of medical services and specialties, including: cardiology, internal medicine, critical care medicine, family practice, nephrology, pulmonary medicine, oncology/hematology, infectious disease treatment, neurology, pathology, endocrinology, gastroenterology, radiation oncology, and anesthesiology. Board certification is required to maintain privileges on the medical staff of Oak Hill. Oak Hill's six-story facility is situated on a large campus, and has been renovated over time so that the hospital's physical plant permits the provision of efficient care for patients. Oak Hills's surgery department has five operating rooms, plus a cystoscopy room. The department performs approximately 7,800 surgeries annually, a figure that demonstrates functional efficiency. Oak Hill is JCAHO accredited, with commendation. Recently named one of the nation's top 100 hospitals for stroke care by one organization, it has also received recognition for the excellence of its four intensive care units. Oak Hill's cancer program is the only one to have received full accreditation from the American College of Surgeons within a six-county contiguous area. Oak Hill recently expanded its emergency department and implemented a fast track program called Quick Care. The program is designed to treat lower acuity patients more rapidly. Gallup Organization surveys reflect a 98 percent patient satisfaction rate with the emergency department, the eighth best rate among the approximately 200 HCA-affiliated hospitals. During 1999, the emergency department treated 24,678 patients. During the same period, 376 patients presented to Oak Hill's emergency department with an acute myocardial infarction, and there were 258 such patients during the first eight months of 2000. Oak Hill operates a mature cardiology program with ten Board-certified cardiologists on staff. Eight of the ten perform diagnostic cardiac catheterizations in the hospital's cath laboratory. Oak Hill's program is active with regard to both invasive and non-invasive cardiology. The non-invasive cardiology laboratory offers a variety of services, including echocardiography, holter monitoring, stress testing, electrocardiography, and venous, arterial and carotid artery testing. The invasive cardiology laboratory has been providing inpatient and outpatient cardiac catheterization services since 1991. During calendar year 1999, Oak Hill saw 1,671 diagnostic cardiac catheterization procedures and transferred 619 cardiac patients to Bayonet Point, 258 for open heart surgery, 311 for angioplasty, and 50 patients for cardiac catheterization. The volume of catheterization procedures at Oak Hill has led to the construction of a second "cardiac cath" laboratory suite, scheduled for completion in May of 2001. The cath lab's medical director (Dr. Mowaffek Atfeh, the first interventional cardiologist in Hernando County) has served in that capacity since inception of the lab in 1991. The cath lab equipment is state-of-the-art. Oak Hill's cath lab provides excellent quality of care through its Board-certified cardiologists and the dedication and experience of its well- trained nursing and technical staff. Brooksville Regional Originally a 166-bed facility operated by Hernando County, 75 of the beds at Brooksville Regional were moved in 1991 to create a second facility at Spring Hill. A few years later, the facilities went into bankruptcy. The bankruptcy proceeding concluded in 1998, with operational control of both facilities being acquired by Hernando HMA, Inc. ("Hernando HMA"). The CON applicant for the adult open heart surgery program to be sited at Brooksville Regional, Hernando HMA is a wholly-owned subsidiary of Health Management and Associates, Inc. ("HMA"), a corporation located in Naples, Florida, and whose shares are traded publicly. Under the arrangement produced by the bankruptcy proceeding, Hernando County retained ownership of the buildings and the land. Hernando HMA, in turn, operates the facilities per a long-term lease with the County. Hernando HMA operates the Brooksville Regional and Spring Hill Campuses under a single hospital license issued by AHCA. The two campuses therefore share key administrative staff, including their chief executive officer. They share a single Medicare provider number and they have a common medical staff. HMA (Hernando HMA's parent) operates 38 hospitals throughout the country, many in the State of Florida. Among the 38 is Charlotte Regional Medical Center in Charlotte County, an existing provider of adult open heart surgery and recently recognized as one of the top 100 OHS programs in the country. Charlotte Regional will be able to assist Brooksville Regional with staff training and project implementation if its application is approved. An active participant in managed care contracting, Hernando HMA is committed to serving all payer groups, including Medicaid and indigent patients. It recently qualified as a Medicaid disproportionate share provider. It also serves patients without ability to pay. In fiscal year 2000, it provided $5 million of indigent care. Under the lease agreement Hernando HMA has with Hernando County, it must continue the same charity care policies as when the facilities were operated by the County. Hernando HMA must report annually to the County to show compliance with this charity care obligation. Also under the lease, Hernando HMA is obliged to invest $25 million in renovations and improvements to the two facilities over a 5-year period. About $10 million has already been invested. If the adult open heart surgery program is granted this would nearly satisfy the $25 million obligation. The County reserves to itself certain powers under the lease. For example, the County reserves the authority to pre- approve the discontinuation of any services currently offered at these facilities. Also, if Hernando HMA seeks to relocate either of the two, the County retains the authority whether to approve the relocation. The Spring Hill facility is located in the southwest portion of Hernando County, very near the Pasco County line. It is a general acute care facility, offering a full range of cardiology and other acute care services. Spring Hill was recently approved to add the tertiary service of Level II Neonatal Intensive Care. The Brooksville facility is located in the geographic center of Hernando County. Its service area is all of Hernando County and southern Citrus County. Brooksville is a full- service, general acute care facility. It offers services in cardiology, orthopedics, general surgery, pediatrics, ICU, telemetry, gynecology, and other acute services. Brooksville Regional has 91 acute care beds. Normally, the beds are used as 12 ICU beds, 24 telemetry beds, and 55 medical/surgical beds. During its peak annual period of occupancy, Brooksville has the capability to use up to 40 beds for telemetry purposes. The hospital has ample unused space and facilities associated with its 91 beds that resulted from the move of the 75 beds to create the Spring Hill campus. Brooksville Regional offers full scope cardiology services and technologies, including diagnostic cardiac catheterization. Just as in the case of Oak Hill, the cardiac cath lab is state-of-the-art. The only cardiac services not offered at the hospital are open heart surgery and angioplasty. The quality of cardiology and related services at Brooksville Regional are excellent. The equipment, the nursing staff, the allied health professional staff, and the technology support services are very good. The medical staff is broad- based and highly qualified. Brooksville Regional offers substantial educational and training programs for its nursing staff and other personnel on staff. Brooksville Regional routinely treats patients in need of OHS or angioplasty services. Nearly 400 patients per year receive a diagnostic cardiac cath at Brooksville Regional and are then transferred for open heart surgery or angioplasty. The vast majority of these patients are transferred to Bayonet Point, about 45 minutes away. In addition to transfers of patients following diagnostic catheterization, Brooksville Regional transfers about 120 patients per year to Bayonet Point who have not had such services. These patients fall into two categories: (1) high- risk patients, and (2) persons presenting at Brooksville's emergency room in need of angioplasty or open heart surgery. The Proposals Citrus Memorial By its application, Citrus Memorial proposes to establish a program that will provide adult open heart surgery and angioplasty services. There is no dispute that Citrus Memorial has the ability to provide adequate and reasonable quality of care for the proposed project (just as per the stipulation of the parties, there is no dispute that all of the applicants have such ability.) There is also no dispute that each applicant, including Citrus Memorial, will have all of the staff, equipment and other resources necessary to implement and support adult open heart surgery and angioplasty services. The ability to provide high quality care stems, in part, from Citrus Memorial's contract with the Ocala Heart Institute. Under the contract the Institute will provide supervision of the implementation and ongoing operations of the Citrus Memorial program. This supervision will be provided under the leadership of the president of the Institute, cardiovascular surgeon Michael J. Carmichael, M.D. The contract between Citrus Memorial and the Ocala Heart Institute is exclusive. Citrus Memorial will not extend medical staff privileges to any cardiovascular surgeon not affiliated with the Ocala Heart Institute unless approved by the Institute. The Ocala Heart Institute (whose physician members include not only cardiovascular surgeons, but also cardiovascular anesthesiologists and invasive cardiologists) has similar exclusive contracts for the operation of adult open heart surgery programs at Monroe Regional Medical Center and at Ocala Regional Medical Center and at Leesburg Regional Medical Center. At these three hospitals, the Institute's physicians have consistently produced excellent outcomes. The Ocala Heart Institute produces these results not just through the skills of its physicians but also through the use of the same clinical protocols at each hospital governing the provision of open heart surgery. Citrus Memorial proposes to follow identical protocols at its facility. Excellent open heart surgery outcomes for the Institute's physicians are also the product of standardized facility design, equipment and supplies. The standardization of design, equipment, supplies, and protocols has the added benefit of clinical efficiencies that reduce costs and shorten lengths of stay. Beyond supervision of the initial implementation of the program, the Ocala Heart Institute will provide the medical directorship for Citrus Memorial's program. In cooperation with Munroe Regional, the directorship's 24-hour-a-day, 7-days-a-week coverage of the program will include scheduled case, emergency case, and backup coverage by cardiovascular surgeons, cardiovascular anesthesiologists, perfusionists, and interventional cardiologists. The Ocala Heart Institute will provide education and training to Citrus Memorial's medical staff and other hospital personnel as appropriate. The Institute's obligations will include continually working to improve the quality of, and maintain a reasonable cost associated with, the medical care furnished to Citrus Memorial's open heart surgery and angioplasty patients, consistent with recognized standards of medical practice in the field of cardiovascular surgery. The contract with the Ocala Heart Institute ensures to the extent possible that Citrus Memorial will have a high- quality adult open heart surgery program. Oak Hill Through approval of its application to establish an adult open heart surgery program at its facility, Oak Hill hopes Hernando County residents who now must travel outside the county to receive open heart and angioplasty services will be better served. In particular, Oak Hill hopes to provide these services to the residents of the six zip code area that comprise its primary service area ("PSA"). Containing 75 percent of the county's population, Oak Hill's PSA also encompasses the county's concentration of recent growth. Oak Hill's administration is committed to the proposal contained in its application. It has the support of the hospital's Board of Trustees and medical staff. Not surprisingly, the proposal enjoys a measure of popularity in the county. A petition in support of a program at Oak Hill drew 7,628 signatures from residents of Hernando County. This popularity is based in the fact that residents now must leave District 3 (albeit Bayonet Point in District 5 is close to Oak Hill and closer for many residents of south Hernando County) to receive open heart and angioplasty services. The number of affected residents is substantial. In 1999, for example, over 600 cardiac patients were transferred by ambulance from Oak Hill to Bayonet Point. A greater number of patients traveled on a scheduled basis to Bayonet Point for cardiac care. The vast majority of Hernando County residents and Oak Hill primary service area residents in need of OHS services receive them at Regional Medical Center-Bayonet Point. HCA Health Services of Florida, a subsidiary of HCA-The Healthcare Company ("HCA") holds the Bayonet Point license. It also is the licensee of Oak Hill and other hospitals in Florida including North Florida Regional and Ocala Regional. Bayonet Point (Regional Medical Center-Bayonet Point) is an acute care hospital in Hudson. Hudson is in Pasco County, the county immediately to the south of Hernando County. Although in a separate health planning district (District 5), Bayonet Point is relatively close to Oak Hill, 17 miles to the south. Bayonet Point's open heart surgery program experiences the fourth highest case volume in the state. The program is recognized as one of the top two programs in the state. It enjoys a national reputation. For example in July of 1999, it was ranked 50th in the nation in cardiology and heart surgery in U.S. News and World Report's list of "America's Best Hospitals." Oak Hill, as a sister hospital of Bayonet Point under the aegis of HCA, plans to develop its program in cooperation with Bayonet Point and its cardiovascular surgeons so as to bring the high quality program at Bayonet Point to Oak Hill's community and patients. A prospective operational plan for the adult open heart surgery program has been initiated by Oak Hill with assistance from Bayonet Point. Oak Hill, unlike Citrus Memorial, did not present evidence concerning the specific duties to be imposed on each physician group under contract. Nor did Oak Hill present evidence as to whether and how those groups would create and implement the type of standardization of protocols, facility design, equipment, and supplies that Citrus Memorial's program will rely upon for high quality and reduced costs. Nonetheless, it can be expected that the cooperation of Oak Hill and Bayonet Point, as sister HCA hospitals, will continue through the development and implementation of appropriate staff training, policies, procedures and protocols in the establishment of a high quality program at Oak Hill. Oak Hill's achieved volume in its open heart surgery program, if approved, will be at the direct expense of Bayonet Point. Its approval will increase the operating costs per case at Bayonet Point. Patients transferred from Oak Hill to Bayonet Point for OHS and angioplasty receive excellent outcomes. Patients are transferred to Bayonet Point for OHS and angioplasty smoothly and without delay particularly because Bayonet Point operates a private ambulance system for the transport of cardiac patients to its hospital. Two groups of cardiovascular surgeons are the exclusive cardiovascular/thoracic surgeons at Bayonet Point. Although, at present, there are no capacity constraints at Bayonet Point, both groups support a program at Oak Hill and are committed to participate in an open heart surgery program at Oak Hill. If approved, Oak Hill will enter similar exclusive contracts with the two groups. Raymond Waters, M.D., a cardiovascular surgeon, heads one of the groups. He has performed open heart surgery at Bayonet Point since its inception and is largely responsible for the development of the surgery protocols used there. Dr. Waters has consulting privileges at Oak Hill. In addition to consulting there, Dr. Waters presents medical education programs at Oak Hill. Forty to 50 percent of Dr. Waters' patients come from Hernando County and Oak Hill Hospital. Dr. Waters and his group strongly support initiation of an open heart surgery ("OHS") program at Oak Hill. Their support is based, in part, on the excellence of the institution, including its physical structure, cath labs, intensive care units, nursing staff, medical staff, and the state of its cardiology program. Dr. Waters and his group are prepared to assist in the development of an open heart surgery program at Oak Hill, and to assure appropriate surgery coverage. Oak Hill will create a Heart Center at the hospital to house its OHS program. All diagnostic and invasive cardiac services will be located in one area of the hospital to ensure efficient patient flow and access to support services. The center will occupy existing space to be renovated and newly constructed space on the first floor of the facility. Two new cardiovascular surgery suites, with all support spaces necessary, will be constructed, along with an eight-bed cardiovascular intensive care unit. The hospital's two state- of-the-art cardiac catheterization laboratory suites are available for diagnostic procedures and angioplasty procedures. A large waiting area and cardiac education/therapy room will also be constructed. Open heart surgery patients will progress from the OR to the new CVICU for the first 24-28 hours after surgery. From the CVICU, the patient will be admitted to a thirty-bed telemetry monitored progressive care unit, located on the second floor. Currently a 38-bed medical/surgical unit, thirty of the beds will remain as PCU beds. Eight beds will be relocated to create the CVICU. The PCU will provide continued care, education and discharge planning for post open heart surgery and angioplasty patients. Oak Hill will also implement a comprehensive cardiac rehabilitation program for both inpatients and outpatients. Brooksville Regional Like Oak Hill, part of the purpose of the Brooksville Regional proposal is to provide more convenient OHS and angioplasty services to Hernando County residents in need of them, 94 percent of whom now travel to Bayonet Point in Pasco County for such services. In addition to proposing improvements in patient convenience and access, Brooksville Regional sees its application as increasing patient choice and competition in the delivery of the services. Indeed, patient choice and competition for the benefit of patients, physicians and payers of hospital services are the cornerstone of Brooksville Regional's application. There is support for the proposed program from the community and from physicians. For example, Dr. Jose Augustine, a cardiologist and Chief of the Medical Staff at Oak Hill since 1997, wrote a letter of support for an open heart program at Brooksville Regional. Although he believes Hernando County would be better served by a program at Oak Hill, he wrote the letter for Brooksville Regional because, "if Oak Hill didn't get it, [he] wanted the program to be here in Hernando County." (Oak Hill No. 12, p. 43.) Consistent with his position, Dr. Augustine finds Brooksville Regional to be an appropriate facility in which to locate an open heart program and he would do all he could to support such a program including providing support from his cardiology group and encouraging support other physicians. But Brooksville Regional offered no evidence regarding the identity of its cardiovascular surgeons. Hernando HMA proposes to construct a state-of-the-art building of 19,500 square feet at Brooksville Regional to house its OHS program. Two OHS operating rooms will be built. Eight CVICU beds will be used for the program, to be converted from other licensed beds. A second cath lab will be added. The total project cost is nearly $12 million. Brooksville Regional proposes to serve all of Hernando County. In addition, 10 percent of its volume is expected to come from Citrus County. Brooksville Regional commits to serving all payer groups with the vast majority projected to be Medicare, Medicare HMO/PPO and non-Medicare managed care. Brooksville lists two specific CON conditions in its application. First, it commits to over 2 percent for charity care and 1.6 percent for Medicaid. Second, it commits to establishing the OHS program at Brooksville's existing facility, located at 55 Ponce de Leon Boulevard in the City of Brooksville. The second of these two was reaffirmed unequivocally at hearing when Brooksville introduced testimony that if Brooksville's CON application is approved, its OHS program will be located at Brooksville's existing facility. Need In Common One "not normal" circumstance exist that supports all three applications: the lack of effect any approval will have on the sub-350 performers in the district. Which, if any, of the three applicants should be awarded an adult open heart surgery program, therefore, is determined on the basis of need and that determination is to be made in the context of comparative review. Benefits of Increased Blood Flow Lack of blood flow to the heart caused by narrowed arteries or blood clots during a heart attack, results in a loss heart of muscle. The longer the blood flow is disrupted or diminished, the more heart muscle is lost. The more heart muscle lost, the more likely the patient will either die or, should the patient survive, suffer a severe reduction in the quality of life. The key to prevent the loss of heart muscle in a heart attack is to restore blood flow to the heart through a process of revascularization as quickly as possible. Cardiovascular surgeons and cardiologists make reference to this phenomenon through the maxim, "time is muscle." The faster revascularization is accomplished the better the outcome for the patient. Those who treat heart attack patients seek to restore blood flow within a half hour of the onset of the attack. Revascularization within such a time frame maximizes the chance of reducing permanent damage to the heart muscle from which the patient cannot recover. Achievement of revascularization between 30 minutes and 90 minutes of the attack results in some damage. Beyond 90 minutes, significant permanent damage resulting in death or severe reduction in quality of life is likely. The three primary treatment modalities available to a patient suffering from a heart attack are: 1) thrombolytics; 2) angioplasty and 3) open heart surgery. Thrombolytic therapy is the standard of care for the initial attempt to treat a heart attack. Thrombolytic therapy is the administration of medication, typically tissue plasminogen ("TPA") to dissolve blood clots. Administered intravenously, the thrombolytic begins working within minutes in an attempt to dissolve the clot causing the heart attack and, therefore, to prevent or halt damage to the heart muscle. Thrombolytic therapies are successful in restoring blood flow to the affected heart muscle about 60 to 75 percent of the time. In the event it is not successful or the patient is not appropriate for the therapy, the patient is usually referred for primary angioplasty, a therapeutic cardiac catheterization procedure. Cardiac catheterization is a medical procedure requiring the passage of a catheter into one or more cardiac chambers with or without coronary arteriograms, for the purpose of diagnosing congenital or acquired cardiovascular diseases, and includes the injection of contrast medium into the coronary arteries to find vessel blockage. See Rule 59C-1.032(2)(a), Florida Administrative Code. Primary angioplasty is defined as a therapeutic cardiac catheterization procedure in which a balloon-tipped catheter inflated at the point of obstruction is used to dilate narrowed segments of coronary arteries in order to restore blood flow to the heart muscle. Rule 59C-1.032(2)(b), Florida Administrative Code. More often now, in the wake of cardiac care advances, a "stent" is also placed in the re-opened artery. A stent is a wire cylinder or a metal mesh-sleeve wrapped around the balloon during an angioplasty procedure. The stent attaches itself to the walls of the blocked artery when the balloon is inflated, acting much like a reinforced conduit through which blood flow is restored. Its advantage over stentless angioplasty is improved blood flow to the heart and a reduction in the likelihood that the artery will collapse in the future. In other words, a stent may prevent substantial re-occlusion. The development of stent technology has led to dramatically increased angioplasty procedure volumes in recent years and the trend is continuing. Based on mortality rates, studies suggest that immediate angioplasty, rather than thrombolytic treatment, is the preferred treatment for revascularization. When thrombolytic therapy is inappropriate or fails and a patient is determined to be not a candidate for angioplasty, the patient is referred for open heart surgery. Under the Open Heart Surgery Rule, Rule 59C-1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of angioplasty must be located within a hospital that also provides open heart surgery services. Open heart surgery is a necessary backup in the event of complications during the angioplasty. The residents of Citrus Memorial's primary service area (and those of Oak Hill's and Brooksville Regional's), therefore, do not have immediate access (that is access to a hospital in their county of residence) to not just open heart surgery services but to angioplasty services as well. In addition to increased benefits to the residents of the proposed service areas, much of the need in this case is based on a demonstration of geographic access problems. For example, population concentration and historical utilization of open heart surgery services in the district demonstrate that the open heart surgery programs in the district are maldistributed. At the same time, the Bayonet Point program's service by virtue of both superior quality and proximity to Hernando County ameliorates the effect of the maldistribution of the programs intra-district particularly with regard to the residents of Hernando County. The four southernmost of the 16 counties in the district (Citrus, Hernando, Sumter and Lake) account for approximately 41 percent of the total adult population and 53.5 percent of the population aged 65 and over within District 3 as a whole. The super majority of aged 65 and over population in these counties is of great significance since that population is the primary base of those in need of adult open heart surgery and angioplasty. This same base accounts for 57 percent of the total annual open heart surgeries performed on district residents. For District 3 as a whole, 27 percent of the adult population is aged 65 and older. In comparison, 38.2 percent of Citrus County residents fall within that age cohort, 37.2 percent of Hernando County residents and 33.3 percent of residents in Lake and Sumter Counties combined fall within that age cohort. In contrast, in the northern part of the district, the counties closest to the three Gainesville open heart surgery programs (Columbia, Hamilton, Suwanee, Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union) contain a combined basis of 32.4 percent and Putnam County contains 24.7 percent of the District 3 population aged 65 and over. The overall District 3 open heart surgery use rate (number of surgeries per 1,000 population age 15 and over) is 3.47. Yet, the combined use rate for Columbia, Hamilton, and Suwanee Counties is 1.96, the combined use rate for Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union Counties is 1.55, and the Putnam County use rate is 2.05. More specifically, the northern county use rates are significantly below the use rates for the remainder of District 3 counties. Marion County is 4.12. Citrus County is at 4.26. Hernando County is at 6.41. Lake and Sumter Counties are at 4.31. Transfers Drive time is but one component of the total time necessary to effectuate a patient transfer. Additional time is consumed in making transfer and admission arrangements with the receiving hospital, awaiting arrival of an ambulance to begin transport, and preparing and transferring the patient into and out of the ambulance. Time delays that necessarily accompany hospital-to-hospital transfers can be critical, clinically. The fact that a facility-to-facility transfer is required means that the patient is at relatively high risk. Otherwise, the patient would be sent home and electively scheduled later. The need to travel outside the community carries other adverse consequences for patients and their families. Continuity of care is disrupted when patients cannot receive hospital visits from their regular and trusted physicians. Separation from these physicians increases stress and anxiety for many patients, and patients heal better with lower levels of stress and anxiety. Further, most OHS patients are elderly, and travel by their spouses to another community to visit is stressful and difficult at best, sometimes impossible. The elderly loved ones of the patient also tend to have health problems and, even when able, the drive to the hospital is stressful. District 3 Out-migration A high volume of OHS patients leave District 3 for OHS services. During the year ended March 1999, there were a total of 3,520 District 3 residents discharged from Florida hospitals following OHS. Only 2,428 of those OHS cases were reported by hospitals located within District 3. An outmigration rate of 31 percent, on its face, is indicative of a district geographic access problem. The problem is mitigated, however, by an understanding that most of the outmigration is of Hernando County residents who are able to travel or are transferred to Bayonet Point, a provider within 30 to 45 minutes driving time from the two Hernando County applicants in this proceeding. Citrus Memorial Volume Projections and Financial Feasibility Citrus Memorial reasonably projects an open heart surgery case volume of 266 for the first year of operation, 313 for the second year, and 361 for the third year. Citrus Memorial reasonably projects an angioplasty case volume of 409 for the first year of operation, 481 for the second year, and 554 for the third year. The Citrus Memorial program is financially feasible in the long term. It will generate approximately $1 million in not-for-profit income by the end of the second year of operation ($327,609 from open heart surgery cases, and $651,323 from angioplasty cases). Increased Access in Citrus County The two Ocala hospitals are approximately 30 miles from Citrus Memorial. With traffic, the normal driving time from Citrus Memorial to the hospitals is 60 minutes. The driving time from Oak Hill to Bayonet Point is normally 29 minutes or about half the time it takes to get from Citrus Memorial to one of the Ocala providers. The drive time from Brooksville Regional to Bayonet Point is approximately 45 minutes, 25 percent faster than the driving time from Citrus Memorial to the Ocala hospitals. Myocardial infarction patients for whom thrombolytic therapy is inappropriate or ineffective who present to the emergency room at Citrus Memorial, on average, therefore, are exposed to greater risk of significant heart muscle damage than those who present to the emergency rooms at either Oak Hill or Brooksville Regional. The delay in transfer for a Citrus Memorial patient in need of angioplasty or open heart surgery can be compounded by the ambulance system in Citrus County. There are only 7 ambulances in the system. If one is out of the county, the provider of ambulance services will not allow another to leave the county until the first has returned. Citrus Memorial presented medical records of 17 cases in which transfers took more than an hour and in some cases more than 3 hours from when arrangements for transfers were first made. There was no testimony to explain the meaning of the records. Despite the status of the records as admissible under exceptions to the hearsay rule and therefore the ability to rely on them for the truth of the matters asserted therein, the lack of expert testimony diminishes the value of the records. For example in the first case, the patient presented at the emergency room on June 14, 1999. Treatment reduced the patient's chest pain. In other words, thrombolytics appeared to be beneficial. The patient was admitted to the coronary care unit after a diagnosis of unstable angina, and cardiac catheterization was ordered. On June 15, the next day, at about 11:40 a.m., "just prior to going down to Cath Lab, patient developed severe chest pain." (Citrus Memorial Ex. 16, p. 1017.) Following additional treatment, the chest pains were observed half an hour later to be "better." (Id.) Several hours later, at 1:45 p.m., that day, transfer to Ocala Regional was ordered. (Id., p. 1043). The patient's progress notes show that the transfer took place at 3:45 p.m., two hours after the order for transfer was entered. Whether rapid transfer was required or not is questionable since the patient appears to have been stabilized and had responded to thrombolytics and other therapy. In contrast, the second of the 17 cases is of a patient whose "risk of mortality [was] . . . close to 100%." The physician's notes indicate that at 1:10 p.m. on August 8, 1999, "emergency cardiac cath [was] indicated [with] a view toward revascularization." (Citrus Memorial Ex. 16, p. 1093). The same notes indicate after discussion between the physician and the patient and his spouse "that transfer itself is risky, but that risk of mortality [if he remained at Citrus Memorial] . . . is close to 100 percent." Although these same notes show that at 1:10 p.m., the patient's transfer had been accepted by the provider of open heart surgery, it was not until 3:30 p.m., that the "Ocala team" (id., at 1113) was shown to be present at Citrus Memorial and not until 3:45 p.m., that the patient was "transferred to Ocala." (Id.) Given the maxim that "time is muscle," it may be assumed that the 2-hour and 45- minute delay in transfer from the moment the patient was accepted for transfer until it occurred and the ensuing time thereafter for the drive to Ocala contributed to significant negative health consequences to the patient. Whatever the value of the 17 sets of medical records, they demonstrate that transfers from Citrus Memorial on occasion take up time that is outside the 30-minute and 90-minute timeframes for avoiding significant damage to heart muscle or minimizing such damage to heart attack patients for whom angioplasty or open heart surgery procedures is indicated. Citrus Memorial also presented twenty sets of records from which the "emergent" nature of the need for angioplasty or open heart intervention was more apparent from the face of the records than in the 17 cases. (Compare Citrus Memorial Ex. No. 16 to No. 17). These records reveal transport delays in some cases, lack of immediate bed ability at the Ocala hospitals in others, and in some cases both transport delays and lack of bed availability. In 16 of the cases, it took over 90 minutes for the patient to reach the receiving hospital and in 13 of the cases, it took 2 hours or more. It would be of significant benefit to some of those who present to Citrus Memorial's emergency room with myocardial infarctions to have access to open heart surgery services on site should thrombolytic therapy be inappropriate or prove ineffective. Other Access Factors Besides time considerations, there are other factors that provide comparisons related to access by Citrus Memorial service area residents on the one hand and Hernando County residents to be served by either Oak Hill or Brooksville Regional on the other. Among the other factors relied on by Citrus Memorial to advance its application is a comparison of use rate. The use rate per 1,000 population aged 15 and over for Hernando County is 6.08, compared to 4.13 for Citrus County. "[B]y definition" (tr. 458), the use rates show need in Hernando County greater than in Citrus County. But the use rates could indicate an access problem financially or geographically. In the end, there are a lot of components that make up the use rate. One is obviously the age of the population and underlying heart disease, two, . . . is the physician practice patterns in the county. [S]tudies . . . show that [in] two equivalent populations, . . . one with a very conservative medical community that . . . hospitalizes more frequently . . . [versus] another . . . where the physicians hospitalize less frequently for the same situation or who use a medical approach versus a surgical approach. (Id.) While there may be one possible explanation for the lower use rate in Citrus County than in Hernando County that favors Citrus Memorial, a comparison of use rates on the state of this record is not in Citrus Memorial's favor. Other factors favor Citrus Memorial. In support of its open heart surgery and angioplasty volumes, for example, Citrus Memorial reasonably projects an 80 percent market share for such services from its primary service areas. In contrast, Oak Hill projected a much lower market share from its primary service area: 58 percent. The lower market share projection by Oak Hill is due to the proximity of the Bayonet Point program to Hernando County. The difference in the two projections reveals greater demand for improved access in Citrus County than in Hernando County. This same point is revealed by projected county outmigration. Statewide data reveals that the introduction of open heart surgery services within a county causes a county resident generally to stay in the county for those services. Yet with a new program in Hernando County, Bayonet Point is still projected reasonably to capture one-half of the open heart surgeries and angioplasties performed on Hernando County residents, further support for the notion that Hernando County residents have adequate access to open heart surgery services through Bayonet Point's program. As to angioplasty demand, Oak Hill projected an angioplasty/open heart surgery ratio of 1.3. Citrus Memorial's ratio is 1.5. Geographic access limitations also adversely affect continuity of care. To have open heart surgery performed at another hospital, the patient will have to travel for pre- operative, operative, and post-operative follow-up services and duplication of tests. This lack of continuity of care often results in the patient's primary and specialty care physicians not following the patient and not being involved with all phases of care. In assessing travel time and access issues for open heart surgery and angioplasty services, travel time and distance present not only potential hardship to the patient, but also to the patient's family and friends who accompany and visit the patient. These issues are of particular significance to elderly persons (be they the patient, family member or friend) who do not drive and must rely on others for transport. Financial Access - Indigent Care Consistent with its mission as a community not-for- profit hospital, Citrus Memorial will accept any patient who comes to the hospital regardless of ability to pay. In 1999, Citrus Memorial provided approximately $4.9 million in charity care, representing 3.6 percent of its gross revenues. Citrus County provided Citrus Memorial with $1.2 million dollars in subsidization, part of which was allotted to capital construction and maintenance, part of which was allotted to charity care. Subtracting all $1.2 million, as if all had been earmarked for charity care, from the charity care, the dollar amount of Citrus Memorial's out-of-pocket charity care substantially exceeds the dollars for the same period provided by Oak Hill ($1.3 million) and by Brooksville Regional ($935,000). The percentage of gross revenue devoted to charity care is also highest for Citrus Memorial; Brooksville Regional's is 1.1 percent and tellingly, Oak Hill's, at 0.6 percent is less than one-quarter of Citrus Memorial's percentage of out-of- pocket charity care. "[C]learly Citrus has a much stronger charity care credential than does either Oak Hill or Brooksville Regional." (Tr. 241). But this credential does not carry over into the open heart surgery arena. As a condition to its CON, Citrus Memorial committed to a minimum 2.0 percent of total open heart surgery patient days to Medicaid/charity patients. The difference between Citrus Memorial's commitment and that of Oak Hill's and Brooksville Regional's, both standing at 1.5 percent, is not nearly as dramatic as past performance in charity care for all services. The difference in the comparison of Citrus Memorial to the other applicants between past overall charity care and commitment to future open heart services for Medicaid and charity care is explained by the population that receives open heart and angioplasty services. That population is dominated by those over 65 who are covered by Medicare. Competition Citrus Memorial's current charges for cardiology services are significantly lower than comparable charges at Oak Hill or Brooksville Regional. A comparison of the eight cardiology-related DRGs that typically have high volume utilization reveals that Oak Hill's gross charges are 62 percent greater than Citrus Memorial's gross charges. A comparison of gross charges is not of great value, however, even though there are some payers that pay billed charges such as "self-pay" and indemnity insurance. When managed care payments are a function of gross charges then such a comparison is of more value. On a net revenue per case basis for those DRGs, Oak Hill's net revenues are 10 percent greater than Citrus Memorial's. A 10 percent difference in net revenues, a much narrower difference than the difference in gross charges, is significant. Furthermore, it is not surprising to see such a narrowing since most of the utilization is covered by Medicare which makes a fixed payment to the provider. A comparison of projections in the applications reveals that Oak Hill's gross revenue per open heart surgery cases will be 164 percent greater than Citrus Memorial's gross revenue per such case. Oak Hill's net revenue per open heart surgery case will be 32 percent greater than Citrus Memorial's net revenue per such case. A comparison of projections in the applications also reveals that Oak Hill's gross revenue per angioplasty case will be 74 percent greater than Citrus Memorial's and that Oak Hill's net revenues per angioplasty case will be 13 percent greater than Citrus Memorial's. If a program is established at Oak Hill, there will be a hospital within District 3 with a new open heart surgery program. But what Oak Hill, under the umbrellas of HCA, proposes to do in reality is to take a quarter of the volume from [Bayonet Point, a] premier facility to set up in a sense a satellite operation at a facility . . . 16 miles away . . . [when] those patients already have an established practice of going to the premier tertiary facility . . . [ and when the two enjoy] a very strong positive relationship. (Tr. 1434). Such an arrangement will do little to nothing to enhance competition. Comparing Citrus Memorial and Brooksville Regional gross revenues on the basis of the same cardiology-related DRGs reveals that Brooksville's gross charges are 83 percent greater than Citrus Memorial's charges. A comparison of projections in the applications reveals that Brooksville Regional's gross revenue per open heart surgery case will be 147 percent greater than Citrus Memorial's and the Brooksville's net revenue per open heart surgery case will be 45 percent greater than Citrus Memorial's. A comparison of projections in the applications reveals that Brooksville's gross revenue per angioplasty case will be 36 percent greater than Citrus Memorial's and that Brooksville's net revenue per angioplasty case will be 7 percent lower than Citrus Memorial's. Impact of a Citrus Memorial Program on Existing Providers Citrus Memorial reasonably projected that by the third year of operation, a Citrus Memorial program will take away 100 cases from Ocala Regional. In 1999 Ocala Regional had an open heart surgery volume of 401 cases. In 2000, its annual volume was 18 cases more, 419. This is a decline from both the immediately prior two-year period, 1997 to 1998 and the two-year period before that of 1995 to 1996. The volume decline for the two-year period 1999 to 2000 compared to the previous two-year period, 1997 to 1998 is not at all surprising because of "two big factors." (Tr. 97). First, in 1997 and 1998, Ocala Regional was used as a training site for the development of Leesburg Regional's open heart surgery program that opened in December of 1998. In essence, Ocala Regional enjoyed an increase in the volume of cases in 1997 and 1998 when compared to previous years and a spike in volume when compared to both previous and subsequent two-year periods because of the 1997-98 short-term "windfall.) (Id.) Second, Ocala Regional was a Columbia-owned facility. In 1999 and thereafter, "Columbia developed a lot of bad publicity because of some federal investigations that were going on of the Columbia system." (Id.) The publicity negatively affected the hospital's open heart surgery volume in 1999 and 2000. The second factor also helps to explain why Ocala Regional's volume in 1999 and 2000 was lower than in 1995 and 1996. There are other factors, as well, that help explain the lower volume in 1999 and 2000 than in 1995 and 1996. In any event if impact to Ocala Regional, alone, were to be considered for purposes of the prohibition in Rule 59C- 1.033(7)(c), that a new program will not normally be approved if approval would reduce 12-month volume at an existing program below 350, then the impact might result in veto by rule of approval of a program at Citrus Memorial. But Ocala Regional is but one hospital under a single certificate of need shared with another hospital across the street from its facility: Munroe Regional. Annualization for 1999 of discharge data for the 12 months ending September 30, 1999 shows that Munroe Regional enjoyed a volume of 770 cases. There is no danger that the program carried out by Ocala Regional and Munroe Regional jointly under a single certificate of need will fall below 350 procedures annually should Citrus Memorial be approved. Oak Hill Need for Rapid Interventional Therapies and Transfers A high number of residents of Oak Hill's proposed service area present to its emergency room with myocardial infarctions. Many of them would benefit from prompt interventional therapies currently made available to them at Bayonet Point. Over 600 patients annually, almost two patients every day, must be transferred by ambulance from Oak Hill to Bayonet Point for cardiac care. A significant number of them would benefit from interventional therapy more rapidly available. The travel time from Oak Hill to Bayonet Point is the least amount of time, however, of the travel time from any of the three applicants in this proceeding to the nearest existing open heart provider; Brooksville Regional to Bayonet Point or Citrus Memorial to one of the Ocala providers. The extent of the benefit, therefore, is difficult to quantify and is, most likely, minimal. As with the other two applicants, thrombolytic therapy is the only method of revascularization currently available to Oak Hill's patients because Oak Hill is precluded by Agency rule and clinical standards from offering angioplasty without on-site open heart surgery backup. The percentage of MI patients who are ineligible for thrombolytic therapy, coupled with the percentages of patients for whom thrombolytic therapy is ineffective, are extremely significant given the high number of MI patients presenting to Oak Hill's emergency room. During 1998, 418 patients presented to Oak Hill's ER with an MI, and 376 MI patients presented in 1999. During the first eight months of 2000, 255 MI patients presented to Oak Hill's ER, an annualized rate of 384. Conservatively, thrombolytic therapy is not effective for at least 10 percent of patients suffering from an acute MI, either because patients are ineligible to receive the treatment or the treatment fails to clear the blockage. Accordingly, it may be conservatively projected that at least 104 patients who presented to Oak Hill's ER between 1998 and August 2000 (10 percent of 1049) suffering an MI were in need of angioplasty intervention for which open heart surgery backup is required. Most patients are diagnosed as in need of OHS or angioplasty as a result of undergoing a diagnostic cardiac catheterization. Oak Hill performs an extremely high volume of cardiac cath procedures for a hospital that lacks an OHS program. In 1999, for example, it performed 1,641 cardiac catheterizations. This is a higher volume than experienced by any of six hospitals during the year prior to which they recently implemented new OHS programs. If Oak Hill had an OHS program, most of the patients at Oak Hill determined to be in need of angioplasty or OHS could receive those procedures at Oak Hill. Such an arrangement would avoid the inevitable delay and stress occasioned by a transfer to Bayonet Point or elsewhere. Furthermore, if Oak Hill had an OHS program then those patients in need of diagnostic cardiac catheterization and angioplasty sequentially would have immediate access to the interventional procedure. The need is underscored for those patients presenting to Oak Hill's ER with myocardical infarctions who do not respond to thrombolytics because, as stated earlier in this order, access to angioplasty within 30 minutes of onset is ideal. Oak Hill transfers an extremely high number of cardiac patients for angioplasty and open heart surgery. In 1999, Oak Hill transferred 258 patients to Bayonet Point for open heart surgery, and 311 for angioplasty/stent procedures. Of course, most OHS patients are scheduled on an elective basis for surgery, rather than being transferred between hospitals, as is evident from the fact that during the 12-month period ending March 1999, 698 Hernando County residents underwent OHS. For now, Oak Hill patients determined to be in need of urgent angioplasty or open heart surgery must be transferred by ambulance to an OHS provider which for the vast majority of patients is Bayonet Point. Approximately 17 miles south, the average drive time to Bayonet Point from Oak Hill is 30 minutes but it can take longer when on occasion there is traffic congestion. Once the transfer is achieved and patient receives the required procedure, the drive can be difficult for the patient's family and loved ones. Community members often express to physicians and hospital staff their support and desire for an OHS program at Oak Hill. Many believe travel outside Hernando County for those services is cumbersome for loved ones who are important to the patient's healing process. The community support and demand for these services is evidenced by the 7,628 resident signatures on petitions in support of Oak Hill's efforts to obtain approval for an OHS program. While a program at Oak Hill would be more convenient, Oak Hill did not demonstrate a transfer problem that would rise to the level of "not normal" circumstances. Because of Oak Hill's relationship with Bayonet Point, Bayonet Point's proximity and excess capacity, coupled with the high quality of the program at Bayonet Point, Oak Hill's case is more in the nature of seeking a satellite. As one expert put it at hearing, [Oak Hill] is, in fact, a satellite. And my question is, [']What's the wisdom of doing that if you don't have the problems that normally are being addressed when you grant approval of a program?['] In other words, if you don't have transfer issues [that rise to the level of "not normal" circumstances], if you don't have access issues, if you're not achieving any price competition, if it's not particularly cost effective, why would you [approve Oak Hill]? (Tr. 1537-38). Oak Hill's Projected Utilization Oak Hill projected a range of 316 to 348 OHS cases during its first year, and by its third year a range of between 333 and 366 cases. Those volumes are sufficient to ensure excellent quality of care from the beginning of the program, particularly with the involvement of the Bayonet Point surgeons. Oak Hill defined its primary service area (PSA) for OHS based on historic MDC-5 cardiology related diagnosis discharges from its hospital. For the 12-month period ended March 1999, over 90 percent of Oak Hill's MDC-5 discharges were residents of six zip codes, all in the vicinity of Oak Hill Hospital and within Hernando County. Accordingly, that area was chosen as the PSA for projecting OHS utilization. Out-of-PSA residents accounted for only 8.9 percent of Oak Hill's MDC-5 discharges, and of these, 1.5 percent were out-of-state patients, and 4.9 percent were residents from other parts of District 3. For the year ending ("YE") March 1999, Oak Hill had an MDC-5 market share of 40.9 percent within its PSA, without excluding angioplasty, stent, and OHS cases. If angioplasty, stent, and OHS cases are excluded, Oak Hill's PSA market share was 52.7 percent. In order to project OHS service demand, Oak Hill examined the population projections for 1999 and 2004 for District 3, and for Oak Hill's PSA. The analysis was based on age-specific resident populations and use rates, to serve as a contrast to the Agency's projections. The numeric need formula in the OHS Rule utilizes a facility based use rate derived by totaling all of the reported OHS cases performed by hospitals within a District during a given time period, and then dividing those cases by the adult population aged 15 and over. While a facility-based use rate measures utilization in those District hospitals, however, it does not measure out-migration. Nor does it reflect the residence of the patients receiving those services. On the other hand, a resident-based use rate identifies where patients needing OHS actually come from, and permits development of age specific use rates. For example, the resident-based use rates reflects that the southern portion of District 3 has a much higher concentration of elderly persons than does the northern portion of the District, and reveals extremely high migration out of the District for OHS services. Oak Hill's PSA is more elderly than the District 3 population as a whole. In 1999, 32.8 percent of the Oak Hill PSA population was aged 65 or over, as opposed to only 21.5 percent for District 3 as a whole, with similar results projected for the population in 2004, the projected third year of operation of Oak Hill's program. Based on the district-wide use rate resulting from the OHS Rule need methodology, Hernando County would be expected to generate 276 OHS cases in the planning horizon of July 2002 (use rate of 2.3 per 1000 adult population). Application of this OHS Rule use rate to Hernando County clearly understates need if resources to meet the need are considered within the isolation of the boundaries of District 3. For example, the OHS Rule based projection of 276 OHS cases in 2002, is far below the actual 664 Hernando County resident OHS discharges during YE March 1998, and the 698 OHS cases during YE March 1999. While the facility-based district-wide use rate was 2.3, the Hernando County resident-based use rate was 6.45 per 1000 population. The fact of increasing use rates with age is demonstrated by the Hernando County resident use rate of 6.95 for ages 55-64, increasing to 12.01 for ages 65-74, and increasing again to 14.95 for age 75 and over. But focusing on Hernando County use rates within District 3 ignores the reality of the proximity of an excellent program at Bayonet Point. Oak Hill reasonably projected OHS demand in its PSA by examining the age-specific use rates of residents in the southern portion of District 3, which experienced an overall use rate of 4.55 for the year ending March 1999. Those age-specific use rates were then applied to the age-specific population forecast for each of the three horizon years of 2002 through 2004, resulting in an expected PSA demand for OHS of 547 cases in 2002, 561 cases in 2003, and 575 cases in 2004. Those projections are conservative given that 663 actual open heart surgeries were reported among PSA residents during the YE March 1999. The same methodology was used to project angioplasty service demand in the PSA, resulting in an expected demand ranging from 721 cases in 2002 to 758 cases in 2004. Oak Hill then projected its expected OHS case volume by assuming that its first year OHS market share within its PSA would be the same as its MDC-5 market share, being 52.7 percent. Oak Hill next assumed that by the third-year operation its market share would increase to equal its current cardiac cath PSA market share of 57.9 percent. It further assumed that it would have a non-PSA draw of 8.9 percent, which is equal to its current non-PSA MDC-5 market share. Oak Hill reasonably expects that 91.1 percent of its OHS cases would come from within its six zip code PSA, with the remaining 8.9 percent expected to come from outside that area. Oak Hill then projected an expected range of OHS discharges during its first three years of operation by using both a low estimate and a high estimate. The resulting utilization projections reflect a low range of 316 OHS cases in 2002, 324 cases in 2003, and 333 cases in 2004. The high range estimate for the same years respectively would be: 348, 357, and 366 cases. The same methodology was used to project angioplasty cases, resulting in the following low range: 417 cases in 2002; 428 in 2003; and 438 in 2004. The expected high range for the same respective years would be: 458, 470, and 482. Oak Hill's OHS and angioplasty utilization projections are reasonable. Long-term Financial Feasibility Long-term financial feasibility is defined as a demonstration that the project will achieve and maintain financial self-sufficiency over time. Oak Hill's projected gross charges were based on Bayonet Point's charge structure. The projected payer mix was based on Oak Hill's cardiac cath experience. Projected net reimbursement by payor source was based on Oak Hill's experience for Medicare, Medicaid, and contractual adjustment history. Oak Hill's expenses were projected on a DRG specific basis using information generated by the cost accounting system at Bayonet Point. The use of Bayonet Point's expense experience is a reasonable proxy for a number of reasons. Its patient base is comprised of patients who are reasonably expected to be the base of Oak Hill's patients. Management there is similar to what it will be at an Oak Hill program. And, as stated so often, the two facilities are relatively close in location. To account for differences between Bayonet Point's expenses and Oak Hill's project costs, interest and depreciation, adjustments were made by Oak Hill as reflected in its application. As a means of compensating for fixed costs differentials between the two hospitals, Oak Hill added its salary costs projected in Schedule 6 to the salary expenses already included in Bayonet Point's costs. (Schedule 6 nursing, administration, housekeeping, and ancillary labor costs exceeded $3 million in the first year of operations.) This counting of two sets of salary expenses offsets any economies of scale cost differential that may exist between the OHS programs at Bayonet Point and Oak Hill. A reasonable 3 percent annual inflation factor was applied to both projected charges and costs. The reasonableness of Oak Hill's overall approach is supported by Citrus Memorial's use of a substantially similar pro forma methodology in modeling its proposed program on Munroe Regional Medical Center. Oak Hill reasonably projects a profit of $1.38 million in the first year of operation, and that profitability will increase as the case volumes grow thereafter. An Oak Hill program will cost Bayonet Point (a sister HCA hospital) patients and may diminish the corporate profits of the two hospital's parent corporation, HCA Health Services of Florida, Inc. It is clear from the parent's most recent audited financial statements, however, that it has ability to absorb a lower level of profit from Bayonet Point without jeopardizing the financial viability of Oak Hill. Brooksville Regional argues that the financial impact to Bayonet Point of an Oak Hill program demonstrates that the Oak Hill application is nothing more than a preemptive move to stifle competition. Oak Hill, in turn, characterizes its proposal as a sound business judgement to compete with non-HCA hospitals in District 3. Whatever characterization is applied to the Oak Hill proposal, it is clear that it is financially feasible in the long term. Other Statistics The AHCA population estimates for January 1, 1999, show a Hernando County population of 108,687 and a Citrus County population of 98,912. The same data sources show the "age 65 and over" population (the "elderly") in Hernando to be 40,440 and in Citrus to be 37,822. During the year 2000, there were 2,545 more people aged 65 and over in Hernando County than in Citrus County. By the year 2005, the difference is expected to be 3.005. The total change in the elderly population between 2000 and 2005 is projected to be 4,109 in Citrus County and 4,614 in Hernando County. Generally, the older the population, the older the OHS use rate. Comparatively, then, Hernando County has the larger population to be served both now, and in all probability, in the foreseeable future. Oak Hill has the largest cardiology program among the applicants. For the 12-month period ending September 1999, MDC- 5 discharges were 1,130 at Brooksville Regional, 2,077 at Citrus Memorial and 2,812 at Oak Hill. The combined Brooksville and Spring Hill Regional Hospital MDC-5 case volume of 2,238 is below Oak Hill's MDC case volume for the same period. Oak Hill is the largest cardiac cath provider among the applicants. For the 12-month period ending September 2000, Citrus Memorial reported 646 cardiac catheterization procedures and Brooksville Regional reported 812. Oak Hill reported 1,404 such procedures, only sixty shy of a volume double the combined volume at the other two applicants. The level of ischemic heart disease in an area is indicative of the level of open heart surgery needed by residents of the area. The number of ischemic heart disease cases by county during the 12-month period ending September 1999 were: 1,038 for Alachua; 1,978 for Citrus; 2,816 for Marion; and, Hernando, 3,336. During the 12-month period ending September 1999, 657 Hernando County residents underwent OHS at Florida hospitals, while only 408 residents of Citrus County did so. Similarly, 948 Hernando County residents had angioplasty, while only 617 Citrus County residents underwent angioplasty. For the year ending June 30, 1999, the Citrus County OHS use rate was 4.26 per 1,000 population, substantially lower than the Hernando County use rate of 6.41. A comparison of the use rates for the year ending September 30, 1999, again shows Hernando County's use rate to be higher: 4.13 for Citrus, 6.08 for Hernando. Hernando County also experiences a higher cardiovascular mortality rate than does Citrus County. During 1998, the age-adjusted cardiovascular mortality rate per 100,000 population for Citrus was 330.88 and 347.40 for Hernando. During 1999, those mortality rates were 304.64 in Citrus and 313.35 in Hernando (consistent with the decline between 1998 and 1999 for the state as a whole). The Hernando mortality rates greater than Citrus County's indicate a greater prevalence of heart disease in Hernando County than in Citrus County. Most importantly, during 1999, Oak Hill transferred 619 patients to Bayonet Point for cardiac intervention - 258 for open heart surgery, 311 for angioplasty/stent, and 50 for cardiac cath. Brooksville Regional transferred a combined 383 patients after diagnostic cardiac catheterization to other hospitals for either angioplasty or OHS. Brooksville Regional has 91 licensed beds, Citrus Memorial has 171 beds and Oak Hill has 204 beds. Although with Spring Hill one could view Brooksville Regional as "two hospital systems with 166 beds under common ownership and control" (Tr. 1544), at 91 beds, Brooksville would become the smallest OHS program in the state in terms of licensed bed capacity, Hospitals of less than 100 beds are not typically of a size to accommodate an OHS program. There might be dedicated cardiovascular hospitals of 100 beds or less with capability to support an open heart surgery program, but "open heart surgical services in [a general, surgical-medical hospital of less than beds] would overwhelm the hospital as far as the utilization of services." (Tr. 126). Oak Hill's physical plant, hospital size, number of beds, medical staff size, number of cardiologists, cath lab capacity, number of cath procedures, number of admissions, and facility accessibility to the largest local population are all factors in its favor vis-à-vis Brooksville Regional. In sum, Oak Hill is a hospital more ready and appropriate for an adult open heart surgery program than Brooksville. Alternatives As an alternative to its CON application, Oak Hill considered the possibility of seeking approval of a program to be shared with Bayonet Point. Learning that the Agency looks with disfavor on inter-district shared adult open heart surgery programs, Oak Hill decided to seek approval of a program independent of Bayonet Point but one that would rely on Bayonet Point's experience and expertise for development, implementation and operation. Bed Capacity Brooksville contends that Oak Hill lacks sufficient bed capacity to accommodate the implementation of an OHS program in conjunction with its projected-related increased admissions. Brooksville relied on an Oak Hill daily census document, focusing on the single month of January, arguing that the document reflected that Oak Hill exceeded its licensed bed capacity on 5 days that month. The licensed bed capacity, however, was not exceeded. Observation patients, who are not inpatients, and not properly included in the inpatient count, were included in the counts provided by Brooksville. Seasonal peaks in census during the winter months, particularly January, are common to all area hospitals. Similarly, all hospitals experience a higher census from Monday through Thursday, than on other days. Oak Hill has adequate capacity and flexibility to accommodate those rare occasional days during the year when the number of patients approaches its number of beds. Patients are sometimes hospitalized for "observation," and when so classified are expected to stay less than 24 hours. Typically, Oak Hill places such patients in a regular "licensed" bed, so long as such beds are available. There are other areas in the hospital suitable for observation patients, including: 12 currently unused and unlicensed beds adjacent to the cardiac cath recovery area; six beds in the ER holding area; eight beds in the ER Quick Care Unit; and additional beds in the same day surgery recovery area. Observation patients can be cared for appropriately in these other areas, a routine hospital practice. Peak season census is "a fact of life" for hospitals, including Oak Hill and Brooksville. Oak Hill has never been unable to treat patients due to peak season demands. January is the only month during the year when bed capacity presents a challenge at Oak Hill. If necessary, Oak Hill could coordinate patient admissions with Bayonet Point to ensure that all patients are appropriately accommodated. Oak Hill can successfully implement a quality OHS program with its current bed capacity. In fact, all parties have stipulated to Oak Hill's ability to do so. Moreover, should it actually come to pass in future years that Oak Hill's annual average occupancy exceeds 80 percent, it may add up to 20 licensed beds on a CON exempt basis. Brooksville Regional Factors favoring Brooksville over Oak Hill Bayonet Point is the dominant provider of OHS/angioplast to residents of Hernando County. As a non-HCA hospital, a Brooksville program (in contrast to one at Oak Hill) would enhance patient choice in Hernando County for hospitals and physicians, and would create an environment for price and managed care competition. Other health planning factors that support Brooksville Regional over Oak Hill are the locations of the two Hernando County hospitals and the ability of the two to transfer patients to Bayonet Point. Patient Choice and Competition Of the OHS/angioplasty services provided to Hernando County residents, Bayonet Point provides 94 percent, the highest county market share of any hospital that provides OHS services to residents of District 3. Indeed, it is the highest market share provided by any OHS provider in any one county in the state. The importance of patient choice and managed care competition has been acknowledged by all the parties to this proceeding. If Brooksville Regional's program were approved, Hernando County residents would have choice of access to a non- HCA hospital for open heart and angioplasty services and to physicians and surgeons other than those who practice at Bayonet Point. This would not be the case if Oak Hill's program was approved instead of Brooksville's. Price Competition Although Brooksville is not a "low-charge provider for cardiovascular services" (tr. 1347), approving Brooksville creates an environment and potential for price competition. A dominant provider in a marketplace has substantial power to control prices. Adding a new provider creates the motivation, if not the necessity, for that dominant provider to begin pricing competitively. A dominant provider controls prices more than hospitals in a competitive market. Bayonet Point's OHS charges illustrate this. Approving Brooksville's application creates an environment for potential price competition with Bayonet Point, whereas approving Oak Hill's application, whose charges are expected to be the same as Bayonet Point's, does not. Managed Care Contracting Just as competitive effects on pricing are reduced in an environment in which there is a dominant provider, so managed care contracting is also affected. Managed care competition depends not just on competition between managed care companies but also on payer alternative within a market. If a managed care company is forced to deal with one health care provider or hospital in a marketplace, its competitive options are reduced to the benefit of the hospital that enjoys dominance among hospitals. "[T]he power equation moves much more strongly in that type of environment towards the provider [the dominant hospital] and away from the managed care companies." (Tr. 1471). Managed care companies who insure Hernando County residents have no alternative when it comes to open heart surgery and angioplasty services but to deal with Bayonet Point. With a 94 percent share of the Hernando County residents in need of open heart and angioplasty services, there is virtually no competition for Bayonet Point in Hernando County. The managed care contracting for both Bayonet Pont and Oak Hill is done at HCA's West Florida Division office, not at the individual hospital level. Approving Oak Hill will not promote or provide competition for managed care. Approving Brooksville, on the other hand, will provide managed care competition over open heart and angioplasty services in Hernando County. Ability to Transfer Patients While transfers of Hernando County patients always produce some stress for the patient and are cumbersome as discussed above for the patient's loved ones, there is no evidence of transfer problems for Oak Hill that would rise to the level of "not normal" circumstances. Outcomes for patients transferred from Oak Hill to Bayonet Point on the basis of morbidity statistics, mortality statistics, length of stay, patient satisfaction, and family satisfaction are excellent. It is not surprising that sister hospitals situated as are Oak Hill and Bayonet Point would enjoy minimal transfer delays and access problems encountered when patients are transferred. Transfers between unaffiliated hospitals are not normally as smooth or efficient as between those that have some affiliation. Unlike Oak Hill's patients, Brooksville patients, for example, are never transported for OHS/angioplasy by Bayonet Point's private ambulance. Other than in emergency cases, Bayonet Point decides the date and manner when the patient will be transferred. But just as in the case of Oak Hill, there is no evidence of transfer problems between Brooksville Regional and Bayonet Point that would amount to an access problem at the level of "not normal" circumstances. Outmigration As detailed earlier, there is extensive outmigration of Hernando County residents to District 5 for open heart and angioplasty procedures. The outmigration pattern on its face is in favor of both applications of Oak Hill and Brooksville. The outmigration from Hernando County, however, is of minimal weight in this proceeding since Bayonet Point is so close to both Oak Hill and Brooksville. The patients at the two Hernando hospitals have good access to Bayonet Point, a facility that provides a high level of care to Hernando County residents in need of open heart surgery and angioplasty services. The relationship is inter-district so that it is true that there is outmigration from District 3. Outmigration statistics showing high outmigration from a district have provided weight to applications in other proceedings. They are of little value in this case. Location of the Two Hernando Hospitals Brooksville is located in the "dead center" (Tr. 1290) of Hernando County. With good access to Citrus County via Route 41, it is convenient to both Hernando County residents and some residents of Citrus County. It reasonably projects, therefore, that 90 percent of its open heart/angioplasty volume will be from Hernando County with the remaining 10 percent from Citrus. Oak Hill is located in southwest Hernando County, closer to Bayonet Point than Brooksville. Oak Hill's primary service area is substantially the same as that part of Bayonet Point's that is in Hernando County. Oak Hill does not propose to serve Citrus County. Brooksville, then, is more centrally located in Hernando County than Oak Hill and proposes to serve a larger area than Oak Hill. Financial Feasibility (long-term) Brooksville has operated profitably since its bankruptcy. In its 1999 fiscal year, the first year out of bankruptcy, Hernando HMA earned a profit of $3 million. In fiscal year 200, Brooksville's profit was $6 million. OHS programs are generally very profitable. There is no OHS program in Florida not generating a profit. Brooksville's projected expenses and revenues associated with the program are reasonable. Schedule 5 in the Brooksville application contains projected volumes for OHS/angioplasty. The payer mix and length of stay were based on 1998 actual data, the most recent data for a full year available. The projected volumes are reasonable. The projected volumes are converted to projected revenues on Schedule 7. These projections were based on actual 1998 charges generated for both Hernando and Citrus County residents since Brooksville proposes to serve both. These averages were then reasonably projected forward. Schedule 7 and the projected revenues are reasonable. These projected volumes and revenues account for all OHS procedures performed in Hernando and Citrus Counties in 1998 even though effective October 1, 1998, the DRG procedure codes for OHS procedures were materially redefined. Thus, when Brooksville's schedules were prepared using 1998 data, only 3 months of data were available using the new DRG codes. Brooksville opted to use the full year of data since using a full year's worth of data is preferable to only 3 months. Similarly, the DRGs for angioplasty both as to balloon and with stent were re-classified. Again, Brooksville opted to use the full year's worth of data. Brooksville's expert explained the decision to use the full year's worth of data and the effect of the DRG reclassification on Brooksville's approach, "We've captured all the revenues and expenses associated with these open heart procedures and just because the actual DRGs have changed, doesn't . . . impair the results because both revenues and expenses are captured in these projections." (Tr. 1651). Schedule 8 includes the projected expenses. It included the health manpower expenses from Schedule 6 and the project costs from Schedule 1. The remaining operating expenses were based upon the actual costs experienced by all District 3 OHS providers generated from a publicly-available data source, and then projected forward. As to these remaining operating costs, consideration of an average among many providers is far preferable to relying on just one provider. Schedule 8 was reasonably prepared. It accounts for all expense to be incurred for all types of OHS and angioplasty procedures. It is based on the best information available when these projections were prepared and are based on 12 months of actual data. Even if the projections of the schedules are not precise because of the re-classification of DRGs, they contain ample margins of error. Brooksville's financial break-even point is reached if it performs 199 OHS and 100 angioplasty procedures. This low break-even point provides additional confidence that the project is financially feasible. Brooksville demonstrated that its proposed program will be financially feasible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order that grants the application of Citrus Memorial (CON 9295) and denies the applications of Oak Hill (CON 9296 )and Brooksville Regional (CON 9298). DONE AND ENTERED this 4th day of October, 2001, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 2001. COPIES FURNISHED: Diane Grubbs, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Michael J. Cherniga, Esquire Seann M. Frazier, Esquire Greenberg Traurig, P.A. East College Avenue Post Office Box 1838 Tallahassee, Florida 32302-1838 Stephen A. Ecenia, Esquire Rutledge, Ecenia, Purnell and Hoffman, P.A. 215 South Monroe Street, Suite 420 Tallahassee, Florida 32302-0551 James C. Hauser, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 John F. Gilroy, III, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403
Findings Of Fact St. Anthony's is a 434 bed nonprofit acute care hospital located in St. Petersburg, Florida. On September 15, 1987, St. Anthony's filed an application for a CON to establish and implement an open heart surgery program in its facility. The Department filed a notice of intent to deny the application in January, 1988, and thereafter, St. Anthony's filed a Petition for Formal Administrative Hearing to contest the denial. Intervenors, All Children's and Bayfront sought and were granted leave to intervene in the proceeding. By Pre-hearing Stipulation, the parties have agreed to the following Findings of Fact: Each of the parties has a record of providing good quality of care. The licensure and accreditation of each party is not at issue and need not be proven. The equipment proposed by St. Anthony's in its application is adequate and the costs projected for that equipment are reasonable. The staffing levels and related salaries as proposed by St. Anthony's in its application are appropriate and reasonable. The architectural plans and related costs for St. Anthony's proposed project are appropriate and reasonable. The total project costs proposed by St. Anthony's in its application are appropriate and reasonable. St. Anthony's has the ability to finance the project costs. Projected revenues and expenses set out in the pro forma financial projections by St. Anthony's are reasonable. St. Anthony's presently provides a full range of acute, general, medical, and surgical services, and surgical subspecialties including neuro- surgery, maxillofacia surgery, thoracic surgery, and peripheral vascular surgery. It also offers broad psychiatric, substance abuse, and obstetrical services and a full time emergency room capability. It also provides cardiology services including cardiac catheterization. It has a historic commitment to cardiology services, establishing a cardiac catheterization lab in 1961, a coronary care unit in 1968, and a holter monitor service in 1973. In 1975, it established the community's first echocardiography laboratory, and as early as 1965, seriously considered establishing an open heart surgery program at the facility. This program was not, however, developed at the time. St. Anthony's continued its involvement in the area of cardiography and its program covers a full array of diagnostic services including echocardiography, nuclear cardiography, and basic electrocardiography, and possesses a magnetic resonance imaging unit which can be used in the diagnosis of heart problems. Additionally, it has a well equipped vascular laboratory and peripheral vascular disease program as well as a cardiac rehabilitation program and a wellness center that is aimed at early identification and prevention. St. Anthony's is also the site of the Rogers Heart Foundation, a nonprofit, privately funded foundation established in the late 1950's to perform research, education, and clinical diagnostic studies in the field of cardiovascular diseases. As a result of the activities of the foundation, St. Anthony's is well known by physicians in the area as a center for cardiac training and expertise, and until recently, was a participant with Emory University in that institution's cardiac fellowship training program. St. Anthony's has a long tradition in the service area for providing indigent services and is one of the major providers of charity and indigent care in Pinellas County. This care is provided through direct free care to patients as well as discounted charges and the write-off of bad debts. It also provides services through Medicaid and through write-off of Medicare deductible and coinsurance portions of patients' charges. All Children's Hospital is a 113 bed children's hospital located in St. Petersburg approximately two miles from St. Anthony's. It is a full service tertiary facility which serves as a referral center for children from throughout the State of Florida and currently has an approved CON for an additional 55 beds. Following construction, which is due to begin in February, 1989, All Children's will have 6 operating rooms, 2 cardiac catheterization labs, and 5 additional surgical intensive care unit beds for a total of 13 ICU beds. At the present time it has 2 operating rooms used for open heart surgery and 2 cardiac catheterization labs. The hospital has a strong affiliation with the University of South Florida College of Medicine in Tampa. All Children's open heart program began several years after the hospital opened its first cardiac catheterization lab for children in the early 1970's. This came about when several cardiologists whose patients were primarily adult, and who were unable to utilize the facilities at the Rogers Heart Foundation because of its closed status, asked to make use of All Children's cardiac catheterization unite. Since this was consistent with All Children's efforts to increase the quality of its program through higher volume, All Children's began making its services available to adults admitted to Bayfront Hospital, a neighboring facility, with cardiac catheterization done by the patient's cardiologist in the All Children's facility. All Children's currently has 3 pediatric cardiologists and approximately 12 to 15 adult cardiologists on staff. The primary cardiac surgical team consists of Drs. Daicoff and Botero. At the present time, approximately 34% of the adult and pediatric patients treated at All Children's are Medicaid patients. Uncompensated indigent care provided at All Children's ranged from 16.52% in 1986 to 18.03% in 1987 and Medicaid patient days ranged from 30.4% in 1986 to 34.2% in 1987. Bayfront's uncompensated care was 22.15% in 1986 and 23.93% in 1987 while Medicaid patient days for that facility were 7.6% in 1986 and 8.9% in 1987. St. Anthony's devoted 1.2% of its total patient days in 1986 to Medicaid patients and 2.3% of it's total patient days in 1987. Bayfront is a 518 bed not-for-profit, full service acute care hospital located in St. Petersburg adjacent to All Children's. It was founded prior to 1968 as Mound Park Hospital, owned by the City of St. Petersburg, but in 1968, separated from city ownership and became known as Bay front Medical Center. Its mission is to provide care to all citizens in St. Petersburg and the surrounding area regardless of their ability to pay, and it offers a full range of services with the pediatric component provided by its neighbor, All Children's. It has 450 physicians on medical staff. Bayfront serves as a teaching hospital working in conjunction with the University of South Florida Medical School and providing a residency program in Pinellas County covering the entire spectrum of health care training at the facility. Bayfront runs a comprehensive cancer service approved by the American College of Surgeons and its obstetrical and gynecological women's service accounts for approximately 4,500 births per year. With All Children's, it participates in a prenatology program for high risk mothers and infants as part of a regional care program. Bayfront provides helicopter emergency coverage for its trauma center which averages 50,000 emergency room visits per year. The trauma service, staffed on a 24 hour a day basis by a full complement of surgeons, includes open heart surgery capability available for trauma related heart surgery needs. All Children's and Bayfront are connected to each other by an enclosed passageway. Taken together, the primary service area of the three hospital parties to this action is the southern half of Pinellas County up to approximately Ulmerton Road. Because of their geographical proximity to each other and their diverse but complementary populations, All Children's and Bayfront have developed working programs on a shared service basis in an effort to hold down the cost of health care in the community and to avoid unnecessary duplication of service. The Department has recognized and continues to recognize the shared nature of the All Children's/Bayfront open heart surgery program and the Boards of Directors of both institutions, as early as 1975, agreed to share open heart surgery services. The shared program for cardiac catheterization and open heart surgery are now known as the "Cardiac Center of Excellence". Under the "Center" concept, diagnostic services are shared. All Children's Hospital's previously described cardiac catheterization laboratory and its non-invasive diagnostic study equipment is complemented by Bayfront's cardiac catheterization laboratory and its non-invasive diagnostic services including EKG, 2-D echo color flow doppler, magnetic resonance imaging, holter monitoring, and stress testing. Not only are diagnostic services shared by the two facilities but therapeutic services are shared as well. All Children's provides 2 open heart surgery operating suites, percutaneous transluminal coronary angioplasty, laser angioplasty, and intensive care units for children and adult post operative patients. Bayfront provides laser angioplasty and its cardiac catheterization laboratory has the capability to do emergency angioplasty procedures. Once these have been accomplished, Bayfront has a coronary care unit, a surgical unit for post operative patients, and a progressive care unit for its adult patients progressing toward discharge. Transportation services are also shared as are rehabilitation services. All Children's mobile intensive care unit is available to provide ground transportation for adults and children and it has entered into appropriate cardiac transportation protocols with outlying hospitals. Bayfront provides helicopter transportation for children and adults to its trauma center and, too, has appropriate cardiac transportation protocols similar to those entered into by All Children's. This joint program, which has grown to provide up to date, sophisticated, high quality cardiac care to both adults and children, minimizes operating costs and capital investment. An entire range of cardiac services is available with highly trained physicians and professional staff and state of the art equipment and facilities to both adult and pediatric patients. When an adult patient requires open heart surgery at the "Center", he is admitted to Bayfront the day prior to surgery where preliminary preparation is accomplished. On the day of surgery, the patient is prepared and Bayfront personnel transport the patient through the underground connection to All Children's where the actual surgery takes place. Subsequent to the surgery, the patient will normally be kept over night at All Children's in a surgical ICU whereupon, barring complications, he is then transferred by Bay front personnel back to Bay front to continue recovery in a cardiac surgical ICU. The remainder of the recovery period, usually lasting about one week for an uncomplicated case, is accomplished at Bayfront, and upon completion of recovery, the patient is discharged from that hospital, returning there for out patient treatment in Bayfront's cardiac rehabilitation program. In an emergency situation, when an adult patient is presented directly to All Children's for angioplasty, All Children arranges with Bayfront to admit the patient there within 24 hours. For non-Medicare patients, each facility bills the appropriate insurance carrier or patient for the charges for services rendered by each hospital. The Medicare and Medicaid reimbursement mechanisms by which All Children's and Bayfront are paid for providing open heart surgery differ substantially from the norm. The Health Care Finance Administration, which administers thee Medicare program recognizes the Bayfront/All Children's shared open heart surgery program for adults and has structured its reimbursement mechanism in an appropriate manner to accommodate that shared status. The normal method of fixed DRG payments is not followed. Because of accreditation requirements, the process becomes somewhat complicated in that the patient must be discharged from one facility and admitted to the other for surgery and vice-versa for recovery. However, representatives of both facilities claim, and there is no evidence to the contrary, that this procedure does not impose any burden on the patient or his family nor does it affect the quality of care. In fact, under the program, both facilities have been able to maintain an excellent quality of care. The physicians who practice there and who testified for St. Anthony's, indicated some scheduling problems relating to the availability of operating rooms at a time desired by the surgeon, but these problems have not affected quality of care and are being resolved through more acute scheduling and the addition of the 2 new surgical suites at All Children's. Between the two facilities, there are 15 cardiologists on both staffs who refer open heart patients for surgery. There are also 3 cardiovascular surgeons on staff at the two facilities, all of whom are members of the same physician group which exclusively performs open heart surgery under the shared program and which provides backup for all angioplasties in the "Center" program. One of these, Dr. Daicoff, indicated that although he would prefer the development of a single state of the art heart institute to serve the future needs of southern Pinellas County, he and his group would provide angioplasty backup as well as do surgery at St. Anthony's if the capability were approved and if he could be convinced that the St. Anthony's program would achieve the same level of high quality currently enjoyed by Bayfront and All Children's. Recognizing that the likelihood of a centralized heart institute is remote, Dr. Daicoff favors the approval of St. Anthony's program. Open heart surgery is currently being performed at two other hospitals in HRS District V, (Pinellas and Pasco Counties). These are the Largo Medical Center and Morton F. Plant Hospital, both of which are located close to the Ulmerton Road dividing line in the center of Pinellas County. These two facilities provide the majority of open heart surgery in the northern portion of Pinellas County and in Pasco County. Nonetheless, an open heart program at Bayonet Point Hospital in Pasco County was approved in December, 1987, not because of numerical need for the project, but because the applicant also sought approval for cardiac catheterization services. In that case, a need was shown for cardiac catheterization services in Pasco County, and a lab at Bayonet Point was approved. Because of the Department rule requiring open heart surgery backup within 30 minutes of a cardiac catheterization lab, no such backup otherwise being available for the Bayonet Point facility, its program was approved as well. The service area for open heart surgery for the three hospital parties to this proceeding is the St. Petersburg, Florida area. At the present time there are no major referrals to All Children's for open heart surgery from outside this area to the adult program operated in conjunction with Bayfront. The adult program at All Children's/Bayfront is centered around southern Pinellas County, an area in which the rate of growth is somewhat constant and not significant. The majority of growth in the county is located in the north end. For the fiscal year ending September 30, 1988, 268 adult open heart surgery procedures were performed at All Children's. During the same period, 160 children's cases were performed. During 1984, 257 adult and 48 pediatric open heart surgeries were performed at All Children's; during 1985, 215 adult and 75 pediatric; during 1986, 258 adult and 46 pediatric; and during 1987, 268 adult and 72 pediatric. If all theatres at All Children's were operated on a capacity basis, as many as 520 open heart procedures could be accomplished. This would require performing 2 surgeries per day, 5 days a week, 52 weeks per year. At the present time, nowhere near this load is being carried. St. Anthony's contends this would not be realistic. However, additional capacity exists at All Children's to accommodate increased open heart surgery if required. The proper time frame for determining the "actual use rate" referenced in the Department's rule for determining need assessment for new open heart surgery services is July, 1986 through June, 1987. During that period, 299 procedures, including pediatric, were performed at All Children's with 432 total procedures being performed at Largo and 392 at Morton F. Plant. This constitutes a total of 1,123 open heart procedures within the District. St. Anthony's contends that open heart surgery procedures by themselves, however, are net the only factor for consideration. Cardiac catheterization is no longer merely a diagnostic procedure but constitutes a place for acute intervention. Cardiac catheterization practice has increased radically and has carried with it an increase in open heart surgeries. St. Anthony's cannot fully implement a cardiac catheterization program by adding angioplasty without the concomitant open heart surgery capability required for the full operation of angioplasty and its related programs. Without an open heart capability at St. Anthony's, it's ability to provide a full array of non- open heart cardiac catheterization services is constrained. It urges that from a medical standpoint, it would be beneficial to the patient to have acute intervention and angioplasty available at that hospital rather than , as is presently the case, disrupting cardiac care and courting the danger of additional coronary problems, the risk of which is increased when a patient must be transported to another hospital for the angioplasty and acute intervention procedures. St. Anthony's asserts that it will lose its reputation, built up over a period of 40 years, for a continuum of quality care if it is not permitted to provide the required surgical background for acute intervention and angioplasty. This is, however, only speculation not supported by any evidence of record. Rule 10-5.011(f), F.A.C. contains a methodology for determining numerical need for new programs and utilization guidelines for existing and approved programs which the Department uses when assessing the need for new open heart surgery services. Under the terms of the rule, the Department is to consider applications in context with applicable statutory and rule criteria and will not normally approve applications for new open heart surgery programs in a service area unless the conditions of subparagraphs 8 and 11 are met. Subparagraph 8 provides a formula for computing the projected number of open heart surgical procedures in the service area for the year in which the proposed open heart surgery program would initiate service. This is to be not more than two years into the future. This number, projected for the target year, is determined by multiplying the actual use rate, (the number of procedures per 100,000 population) in the service area for the twelve month period beginning fourteen months prior to the letter of intent deadline for the batching cycle, by the projected population in the service area in the year service is to be initiated. As was stated above, the proper time frame for determining actual use was July, 1986 through June, 1987, and during that period, a total of 1,123 procedures, including pediatric procedures, were performed at the three existing facilities in District V. Midway through the fiscal year cited above, the total population in District V was 1,082,797, resulting in an actual use rate of 103.7 procedures per 100,000 population. The population projection for the planning horizon is 1,135,819 persons as July 1, 1989, and when the actual use rate of 103.7 per 100,000 is applied, it is anticipated that 1,178 will be performed by July, 1989, the first projected year for the St. Anthony's program, if approved. Once one has arrived at the projected number of procedures in the target year by applying the methodology contained in paragraph 8 of the rule, one turns to the provisions of subparagraph 11 of the rule which provides for no additional open heart surgery programs unless: ... the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year; Subparagraph 11b provides: No additional open heart surgery programs shall be approved which will reduce the volume of existing open heart surgery facilities below 350 open heart procedures annually for adults and 130 pediatric heart procedures annually, 75 of which are open heart. In the state agency action report, the Department, in computing need for additional open heart programs, utilized a figure of 1,065 procedures in determining actual use rate which excluded surgeries performed upon children within the district at All Children's. At the hearing, the Department's representative, Mr. Jaffe, agreed that it would be more appropriate to utilize the entire number of procedures, including pediatric, (1,123), in order to develop a more accurate use rate. That is the figure which was used in the analysis in this Recommended Order. From a review of the provisions of subparagraph 11 of the rule, the 350 procedure standard is to be applied once estimated procedures during the target year are established. Since subparagraph 11a(I) provides for service volume of existing and approved programs, utilization of that figure results in a need for 3.4 programs based on the 1989 estimated procedures. Since 3 programs currently exist, (All Children's/Bayfront, Largo, and Morton F. Plant), and Bayonet Point's program has been approved, this results in a .6 open heart surgery program surplus. Even if Bayonet Point's program is not considered, then a need exists for only .4 programs which, when rounded down, is not sufficient to approve an additional program. Turning to the utilization provisions of subparagraph 11, it has been the Department's policy to determine utilization of existing programs for the time period over which the use rate is computed, here, July, 1986 through June, 1987. During that period, only 241 adult open heart procedures were performed at Bayfront/All Children's, and in the fiscal year ending September 30, 1988, the combined program accounted for 268 adult procedures. These numbers are not inconsistent with those used by St. Anthony's when adjustments are made to account for that portion of the total surgery figure which pertains to pediatric patients. They are also below the cutoff figure of 350 adult procedures for all existing or approved facilities in the District. St. Anthony's expert witness, Dr. Kolb, advanced an alternative theory that the "actual use rate" in the methodology established by rule should be adjusted to account for the out-migration of residents of District V to facilities outside the District for open heart surgery. She contended that the actual use rate had to account for all open heart surgeries performed on District residents regardless of where that surgery took place. If that theory were to be applied, then the total number of surgeries for the relevant time frame would have to increased from 1,123 to 1,883, and if that figure is incorporated in the rule computation, utilizing the 350 procedure unit of division, the calculation would show a 2.6 new program need if Bayfront Point were not taken into consideration. If it were, then the need, according to the expert, would be 1.6. Utilizing the Department's policy of rounding up or down as appropriate, even taking into account Bayonet Point, there would be a need for 2 new programs. However, St. Anthony's position is not well taken here. There is nothing in the Department's rule which by any reasonable interpretation can include an adjustment for out-migration. The Department has consistently applied its own rule to include only procedures performed at facilities in the district to determine actual use rate and this interpretation is both reasonable and justified. By statute, the Department is required to apply a uniform methodology. The data base available from all of the various districts within the state is not conducive to an application of an adjustment since double counting and the lack of uniformity appear inherent in any non-specified adjustment attempt. Another flaw in the expert's theory is that out-migrating patients would be recaptured by the development of additional programs within the district. This is not a justified assumption in that the out-migration occurs even though there is currently an underutilized capability within the district and it becomes obvious that many out-migrators go elsewhere for reasons totally unrelated to the availability of quality care within the district. Further, there is a substantial question as to the reliability of the data relied upon by St. Anthony's expert in her calculation of an assumed out-migration percentage. The expert relied upon Med Par data which reports on Medicare patients constituting 55 to 60 percent of the District V population. The expert's assumption that the same percentage of non-Medicare patients would out-migrate as Medicare patients do, is erroneous because experience has established that Medicare referral patterns do not necessarily match those appropriate to the rest of the population. Another factor to consider is that a substantial number of the people who make up the District V population are seasonal residents and many of these individuals return for major surgery, especially of an elective or non-emergency nature, to those areas from which they have come and with which they are most familiar and comfortable. St. Anthony's expert, in addition to suggesting an alternative to actual use rate, also suggests that instead of using a 350 procedure figure in calculating numerical need, a 200 procedure figure be used because of the independent pediatric program at All Children's Hospital. The Department urges that this be rejected on the basis that it ignores certain salient factors. One of these is that for the purpose of applying rule standards, All Children's/Bayfront's shared service qualifies as a single existing open heart surgery program. Also, open heart procedures, by their nature highly specialized and complex, require costly, highly specialized manpower and facility resources and the application of the rule procedure standard is, even in the eyes of Petitioner's planner, designed to limit unnecessary duplication of resources while maintaining a high quality of care. Petitioner shows no legitimate health care planning purpose for using any figure other than that called for by the rule and applied by the Department, which is found to be reasonable and appropriate. Moreover, there is a limited pool of nurses available to staff the specialized functions of an open heart surgery program or a CCU incident thereto. The nursing staff which works in these units is made up of specially trained individuals critical to the success of the program and it is generally difficult to recruit this caliber of nurse. In the event an additional facility, Petitioner, is authorized to establish its own separate program, it will have a substantial adverse impact on the staff situation at the existing facilities, and if basic economic principles apply, could result in an increase in nursing costs and a related increase in health care charges. Another factor to be considered is the potential for loss of patients at Bayfront/All Children's if the St. Anthony's operation is begun. One witness estimates a 42 percent (110 adult procedure) loss to Bayfront/All Children's based on the reasonable assumption that several of the cardiologists on staff at St. Anthony's, who currently refer patients to the group performing open heart surgery at All Children's, would begin to refer their patients to the "in house" capability at St. Anthony's where the surgery, now being performed at All Children's, would henceforth be accomplished. It is reasonable to expect that a substantial, if not 42 percent, loss will occur, and taken together, the loss of referrals and the loss of staff to St. Anthony's by the opening of that program would have a substantial adverse impact on the open heart surgery program at All Children's/Bayfront. This potential diminishment in the efficiency and quality of care in the existing open heart surgery program at All Children's/Bayfront, which may come about as the result in the reduction in number of adult patients treated there is not justified in that there is no showing that any group in District V, including the medically indigent, are receiving less than adequate treatment. Even assuming there 1:3 no need established utilizing the Department's numerical methodology, an applicant can successfully apply for a certificate of need if it shows there are "not normal" circumstances justifying award of the certificate. It has long been the Department's position that these "not normal" circumstances be raised by the applicant in the application prior to the completeness deadline in order for them to be legitimately heard, considered, and resolved at hearing. Review of the application submitted by St. Anthony's in this case fails to reveal that the applicant alleged or demonstrated any "not normal" circumstances and even that which might be so considered, the out- migration theory previously discussed herein, was not raised in the application, but only in the testimony of St. Anthony's expert at the hearing. Petitioner has shown no problems regarding financial accessibility nor has it shown that any identifiable subgroup within the district is having difficulty obtaining open heart services. Indigent patients are being served effectively and it was demonstrated that, as currently constituted, All Children's and Bayfront both provide a higher percentage of indigent care than does applicant, St. Anthony's. Assuming approval of St. Anthony's application, there is no indication it will increase its percentage of indigent care in the open heart surgery area above that which it already provides in the other services offered. Rule 10-5.011(f)4(a), FACE requires access to open heart surgery services within two hours for at least 90 percent of the service area population. There is no evidence offered by Petitioner to indicate that this standard is not being met by the existing facilities. St. Anthony's has not established by competent evidence its ability to recruit and maintain adequate, experienced staff to implement its open heart program if approved though, in reality, this may well be one of the lesser problems involved and, as was stated previously, there was no showing that approval of its program would, by enhancing competition, lower costs for health care services. Quite the contrary, it appears that St. Anthony's program would constitute an unnecessary duplication of a specialized service and would have an adverse impact upon the All Children's/Bayfront program and, possibly, the others within the district. Petitioner's evidence of prospective charges for open heart surgery, showing it to anticipate lower charges than Largo and Plant, is somewhat irrelevant in that those two facilities are located in an area of the district which does not fall within the primary service area considered here. Petitioner contends that the Department's approval of a CON for open heart surgery by Humana-Brandon, in District VI, and its approval of a certificate for open heart surgery for Tallahassee Community Hospital, in District III, are inconsistent with its denial of its application in District V. For a variety of reasons, other than the fact that the districts are different and the conditions dissimilar, there is little inconsistency involved. Granting approval of a CON for open heart surgery to St. Anthony's creates a legitimate concern that approval would cause the currently existing All Children's/Bayfront program to drop well below the 200 annual procedures considered necessary for quality of care. Further, in the Tallahassee area, a "not normal" situation existed which does not exist here. The geographical separation of alternative facilities in the Tallahassee area is substantially different and creates an entirely different picture that which exists in the District V/District VI area. Taken together, then, it is found that application of the numerical need and ancillary provisions of rule 10-5.011, F.A.C. demonstrates no numerical need for a new program and approval and implementation of St. Anthony's application would likely result in a diminishment, as opposed to enhancement, of the quality of open heart surgery care in the District as well as an increase rather than a decrease in health care costs. Further, it is found that there are no "not normal" circumstances, aliunde the numerical need, to justify approval of Petitioner's application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the application of St. Anthony's Hospital for approval of a certificate of need to establish and operate an open heart surgery program at its facility in St. Petersburg, Florida be denied. RECOMMENDED this 22nd day of February, 1989 at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-0637 The following constitutes my specific rulings pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. By St. Anthony's Hospital: Accepted and incorporated herein Rejected as contra to the weight of the evidence. Accepted in so far as open heart surgery is not done at Bayfront. Accepted and incorporated herein Accepted and incorporated herein Accepted - 13. Accepted and incorporated herein 14. - 22. Accepted and incorporated herein 23. - 26. Accepted and incorporated herein Rejected as not proven Rejected Rejected & 31. Accepted and incorporated herein Rejected & 34. Accepted and incorporated herein Last sentence rejected. Balance accepted. & 37. Accepted Accepted and incorporated herein Rejected. There was no showing any patient from St. Anthony's has been harmed by transfer to All Children's nor that patients or their families are dissatisfied. - 42. Rejected as not supported by evidence of record. 43. - 47. Accepted and incorporated herein 48. & 49. Accepted 50. & 51. Accepted as to total procedures in District V but rejected as to the conclusion that-all existing providers are performing at a level of more than 350 adult open heart surgeries per year. While Largo and Plant may, All Children's/Bayfront is not. 52. & 53. Accepted Rejected as not supported by the evidence Accepted as a cite to the pertinent rule - 59. Rejected. Out-migration is not a proper factor for consideration under statute or rule Accepted as to the rule not addressing mixed programs. - 63. Rejected as not consistent with the rule and proper implementation of the need methodology thereunder. The conclusion that all existing programs in District 10 are currently operating at more than 350 procedures annually is rejected. All Children's is not. Accepted Accepted and incorporated herein & 68. Rejected. Use of figures attributable to out- migration is not provided for or permitted by the rule. Accepted and incorporated herein Accepted Irrelevant. Even if true, there is no showing of the reason or that petitioner would capture these patients. Accepted Accepted Accepted & 76. Rejected. Cited provision of application stated "may" indicate, not "did' indicate. In addition, MEDPAR data relates only to Medicare patients and an extrapolation of that figure is not necessarily reliable. Accepted Accepted but not considered controlling in that the rule provides time reference for use in the methodology. Not established & 81. Accepted 82. Rejected as not supported by any independent evidence of record. Accepted - 87. Accepted 88. & 89. Rejected. Bayfront's application was withdrawn. 90. Accepted By the Department of Health and Rehabilitative Services 1.-18. Accepted and incorporated herein 19. & 20. Accepted and incorporated herein Accepted and incorporated herein & 23. Accepted and incorporated herein 24. - 26. Accepted and incorporated herein 27. - 29. Accepted and incorporated herein 30. - 32. Accepted and incorporated herein 33. & 34. Accepted and incorporated herein 35. Accepted and incorporated herein 36. & 37. Accepted 38. - 40. Accepted and incorporated herein 41. No ruling. Not understood. 42. Accepted and incorporated herein 43. Accepted and incorporated herein 44. Accepted and incorporated herein 45. - 47. Accepted and incorporated herein 48. Accepted 49. - 55. Accepted and incorporated herein 56. Accepted 57. Accepted and incorporated herein 58. & 59. Accepted and incorporated herein 60. & 61. Accepted and incorporated herein 62. Accepted and incorporated herein 63. & 64. Accepted 65. Accepted and incorporated herein 66. Accepted 67. Accepted and incorporated herein 68. Accepted 69. Accepted By All Children's Hospital 1. - 3. Accepted and incorporated herein 4. & 5. Accepted 6. & 7. Rejected as a summary of testimony and not a Finding of Fact 8. & 9. Accepted 10. - 19. Accepted and incorporated herein 20. - 22. Accepted and incorporated herein 23. & 24. Accepted and incorporated herein Accepted & 27. Accepted and incorporated herein 28. - 30. Accepted and incorporated herein 31. & 32. Accepted Accepted Accepted and incorporated herein & 36. Accepted and incorporated herein By Bayfront Medical Center 1. - 3. Not Findings of Fact 4. - 8. Accepted and incorporated herein 9. & 10. Accepted and incorporated herein 11. & 12. Not Findings of Fact 13. - 49. Accepted and incorporated herein 50. & 51. Accepted and incorporated herein 52. & 53. Accepted and incorporated herein 64. - 56. Accepted and incorporated herein 57. - 68. Accepted and incorporated herein Accepted and incorporated herein - 72(c). Accepted and incorporated herein 72(d). Argument, not Finding of Fact 72(e).- 72(1). Accepted and incorporated herein Not a Finding of Fact Accepted and incorporated herein Accepted & 77. Accepted Not a Finding of Fact - 81. Accepted and incorporated herein Accepted and incorporated herein - 86. Accepted and incorporated herein 87. & 88. Accepted and incorporated herein Merely a comment on the evidence Accepted and incorporated herein Accepted and incorporated herein Accepted and incorporated herein Accepted & 95. Accepted Accepted Accepted and incorporated herein & 99. Accepted 100. Accepted. COPIES FURNISHED: Ivan Wood, Esquire Wood, Lusksinger & Epstein Four Houston Center 1221 Lamar, Suite 1400 Houston, Texas 77010 John H. Parker, Jr., Esquire Hudson, Rainer & Dobbs 1200 Carnegie Building 133 Carnegie Way Atlanta, Georgia 30303 Steven M. Presnell, Esquire Lee Elzie, Esquire MacFarlane, Ferguson, Allison and Kelly 804 First Florida Bank Building Tallahassee, Florida 32301 Gerald B. Sternstein, Esquire H. Darrell White, Jr., Esquire McFarlain, Sternstein, Wiley and Cassedy, P.A. 600 First Florida Bank Building Tallahassee, Florida 32301 Michael J. Cherniga, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Tallahassee, Florida 32301 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
