Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
The Issue Whether the application of Petitioner Naples Community Hospital, Inc. for a Certificate of Need to add a total of 35 beds to Naples Community Hospital and North Collier Community Hospital should be approved based on peak seasonal demand for acute care beds in the relevant subdistrict.
Findings Of Fact Naples Community Hospital, Inc., ("NCH") holds the license for and operates Naples Community Hospital ("Naples"), a 331 bed not-for-profit acute care hospital, and North Collier Community Hospital ("North Collier"), a 50 bed acute care hospital. NCH also operates a 22 bed comprehensive rehabilitation facility and a 23 bed psychiatric facility. NCH is owned by Community Health Care, Inc., "(CHC"). Both Naples and North Collier are located within Agency for Health Care Administration ("ACHA") district 8 and are the only hospitals within subdistrict 2 of the district. Naples is located in central Collier County. North Collier is (as the name implies) located in northern Collier County approximately 2-3 miles from the county line. NCH's primary service area is Collier County from which approximately 85-90 percent of its patients come, with a secondary service area extending north into Lee County. Neither Naples nor North Collier are teaching hospitals as defined by Section 407.002(27), Florida Statutes (1991). NCH is not proposing a joint venture in this CON application. NCH has a record of providing health care services to Medicaid patients and the medically indigent. NCH proposes to provide health care services to Medicaid patients and the medically indigent. Neither Naples nor North Collier are currently designated by the Office of Medicaid as disproportionate share providers. NCH has the funds for capital and initial operating expenditures for the project. NCH has sufficient financial resources to construct and equip the proposed project. The costs and methods of the proposed construction are reasonable. The Agency for Health Care Administration ("AHCA") is the state agency charged with responsibility for administering the Certificate of Need program. Southwest Florida Regional Medical Center ("Southwest") is a 400 bed for-profit acute care hospital located in Fort Myers, Lee County. Lee County is adjacent to and north of Collier County. Southwest is owned by Columbia Hospital Corporation ("Columbia"), which also owns Gulf Coast Hospital in Fort Myers, and two additional hospitals in AHCA District 8. Southwest's primary service area is Lee County. Although Southwest asserts that it would be negatively impacted by the addition of acute care beds at NCH, the greater weight of the credible evidence fails to support the assertion. The primary market services areas of NCH and Southwest are essentially distinct. However, the facilities are located in such proximity as to indicate that secondary service areas overlap and that, at least during peak winter season periods, approval of the NCH application could potentially impact Southwest's operations. Southwest has standing to participate in this proceeding. Southwest offered evidence to establish that it would be substantially affected by approval of the NCH application. The NCH length-of-stay identified in the Southwest documents is inaccurate and under-reports actual length-of-stay statistics. The documentation also includes demographic information from a zip code (33912) which contributes an insignificant portion of NCH patients, and relies on only two years of data in support of the assertion that utilization in the NCH service area is declining. Southwest's chief operating officer testified that he considers Gulf Coast Hospital, another Columbia-owned facility, to offer more competition to Southwest that does NCH. Further, a physician must have admitting privileges at a hospital before she can admit patients to the facility. Of the physicians holding admitting privileges at Southwest, only two, both cardiologists, also have admitting privileges at NCH. Contrary to Southwest, NCH does not have an open heart surgery program. Accordingly, at least as to physician-admitted patients, approval of the NCH application would likely have little impact. On August 26, 1991, NCH submitted to AHCA a letter of intent indicating that NCH would file a Certificate of Need ("CON") application in the September 26, 1991 batching cycle for the addition of 35 acute care beds to the Naples and North Collier facilities. The letter of intent did not specify how the additional beds would be divided between the two facilities. The determination of the number of beds for which NCH would apply was solely based on the fact that the applicant had 35 observation beds which could be readily converted to acute care beds. The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH and are currently staffed. The costs involved in such conversion are minimal and relatively insignificant. Included with the letter of intent was a certified corporate resolution which states that on July 24, 1991, the NCH Board of Trustees authorized the filing of an application for the additional beds, authorized NCH to incur related expenses, stated that NCH would accomplish the proposed project within time and budget allowances set forth in the application, and that NCH would license and operate the facility. By certification executed August 7, 1991, the NCH secretary certified that the resolution was enacted at the July 24, 1991 board meeting and that the resolution did not contravene the NCH articles of incorporation or bylaws. Article X, Sections 10.1 and 10.1.3 of the NCH bylaws provides that no CON application shall be legally effective without the written approval of CHC. On September 26, 1991, NCH filed an application for CON No. 6797 proposing to add 31 acute care beds to Naples and 4 acute care beds to North Collier. The CON application included a copy of the NCH board resolution and certification which had been previously submitted with the letter of intent as well as the appropriate filing fee. NCH published appropriate public notice of the application's filing. As of the date of the CON application's filing, CHC had not issued written approval of the CON application prior to the action of the NCH Board of Directors and the filing of the letter of intent or the application. On October 2, 1992, four days prior to the administrative hearing in this case, the board of CHC ratified the actions of NCH as to the application for CON at issue in this case. The CHC board has previously ratified actions of the NCH in such fashion. There is uncontroverted testimony that the CHC board was aware of the NCH application and that no reservation was expressed by any CHC board member regarding the CON application. Although NCH's filing of the CON application without appropriate authorization from its parent company appears to be in violation of the NCH bylaws, such does not violate the rules of the AHCA. There is no evidence that the AHCA requested written authorization from the CHC board. After review of the application, the AHCA identified certain deficiencies in the application and notified NCH, which apparently rectified the deficiencies. The AHCA deemed the application complete on November 8, 1991. As required by statute, NCH included a list of capital projects as part of the CON application. The list of capital projects attached to the application was incomplete. The capital projects list failed to identify approximate expenditures of $370,000 to construct a patio enclosure, $750,000 to install an interim sprinkler system, $110,000 to construct emergency room triage space, and $125,000 to complete electrical system renovations. At hearing, witnesses for NCH attempted to clarify the omissions from the capital projects list. The witnesses claimed that such omitted projects were actually included within projects which were identified on the list. When identifying the listed projects within which the omitted projects were supposedly included, the witnesses testified inconsistently. For example, one witness testified that the patio project was included in the emergency room expansion project listed in the application. Another witness claimed that the patio enclosure was included in an equipment purchase category. Based on the testimony, it is more likely that the patio enclosure was neither a part of an emergency room expansion nor equipment purchase, but was a separate construction project which was omitted from the CON application. Similarly inconsistent explanations were offered for the other projects which were omitted from the capital projects list. The testimony was not credible. The capital projects omitted from the list do not affect the ability of NCH to implement the CON sought in this proceeding. The parties stipulated to the fact the NCH has sufficient financial resources to construct and equip the proposed project. As part of the CON application, NCH was required to submit a pro forma income statement for the time period during which the bed additions would take place. The application failed to include a pro forma statement for the appropriate time period. Based on the stipulation of the parties that the costs and methods of the proposed construction are reasonable, and that NCH has adequate resources to fund the project, the failure to include the relevant pro forma is immaterial. Pursuant to applicable methodology, the AHCA calculates numeric acute care bed need projections for each subdistrict's specific planning period. Accordingly, the AHCA calculated the need for additional acute care beds in district 8, subdistrict 2 for the July, 1996 planning horizon. The results of the calculation are published by the agency. The unchallenged, published fixed need pool for the planning horizon at issue in this proceeding indicated that there was no numeric need for additional acute care beds in district 8, subdistrict 2, Collier County, Florida, pursuant to the numeric need methodology under Rule 59C-1.038 Florida Administrative Code. The CON application filed by NCH is based on the peak seasonal demand experienced by hospitals in the area during the winter months, due to part-time residents. NCH asserts that the utilization of acute care beds during the winter months (January through April) results in occupancy levels in excess of 75 percent and justifies the addition of acute care beds, notwithstanding the numerical need determination. Approval of the CON application is not justified by the facts in this case. The AHCA's acute care bed need methodology accounts for high seasonal demand in certain subdistricts in a manner which provides that facilities have bed space adequate to accommodate peak demand. The calculation which requires that the average annual occupancy level exceed 75 percent reflects AHCA consideration of occupancy levels which rise and fall with seasonal population shifts. The applicant has not challenged the methodology employed by the AHCA in projecting need. Peak seasonal acute care bed demand may justify approval of a CON application seeking additional beds if the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand experienced by NCH has not adversely affected patient care and there is insufficient evidence to establish that, at this time, such peak demand poses a credible threat of potential negative impact on patient outcomes in the foreseeable future. There is no dispute regarding the existing quality of care at Naples, North Collier, Southwest or any other acute care hospital in district 8. The parties stipulated that NCH has the ability to provide quality of care and a record of providing quality of care. In this case, the applicant is seeking to convert existing beds from a classification of "observation" to "acute care". The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH. Approval of the CON application would result in no net increase in the number of licensed beds. NCH offered anecdotal evidence suggesting that delays in transferring patients from the Naples emergency room to acute care beds (a "logjam") was caused by peak seasonal occupancy rates. There was no evidence offered as to the situation at the North Collier emergency room. The anecdotal evidence is insufficient to establish that "logjams" (if they occur at all) are related to an inadequate number of beds identified as "acute care" at NCH facilities. There are other factors which can result in delays in moving patients from emergency rooms to acute care beds, including facility discharge patterns, delays in obtaining medical test results and staffing practices. NCH asserted at hearing that physicians who refer patients to NCH facilities will not refer such patients to other facilities. The evidence fails to establish that such physician practice is reasonable or provides justification for approval of CON applications under "not normal" circumstances and further fails to establish that conditions at NCH are such as to result in physicians attempting to locate other facilities in which to admit patients. The rule governing approval of acute care beds provides that, prior to such approval, the annual occupancy rate for acute care beds in the subdistrict or for the specific provider, must exceed 75 percent. This requirement has not been met. Applicable statutes require that, in considering applications for CON's, the AHCA consider accessibility of existing providers. The AHCA- established standard provides that acute care bed accessibility requirements are met when at least 90 percent of the residents in an urban subdistrict are within a 30 minute automobile trip to such facilities. At least 90 percent of Naples residents are presently within a 30 minute travel time to NCH acute care beds. The number of acute care beds in the subdistrict substantially exceed the demand for such beds. Additional beds would result in inefficient utilization of existing beds, would further increase the current oversupply of beds, would delay the time at which need for additional beds may be determined and, as such, would prevent competing facilities from applying for and receiving approval for such beds. The financial feasibility projections set forth in the CON application rely on assumptions as to need and utilization projections which are not supported by the greater weight of the evidence and are not credited. Accordingly, the evidence fails to establish that the addition of 35 acute care beds to NCH facilities is financially feasible in the long term or that the income projections set forth in the CON application are reasonable. As to projections related to staffing requirements and costs, the beds are existing and are currently staffed on a daily, shift-by-shift basis, based on patient census and acuity of illness. There is reason to believe that the staffing patterns will remain fairly constant and accordingly the projections, based on historical data, are reasonable. Generally stated, where there is no numeric or "not normal" need for the proposed addition of 35 acute care beds in the relevant subdistrict, it could be predicted that the addition of acute care beds would exacerbate the oversupply of available beds and could cause a slight reduction in the occupancy levels experienced by other providers. In this case, the market service areas are sufficiently distinct as to suggest that such would not necessarily be the result. However, based on the lack of need justifying approval of the CON application under any existing circumstances, it is unnecessary to address in detail the impact on existing providers. The state and district health plans identify a number of preferences which should be considered in determining whether a CON application should be approved. The plans suggest that such preferences are to be considered when competing CON applications are reviewed. In this case there is no competing application and the applicability of the preferences is unclear. However, in any event, application of the preferences to this proposal fail to support approval of the application.
Recommendation RECOMMENDED that a Final Order be entered DENYING the application of Naples Community Hospital, Inc., for Certificate of Need 6797. DONE and RECOMMENDED this 19th day of March, 1993 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1510 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3-4, 6-8, 16-20, 29-36, 38, 41, 44, 47, 49-61, 80, 88, 95-96, 100, 104, 108, 117-119, 122-125, 127, 134-138. Rejected as unnecessary. 15. Rejected as irrelevant. Peak seasonal demand is accounted for by the numeric need determination methodology. There is no credible evidence which supports a calculation of three years of four month winter occupancy to reach a 12 month average occupancy rate. 21-27, 37, 42-43, 62-64, 66, 97, 99, 101-103, 105-107, 109, 120-121, 126. Rejected as not supported by the greater weight of credible and persuasive evidence. 28. Rejected as not supported by the greater weight of credible and persuasive evidence and contrary to the stipulation filed by the parties. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the transfer of patients from emergency room to acute care beds is delayed due to numerical availability of beds. Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the alleged lack of acute care beds is based on insufficient number of total beds as opposed to other factors which affect bed availability. Rejected as immaterial and contrary to the greater weight of the evidence Rejected as immaterial and contrary to the greater weight of the evidence which fails to establish reasonableness of considering only a four month period under "not normal" circumstances where the period and the peak seasonal demand are included within the averages utilized to project bed need. 86. Rejected as cumulative. 114. Rejected as unsupported hearsay. Respondent/Intervenor The Respondent and Intervenor filed a joint proposed recommended order. The proposed order's findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 6, 45, 51, 53, 59-67, 69-70, 94-113. Rejected as unnecessary. 16. Rejected as to use of term "false", conclusion of law. 58. Rejected as not clearly supported by credible evidence. 71-93, 114-124. Rejected as cumulative. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 W. David Watkins, Esquire Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507 Tallahassee, Florida 32314-6507 Edward G. Labrador, Esquire Thomas Cooper, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 John D.C. Newton, II, Esquire Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000 101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
Findings Of Fact I The Parties Charter Medical of Orange County, Inc., (Charter) is a wholly-owned subsidiary of Charter Medical Corporation, founded in Macon, Georgia in 1969. The parent corporation operates approximately 92 hospitals throughout the country, including Florida. Most of its hospitals are psychiatric or substance abuse facilities. Orlando Regional Medical Center (ORMC) is a 1,119- bed, nonprofit medical system comprised of four divisions. In downtown Orlando it operates a 630-bed tertiary care hospital and a 255-bed Arnold Palmer Hospital for women and children. A Sand Lake campus is located 10 miles southwest of Orlando, off I-4, and includes medical/surgical beds and 32 licensed short-term psychiatric beds. ORMC's St. Cloud Campus in Osceola County, south of Orlando, includes 84 medical/surgical beds. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for implementing and enforcing the certificate of need program pursuant to Sections 381.701-.715, F.S. Psychiatric Institute of Orlando, Inc., d/b/a Laurel Oaks Hospital, (Laurel Oaks) is a subsidiary of P1A Psychiatric Hospitals, Inc., which is a subsidiary of National Medical Enterprises (NME). P1A owns approximately 50 psychiatric hospitals throughout the county, including (30-bed Laurel Oaks, in southwest Orange County, a short-term psychiatric and substance abuse facility for children and adolescents Health Management Associates, Inc., (HMA) is a health management company which owns or operates 16 hospitals in the southeastern United States, including four psychiatric hospitals in Florida. HMA's Crossroads University Behavioral Center is a 100-bed free-standing psychiatric hospital in northeast Orange County. Its 60 adult beds and 40 adolescent beds opened in January 1989 as a licensed long-term facility, but it has been operating continually as a short-term facility. The Applications Charter proposes to develop a new free-standing 60- bed psychiatric hospital (40 beds for adults, 10 beds for adolescents and 10 beds for children). It plans a wide range of treatment modalities utilizing a multi-disciplinary team approach, tailored to the age and needs of the patient. Although no specific site has been selected, several have been identified in southwest Orange County. Charter anticipates the total cost for the project will be $7,783,000. Charter's patients will be primarily commercially insured (71%), with 15% Medicare and 4% indigent. Charter has committed to serve this share of indigent for the first two years of operation. As a specialty hospital, Charter is not eligible to accept Medicaid patients. ORMC proposes to build a 60-bed free-standing facility on a 7.2 acre site within 40 acres it already owns at Sand Lake and adjacent to its existing Sand Lake Hospital, for a total project cost of $6,678,935. No new licensed beds are required as ORNC will transfer its 32 short term beds from the sixth floor of the Sand Lake Hospital and will convert 28 of its licensed medical/surgical beds from its downtown hospital. The 60 beds will consist of 30 adult and 30 adolescent short term beds. Since the existing 32 beds are primarily adult beds, ORMC's project will be adding adolescent beds to the inventory in District 7. Proximity to Sand Lake Hospital will facilitate shared services, including engineering, dietary and laundry. ORMC also expects the joint use of therapists at its psychiatric facility and its existing brain injury rehabilitation unit at Sand Lake. Because the facility will be added to ORMC's general hospital license, it can and will accept Medicaid patients. ORMC has committed to serve 20% Medicare, 8% Medicaid and 8% indigent patients. ORMC will likely seek an outside management firm to operate its psychiatric facility. The Review On August 23, 1988, HRS published a need for 140 short-term psychiatric beds in District 7. Its SAAR issued in January 1989, recommended approval of a total of 137 beds. When the SAAR was amended in March 1989, to include the Charter approval, the total surged to 197 approved beds. Even after First Hospital withdrew its application for 55 beds, the total approved exceeded the published need for the 1993 horizon year by two beds. Numeric Need The short-term psychiatric bed need rule is found at Rule 10- 5.011(1)(o) , F.A.C. "Short-term" is defined as an average length of stay of 30 days or less for adults, and 60 days or less for children and adolescents under 18 years. A favorable need determination will not normally be given to an applicant unless a bed need exists according to sub-paragraph (1)(o)4 of "the rule". Rule 10-5.011(1)(0)4, F.A.C. provides as follows: Bed allocations for acute care short term general psychiatric services shall be based on the following standards: A minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health These beds shall be designated as short term inpatient hospital psychiatric beds. 20 short term inpatient hospital beds per 1,000 population may be located in specialty hospitals, or hospitals holding a general license. The distribution of these beds shall be based on local need, cost effectiveness, and quality of care considerations. The short term inpatient psychiatric bed need for a Department service district shall be projected 5 years into the future based on the most recent available January or July population estimate prior to the beginning to the respective batching cycle. The projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population. These beds are allocated in addition to the total number of general acute care hospital beds allocated to each Department District under Paragraph 10-5.011(1)(m). The net need for short term psychiatric beds shall be calculated by subtracting the number of licensed and approved beds from the number of projected beds. The population estimates are based on population projections by the Executive Office of the Governor. Occupancy Standards. New Facilities must be able to project an average 70% occupancy rate for adult psychiatric beds and 60% for children and adolescent beds in the second year of operation, and must be able to project an average 80% occupancy rate for adult beds and 70% for children and adolescent short term psychiatric inpatient hospital beds for the third year of operation. No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75% for the preceding 12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70% for the preceding 12 month period. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75% or greater for the preceding year. Unit size. In order to assure specialized staff and services at a reasonable cost, short term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds. The parties do not dispute that application of the formula yields a need for 140 beds, the total published in the applicable fixed need pool. Nor do the parties dispute that the occupancy standard was met, since HRS uses the lower standard of 70% as a threshold for determining whether need should be published. The parties agree that approval of both Charter's and ORMC's applications results in an excess of two beds over the published need. There is substantial dispute as to whether that excess is justified, and as to the composition of the beds as "speciality hospital" or "general hospital" beds. The only provision in agency rules or policy for exceeding bed need calculations is when "not normal" or "special" circumstances exist in the District. HRS' Policy Manual for the Certificate of Need program, dated October 1, 1988, provides in Section 9-6 B. (3): If a qualified applicant exist but the proposed project exceeds the beds or services identified in the fixed need pool, the department may award beds or services in excess of the pool when warranted by special circumstances as defined in rule 10- 5.011(1)(b), 1-4, F.A.C. and, specifically for nursing homes Rule 10-5.011(1)(K)2.j. F.A.C. (Laurel Oaks Exhibit #10, P. 9-2) The referenced sections of Rule 10-5.011(1)(b), F.A.C., relate to the enhancement of access--primarily economic access and access by underserved groups. Access is addressed in Part VII, below. No evidence was presented regarding special problems of access in District 7. Rather, HRS asserts that its excess approval was based on "rounding up" the numbers of beds, and on the favorable occupancy rates in the district. In its SAAR, HRS calculated the following occupancy rates by age cohort in the district: Adult 75.8% Child/Adolescent 74.8%; and in Orange County: Adult 57.4% Child/Adolescent 100. The adult rate is therefore slightly above the 75% minimum in the district, and substantially below the minimum in Orange County. The child/adolescent rate is above the 70% minimum in both the district and county. HRS appropriately does not utilize occupancy in beds other than licensed short term psychiatric bed in calculating its rates as it would be difficult to compute the number of available beds (medical/surgical, long term psychiatric, etc.). The rule specifies that a minimum of .15 beds per 1000 population "should" be allocated to hospital1s holding a general license and that .20 beds per 1000 population may be located in either speciality hospitals or hospitals holding a general license. Of the 140 beds needed in District 7, 75 may be located in a speciality hospital under this formula. 30 speciality beds were awarded to West Lake and are unchallenged. The Charter application for 60 speciality beds exceeds by 15, the 45 speciality beds left to be allocated. The State and Local Health Plans The State Health Plan is dated 1985-1987. Goal 1 is the only portion of the plan that is relevant in this review. It essentially reiterates the need methodology described above, regarding the .35 beds per 1000 population and the 70% and 75% annual occupancy thresholds. The applicable local health plan is the 1988 local health plan for District 7. This plan divides the district into "planning areas": Brevard, Osceola, Seminole and Orange -- the four counties within the district. Planning areas, unlike subdistricts, are more in the nature of guidelines and do not carry the same legal weight as subdistricts. Both applicants are committed to submit data to the local health councils, as provided in recommendation #2. Both applicants have committed to provide a fair share of care to the underserved, although ORMC's commitment is substantially greater and has a proven record to support it. Recommendation #5 provides that no new short-term psychiatric or substance abuse beds shall be approved until all existing beds in the planning area are operating at or above 75% occupancy for the most recent twelve months for which data is available from the local health council. This criteria is barely met when adult and children/adolescent occupancy is combined, and is not met by the occupancy rate for adult beds in Orange County. Financial Feasibility The pro formas of both applicants, which are no more than best guess estimates, are generally reasonable, based upon the experience of the applicants' existing programs. Charter's proposal makes no provision for management fees, although such fees are remitted to the parent company by its subsidiaries and are reported to the Health Care Cost Containment Board. Charter anticipates that it would not incur additional corporate overhead to support this facility if it is built. In recent years ORMC's psychiatric unit has lost money in its operation when overhead is factored into the cost. Its Program Director, Jeffrey Oppenheim, reasonably anticipates the new facility will make a profit, as it will serve a better mix of age cohorts and will offer a more desirable setting than its limited facility now located on the sixth floor of a medical/surgical hospital. The financial feasibility of both applications depends on the programs' ability to attract patients. That ability is not seriously questioned. Both applications have substantial experience in operating financially efficient health care programs. Quality of Care and Accessibility No evidence was presented to challenge either applicant's ability to provide quality care. Nor, however, was the quality of care of existing alternative programs at issue. Geographic access in District 7 is not a problem, and none suggests that the access standard in Rule 10-5.011(1)(o)5.g., F.A.C., is not met (travel time of 45 minutes or less for 90% of the service area population). Charter's inability to provide Medicaid services and its time-limited commitment to serve even 4% indigents amount to only minimal contribution to the economically underserved population. In the past, ORMC has been a receiving facility for Baker Act patients and it anticipates it will again when the psychiatric program has its new quarters. It is only one of two hospitals in Orange County eligible to provide Medicaid services and is the fifth highest provider of charity and Medicaid in the State of Florida, according to Medical Health Care Cost Containment Board data. Impact on Existing Facilities and Competition Positive competition among providers already exists in District 7. There are eleven existing short term psychiatric programs in the four-county area, including both speciality and general hospitals, and adult, children and adolescent programs. Only three obtained an occupancy rate of more than 75% for the fiscal period ending June 1988. The Availability of Health Manpower There is a shortage of nurses, qualified social workers and counsellors in District 7. HMA has experienced problems in recruiting staff at its Orlando facility. Competition for these staff has caused salaries to rise, and consequently the cost of providing services has risen. Turnover results when staff are attracted to new facilities, causing training problems and affecting quality of care. Charter has the corporate resources to conduct effective recruiting, but has no experience recruiting in the Orlando area. ORMC, a large diverse facility, with good opportunity for lateral and upward mobility, has experienced few problems staffing its programs. The Availability of Alternatives Eight of eleven District 7 short term psychiatric facilities have operated below 75% occupancy in the last two years. These under-utilized facilities are plainly alternatives for new projects proposing the same services. Neither applicant is proposing novel or innovative services in psychiatric care. That licensed long term psychiatric facilities such as HMA, are operating short term programs does not justify the approval of new short term beds, but rather suggests these programs could be converted, with little or no capital outlay, into short term programs. Conversion of under-utilized acute are beds to short term psychiatric beds is also an alternative in District 7. Acute care bed occupancy rates in each county of District 7 failed to reach 60% in the most recent 12-month period of available data. The criterion of Rule 10-5.011(1)(o)5.f., F.A.C. favors the conversion of under-utilized beds in other hospital services unless conversion costs are prohibitive. There has been a trend in the last several years away from inpatient care and toward less restrictive treatment modalities. Both applicants acknowledge this trend with their inclusion of partial hospitalization programs in their plans. ORMC has no reasonable alternative to building a new facility if it is to maintain its inpatient psychiatric program. There is an increasing demand for the medical surgical beds it currently occupies on the sixth floor of Sand Lake Hospital. There is no appropriate space in its downtown facilities. Balancing the Criteria Comparative Review and Summary As reflected above, not all of the relevant statutory and rule criteria have been met by these applicants. There remains, however, the planning horizon numerical need for additional short term psychiatric beds. While that need could likely be met with the utilization of beds that are not licensed for the provision of short term care, such a solution frustrates state licensing requirements. Three alternative dispositions exist: to deny both ORMC and Charter applications, leaving an unmet need in this cycle for 86 beds; to grant one application only; or to approve both and exceed the need by two beds. HRS argues that the two-bed difference is of little consequence and that the excessive number of specialty beds if Charter is approved is irrelevant, as no general hospital is currently competing for the beds. It is not possible to conjecture that appropriate general hospital applicants will participate in a near future cycle, but it is certain that if those beds are awarded in this cycle to a specialty hospital, they will not be available in a future cycle. Nothing requires that all beds identified in a fixed pool must be awarded in that cycle. The converse follows when, as here, other considerations weigh against approval of additional beds. Between the two applicants, ORMC more consistently meets the rule and statutory criteria. Although it still proposes a substantial capital outlay, (ORMC) relies on conversion of existing licensed beds and results in less impact on other existing programs. Its contribution to the underserved population is more substantial; it proposes more needed adolescent, rather than adult beds; and it does not violate the .15/.20 general hospital, specialty hospital bed balance. That balance needs to be maintained in this case to insure competition among Medicaid providers. In summary, the evidence supports approval of ORMC's application and denial of Charter's.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered denying CON number 5691 to Charter Medical of Orange County, Inc.; and granting CON #5697 to Orlando Regional Medical Center. DONE AND RECOMMENDED this 15th day of February, 1990, in Tallahassee, Leon County, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of February, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASES NO. 89-1358,89-1366.89-1368,89-2039 & 89-2041 The following constitute rulings on the findings of fact proposed by each party: Charter Medical of Orange County, Inc. Adopted in substance in paragraph 1. Adopted in substance in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. 6.-17. Adopted in statement of the issues. 18. Adopted in paragraphs 6 and 7. 19.-36. Rejected as unnecessary, except as summarized in paragraph 6. 37. Addressed in paragraph 30. 38.-5O. Rejected as unnecessary, except as summarized in paragraph 36. 51.-57. Rejected as unnecessary, except at summarized in paragraph 7. 58.-6I. Adopted in paragraph 16. 62.-69. Rejected as unnecessary and contrary to the methodology in the rule. 70. Adopted in substance in paragraph 16. 71.-77. Rejected as unnecessary. 78. Rejected as contrary to the evidence and law. "Not normal" does not include high occupancy rates in several facilities. 79.-8I. Adopted in summary in paragraph 21. 82.-83. Rejected as immaterial. The evidence in this case supports maintenance of the balance, notwithstanding past practice. 84. Adopted in paragraph 15. 85.-103. Rejected as unnecessary. 104. Rejected as contrary to the law and evidence. 105. & 106. Adopted in paragraph 22. 107.-109. Adopted in paragraph 23. 110. & 111. Rejected as unnecessary. 112. & 113. Adopted in paragraph 24. Rejected as unnecessary. Adopted in substance in paragraph 25. 116.-149. Rejected as unnecessary. 150. Adopted in substance in paragraphs 26 and 29. 151.-161. Rejected as unnecessary. 162.-164. Adopted in substance in paragraph 27. 165.-171. Rejected as unnecessary. 172. Rejected as contrary to the evidence. 173.-180. Rejected as immaterial and unnecessary. 181. Adopted in paragraph 5. 182.-190. Rejected as unnecessary. Adopted in substance in paragraph 43. Rejected as contrary to the evidence. 193.-198. Rejected as unnecessary. 199. Rejected as contrary to the evidence. 200.-206. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as unnecessary. Adopted in paragraph 8. 210.-213. Rejected as unnecessary. 214. Adopted by implication in paragraph 33. 215.-218. Rejected as unsupported by the weight of evidence. Rejected as unnecessary. & 221. Rejected as contrary to the weight of evidence. 222. Adopted in summary in paragraph :28. 223.-238. Rejected as unnecessary. Orlando Regional Medical Center Adopted in paragraph 2. Adopted in paragraph 9. 3.-7. Rejected as unnecessary. Adopted in paragraph 9. Rejected as unnecessary. Adopted in substance in paragraph 42. Rejected as unnecessary. Adopted in substance in paragraph 42. Adopted in summary in paragraph 12. Adopted in paragraph 1. Rejected as ummaterial. Adopted in paragraph 6. Adopted in paragraph 4. Adopted in paragraph 15. Addressed in the preliminary statement. Adopted in paragraph 14. Rejected as unnecessary. 22.-24. Adopted in summary in paragraph 16. Adopted in paragraph 15 and conclusion of law #7. Adopted in substance in paragraph 21. Adopted in paragraph 15. Rejected as unnecessary. 29 & 30. Adopted in paragraph 9. Adopted in paragraph 20. Adopted in paragraph 22. Rejected as unnecessary. Adopted in paragraph 23. Adopted in paragraph 23. 36 & 37. Adopted in paragraph 24. Adopted in paragraph 11 and 33. Adopted in paragraph 8. Adopted in paragraph 11. 41 & 42. Rejected as unnecessary. Adopted in summary in paragraph 25. Rejected as unnecessary. Rejected as cumulative and unnecessary. Rejected as unnecessary. Adopted in summary in paragraph 26. 48.-52. Rejected as unnecessary. Adopted in paragraph 10. Rejected as contrary to the weight of evidence (the finding as to no alternatives). The finding regarding Park Place is unnecessary. Rejected as cumulative and unnecessary. Adopted in paragraph 42. Rejected as cumulative and unnecessary. Adopted in paragraph 9. Adopted in paragraph 7. Adopted in paragraph 36. Rejected as cumulative and unnecessary. Adopted in paragraph 30. 63.-66. Rejected as unnecessary. 67. Adopted in paragraph 47. The Department of Health and Rehabilitative Services 1. & 2. Addressed in Preliminary Statement. Adopted in paragraphs 6. and 9. Adopted in paragraph 24. Adopted in paragraph 20. Adopted in paragraph 36. 7.-9. Rejected as contrary to the weight of evidence. Adopted in paragraph 30. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in paragraph 26. Rejected as contrary to the evidence. Adopted in paragraph 33. Adopted in substance in paragraph 32. Adopted by implication in paragraphs 30 and 34. Rejected as contrary to the evidence. Adopted in summary in paragraph 13. Adopted in paragraph 15. Rejected as contrary to the weight of evidence. Rejected as contrary to the evidence. The policy is found in HRS' Policy Manual. Rejected as immaterial. Adopted in paragraph 21. Rejected as unnecessary. 26 & 27. Adopted by implication in 23. Rejected as unnecessary. Rejected as contrary to the evidence. Rejected as immaterial. Rejected as unnecessary. Rejected as contrary to the evidence. 33 & 34. Rejected as unnecessary. Adopted in summary in paragraph 46. Rejected as contrary to the evidence, and immaterial (as to the ratio). Rejected as contrary to the definition "not normal" and immaterial. 38 & 39. Rejected as argument. Adopted in paragraph 16. Adopted in paragraph 20. Rejected as unnecessary. 43 & 49. Rejected as argument. Laurel Oaks Hospital Adopted in paragraph 1. Adopted in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 4. Adopted in paragraph 5. Rejected as unnecessary. Adopted in paragraph 13. & 9. Addressed in Preliminary Statement. 10. Adopted in paragraph 18. 11.-21. Rejected as unnecessary and immaterial. Adopted in paragraph 6. Adopted in paragraph 8. Adopted in paragraph 7. Adopted in paragraph 9. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 11. Adopted in paragraph 9. Adopted in paragraph 14. Rejected as unnecessary. Rejected as contrary to the evidence. The term is "should", not "shall". Adopted in paragraph 15. 36 Adopted in paragraph 13. 37.-40. Adopted in paragraph 16. 41 & 42. Adopted in paragraph 18. 43 & 44. Rejected as immaterial and unnecessary. 45.-47. Rejected as argument and unnecessary. 48 & 49. Adopted in paragraph 21. Rejected as unnecessary. Adopted in substance in paragraph 16. 52 - 54. Rejected as unnecessary. 55 & 56. Adopted in summary in paragraph 20. 57.-61. Rejected as unnecessary or argument. 62.-65. Adopted in summary in paragraphs 20 and 23. 66 & 67. Adopted in paragraph 22. 68. Adopted in paragraph 23. 69.-72. Rejected as unnecessary or cumulative. 73 & 74. Adopted in substance in paragraph 24. 75. Rejected as contrary to the evidence. 76.-78. Rejected as unnecessary. Rejected as contrary to the evidence. Adopted in paragraphs 30 and 31. Adopted in paragraph 37. 82.-85. Rejected as unnecessary. 86. Adopted in paragraph 30. 87 & 88. Rejected as unnecessary. Adopted in paragraph 34. Adopted in paragraph 41. Adopted in paragraphs 38 and 39. 92.-95 Rejected as immaterial and unnecessary. Adopted in substance in paragraph 39. Adopted in paragraph 35. Adopted in paragraph 30. Rejected as cumulative. Rejected as contrary to the evidence. 101-112. Rejected as unnecessary. Adopted in paragraph 27. Rejected as unnecessary. Adopted in paragraph 35. 116-121. Rejected as cumulative or unnecessary. Health Management Associates1 Inc:. (HMA) 1. & 2. Adopted in paragraph 6. Adopted in paragraph 1. Adopted in paragraph 6. 5.-6. Rejected as unnecessary. 7.-11. Adopted in paragraph 9. Adopted in paragraph 10. Adopted in paragraph 12. Rejected as unnecessary. Adopted in paragraph 16. Adopted in paragraphs 15 and 23. Adopted in paragraph 25. Adopted in paragraph 16. Adopted in paragraphs 16 and 18. 20 Adopted in paragraph 19. Adopted in paragraph 15. Adopted in paragraph 21. 23 & 24. Rejected as unnecessary. 25 & 26. Adopted in paragraph 5. 27.-51. Rejected as unnecessary. 52. Adopted in paragraph 35. 53.-55. Rejected as unnecessary. COPIES FURNISHED: Stephen A. Ecenia, Esquire Michael J. Cherniga, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Tallahassee, FL 32301 James M. Barclay, Esquire Cobb, Cole & Bell 315 South Calhoun Street Tallahassee, FL 32301 Steven R. Bechtel, Esquire Mateer, Harbert & Bates 225 East Robinson Street Orlando, FL 32802 Edgar Lee Elzie, Esquire MacFarlane, Ferguson, Allison & Kelly First Florida Bank Building, Suite 804 Tallahassee, FL 32401 C. Gary Williams, Esquire R. Stan Peeler, Esquire Ausley, McMullen, McGehee, Carothers & Proctor 227 South Calhoun Street Tallahassee, FL 32301 John Brennan, Jr., Esquire Bonner & O'Connell 900 17th street, Suite 1000 Washington, D.C. 20006 Robert S. Cohen, Esquire Haben & Culpepper 306 North Monroe Street Tallahassee, FL 32301 John Miller, General Counsel HRS 1323 Winewood Blvd. R. S. Power, Agency Clerk HRS 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue The issues in these cases are whether Certificate of Need (CON) Application No. 10432 filed by East Florida-DMC, Inc. (DMC), to build an 80-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, or CON Application No. 10433 filed by The Public Health Trust of Miami-Dade County, Florida d/b/a Jackson Hospital West (JW), to build a 100-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, on balance, satisfy the applicable criteria; and, if so, whether either or both should be approved.
Findings Of Fact Based upon the parties’ stipulations, the demeanor and credibility of the witnesses, other evidence presented at the final hearing, and on the entire record of this proceeding, the following Findings of Fact are made: The Parties The Public Health Trust of Miami-Dade County d/b/a Jackson Hospital West and Jackson Health System (JHS) JHS is a taxpayer-funded health system located in and owned by Miami-Dade County. It is governed by The Public Health Trust of Miami Dade-County, Florida (PHT), a seven-member board. JHS owns and operates three acute care hospitals in Miami-Dade County--Jackson Memorial Hospital (JMH); Jackson North Medical Center (JN); and Jackson South Medical Center (JS)--as well as three specialty hospitals: Holtz Children’s Hospital (Holtz); Jackson Rehabilitation Hospital; and Jackson Behavioral Health Hospital. JHS also owns and operates numerous other non- hospital healthcare facilities within Miami-Dade County. JHS’s applicant in this proceeding is JW which, if approved, will be another acute care hospital in JHS. JHS is an academic teaching institution, and the University of Miami (UM) is JHS’s affiliated medical school. Over 1,000 UM residents staff JMH pursuant to an operating agreement with JHS. JN and JS are not academic medical centers. JHS annually receives sales tax and ad valorem tax revenues from Miami-Dade County in order to help fund its operations. JS and JN are community hospitals operated as part of JHS. JS was acquired in 2001. JS is licensed for 226 beds and is also home to a verified Level II trauma center. The JN facility was acquired by JHS in 2006. The facility is licensed for 382 beds. East Florida (DMC) DMC is an affiliate of HCA Healthcare, Inc. (HCA), the largest provider of acute care hospital services in the world. DMC will operate within HCA’s East Florida Division (EFD), which is comprised of 15 hospitals, 12 surgery centers, two diagnostic imaging centers, four freestanding emergency departments, nine behavioral health facilities, and one regional laboratory, along with other related services. There are three HCA-affiliated hospitals in Miami-Dade County: KRMC; Aventura Hospital and Medical Center (Aventura); and Mercy Hospital, a campus of Plantation General Hospital (Mercy). Kendall Regional (KRMC) KRMC, which is located at the intersection of the Florida Turnpike and Southwest 40th Street in Miami-Dade County, is a 417-bed tertiary provider comprised of 380 acute care beds, 23 inpatient adult psychiatric beds, eight Level II neonatal intensive care unit (NICU) beds, and five Level III NICU beds. It is a Baker Act receiving facility. KRMC is a verified Level I trauma center. It also has a burn program. KRMC is also an academic teaching facility, receiving freestanding institutional accreditation from the Accrediting Council for Graduate Medical Education (ACGME) in 2013. KRMC currently has six residency programs including, among others, surgery, internal medicine, podiatry, anesthesia, and surgical critical care. Its teaching programs are affiliated with the University of South Florida, Nova Southeastern University, and Florida International University. KRMC also participates in scholarly and clinical research. In 2017, KRMC had over 82,000 Emergency Department (ED) visits. It treated over 115,000 total inpatients and outpatients that year. There are 850 physicians on KRMC’s medical staff. It offers a full range of medical surgery services, interventional procedures, obstetrics (OB), pediatric, and neonatal care, among many other service lines. KRMC primarily serves southern and western portions of Miami-Dade County but also receives referrals from the Florida Keys up through Broward County, Palm Beach County, and the Treasure Coast. Its main competitors include, but are not limited to: Baptist Hospital; Baptist West; South Miami Hospital; PGH; Hialeah; CGH; JS, and Palm Springs General Hospital. The Tenet Hospitals PGH, Hialeah, and CGH are wholly-owned subsidiaries of Tenet South Florida. These are all for-profit hospitals. PGH is a 368-bed tertiary facility that opened in the early 1970s. It has 297 licensed acute care beds, 48 adult psychiatric beds, 52 ICU beds, and 15 Level II NICU beds. It is located at the Palmetto Expressway and Northwest 122nd Street in Hialeah, Florida. The hospital employs about 1,700 people and has over 600 physicians on its medical staff. PGH is a tertiary-level facility offering a variety of specialty services, including adult open heart surgery, a comprehensive stroke center, and robotic surgery. It has inpatient mental health beds and serves the community as a Baker Act receiving facility. It also offers OB and Level II NICU services with approximately 1,500 births a year. It has approximately 70,000 ED visits and between 17,000 and 18,000 inpatient admissions per year. In addition to its licensed inpatient beds, PGH operates 31 observation beds. PGH is ACGME accredited and serves a significant teaching function in the community. It has approximately 89 residents and fellows. The hospital provides fellowships in cardiology, critical care and interventional cardiology, and also has rotations in neurology and gastroenterology. Residents from Larkin General Hospital also rotate through PGH. PGH generally serves the communities of Opa Locka, Hialeah, Miami Lakes, Hialeah Gardens, Doral, and Miami Springs. In reality, all of the hospitals in the county are competitors, but more direct competition comes from Palm Springs Hospital, Memorial in Miramar, Mount Sinai, Kendall, and even its sister hospital, Hialeah. Hialeah first opened in 1951 and is a 378-bed acute care facility. It has 356 acute care beds, 12 adult psychiatric beds, and 10 Level II NICU beds. The ED has 25 beds and about 40,000 visits per year. It has approximately 14,000 inpatient admissions and 1,400 babies delivered annually. It offers services including cardiac, stroke, robotic surgery, colorectal surgery, and OB services. The hospital has a Level II NICU with 12 beds. CGH is located in the City of Coral Gables and is near the border between Coral Gables and the City of Miami on Douglas Road. It first opened in 1926. Portions of the original structure are still in use. CGH has 245 licensed beds, over 725 employees, 367 physicians, and over 100 additional allied providers on its medical staff. The hospital has a full-service ED. Its service lines include general surgery, geriatrics, urology, treatment of cardiovascular and pulmonary disease, and others. The hospital has eight operating rooms and offers robotic surgery. The ED has 28 beds divided into the main area and a geriatric emergency room. It had about 25,000 ED visits last year, which is lower than prior years, due in part to the presence of over a dozen nearby urgent care centers. CGH has over 8,500 inpatient admissions per year and is not at capacity. While patient days have grown slightly, the average occupancy is still just a little over 40%, meaning, on average, it has over 140 empty inpatient beds on any given day. The hospital is licensed for 245 beds, but typically there are only 180 beds immediately available for use. Agency for Healthcare Administration (AHCA) AHCA is the state health-planning agency charged with administration of the CON program as set forth in sections 408.31-408.0455, Florida Statutes. The Proposals Doral Medical Center (DMC) DMC proposes to build an 80-bed community hospital situated within the residential district of Doral. The hospital will be located in southwestern Doral in zip code 33126 and will serve the growing population of Doral, along with residential areas to the north and south of Doral. The hospital will be located in the City of Doral’s residential district on Northwest 41st Street between Northwest 109th Avenue to the east, and Northwest 112th Avenue to the west. Doral has seen significant growth in the past 15 years and has been consistently included on the list of the fastest growing cities in Florida. The new facility will have a bed complement of 80 licensed acute care beds, including 72 medical/surgical and eight OB beds. The proposed acute care hospital will be fully accredited by the Joint Commission for the Accreditation of Healthcare Facilities and licensed by the State of Florida. No public funds will be utilized in construction of the hospital and it will contribute to the state, county, and municipal tax base as a proprietary corporation. DMC will offer a full range of non-tertiary services, including emergency services, imaging, surgery, intensive care, cardiac catheterization, and women's services, including an OB unit, and pediatric care. DMC will be a general medical facility that will include a general medical component and a surgery component. Although DMC will operate an OB unit, NICU services will not be offered at DMC. If DMC’s patients need more advanced services, including NICU, the EFD hopes they will receive them from KRMC. The open medical staff will be largely community-based, but University of Miami physicians would be welcome at DMC. Before the hospital is built, KRMC will construct and operate a freestanding emergency department (FSED) at the location that will eventually become the ED of DMC. Construction of the FSED is now underway, and Brandon Haushalter, chief executive officer (CEO) of KRMC, estimated that it will open in March or April of 2019. Jackson West JHS proposes to build a community hospital to be known as “Jackson West” near the eastern edge of Doral. The proposed 100-bed general acute care hospital would have medical surgical and obstetrical beds and offer basic acute care services. JHS is a public health system owned by Miami-Dade County. All of JHS’s assets, as well as its debts, belong to the county. JHS is a not-for-profit entity, and therefore does not pay taxes, though it receives hundreds of millions of dollars from property taxes and sales taxes in Miami-Dade County. JHS’s main campus is a large health campus located near the Midtown Miami area in between Allapattah (to the north) and Little Havana (to the south). In addition to JMH, the campus includes Holtz Children’s Hospital, a behavioral health hospital, an inpatient rehabilitation hospital, and several specialty clinics. Bascom-Palmer Eye Institute, a Veterans Administration hospital, and University of Miami Hospital are also located adjacent to Jackson West’s main campus. JMH is a 1,500-bed hospital with a wide array of programs and services, including tertiary and quaternary care, and a Level I trauma program, the Ryder Trauma Center. JMH receives patients from throughout Miami-Dade County, elsewhere in Florida, and internationally. JMH is a teaching hospital and has a large number of residents, as well as professors from the University of Miami, on staff. UM and JMH have had a relationship for many years, and in addition to research and teaching, UM provides physician staffing to JMH. JN is a 342-bed community hospital located in between Miami Gardens and North Miami Beach, just off of I-95 and the Turnpike. JS is a 252-bed community hospital located in the Palmetto Bay area just south of Kendall. It has stroke certification and interventional cardiology, and was recently approved for a trauma program, which began in May 2016. Both JN and JS were existing hospitals that were acquired by JHS. JHS has never built a hospital from the ground up. In 2014, JHS leadership directed its internal planning team to review the healthcare needs of county residents. JHS’s analysis identified a need for outpatient services in western Miami-Dade, the only remaining quadrant of the county in which JHS did not have a hospital or healthcare program at the time. As part of its due diligence, JHS then consulted healthcare firm Kurt Salmon & Associates (KSA) to independently evaluate the data. KSA’s investigation validated a need in the west county for adult and pediatric outpatient services, including need for an FSED. This prompted JHS to explore opportunities for expansion of outpatient services where needed: in the western corridor of Miami-Dade. This was also the genesis of JHS’s long-range plan to first build an FSED in the Doral area, to be followed ultimately by the addition of a general acute care hospital at the site. The JW site is a 27-acre parcel of land located just west of the Palmetto Expressway and north of 25th Street. The site is in an industrial area only a short distance from the western end of the runways at Miami International Airport. The site is located in zip code 33122, which is very sparsely populated. JW proposed a primary service area (PSA) consisting of zip codes 33126, 33144, 33166, 33172/33122, 33174, 33178, and 33182, and a secondary service area (SSA) of zip codes 33155, 33165, 33175, and 33184. JW intends to serve general, acute care non-tertiary patients and OB patients. Detailed below, trends in the JW service area do not demonstrate need for its proposed hospital. The location of the JW site will not contribute to the viability of the proposed hospital. According to 2010 census data, only 328 people live within a one-mile radius of the JW site. Since 2000, only 32 total people have moved into that same area around the JW site--an average of three per year. There are virtually no residences within a one-mile radius of the JW site. From 2000 to 2010, the population within a two- mile radius of the JW site decreased by a rate of 9.4%. The JW health planner projects JW’s home zip code of 33122 will have a total population of only eight (8) people in 2022. From 2012 to 2014, the use rate in the JW service area for non-tertiary patients decreased by 3.9%. That decline continued at a steeper pace of 4.2% from 2014 to 2017. This was largely due to the 65+ age cohort, the demographic of patients that utilize inpatient services the most. The 65+ age cohort is growing at a slower pace in the JW service area than in Miami- Dade or Florida as a whole. Non-tertiary discharges in the JW service area are declining at a greater pace than that of Miami- Dade County--negative 4.2% compared to negative 1.9%. The rate of projected population growth in the JW PSA is decreasing. The projected rate of growth for the JW service area is lower than that of Miami-Dade County and Florida as a whole. The OB patient base JW intends to rely on is projected to remain flat. The inpatient discharges for all ages in the JW service area have declined from 2014 to 2017. For ages 0-17, discharges in the JW service area declined 21.4% during that time period. The discharges for ages 18-44 declined by 4.8%, and the discharges for ages 45-64 declined by 8.9%. The discharges for the important 65+ age cohort declined by 0.1%. Specifically, the discharges for ages 65-74 declined by 6.5%, and the discharges for ages 75-84 declined by 3.3%. The discharges for ages 85+ are the only age cohort that has not declined from 2012 to 2017. Overall, the non-tertiary discharges per 1,000 population (i.e., use rate) for all ages in the JW service area declined from 2012 to 2014 by 6%, and from 2014 to 2017 by 7.8%. Despite these declines in discharges in the JW service area, the health planners who crafted the JW projections used a constant use rate for the 0-17, 18-44, and 45-64 age cohorts. The JW health planners used a declining use rate for the 65+ age cohort. These use rates were applied uniformly across all zip codes, despite wide variance in actual use rates in each zip code. Applying the zip code specific use rates in conjunction with the other assumptions used by the JW health planner demonstrates that the JW projections are unreasonable. For instance, JW’s reliance on a uniform use rate over-projects the number of discharges in JW PSA zip code 33178 by nearly 1,000 patients. This occurs because the population is only growing at a 2% rate in the zip code, but JW’s reliance on service area-wide projections cause the discharges to grow at an extraordinary rate of 8.9% per year. Applying actual use rates across all zip codes causes a drastic change in the JW PSA and SSA definition. Section 408.037(2) requires a CON applicant to identify its PSA and SSA by listing zip codes in which it will receive discharges in descending order, beginning with the zip code with the highest amount of discharges, then proceeding in diminishing order to the zip code with the lowest amount of discharges. The zip codes, which comprise 75% of discharges, constitute the PSA; and the remaining zip codes, which consist of the remaining 25% of discharges, makes up the SSA. However, JW did not project its utilization in this manner. In its application, JW did not define its service area, PSA, and SSA zip codes in descending order by number or percentage of discharges. When this correct adjustment is made, its PSA consists of zip codes 33126, 33172, 33178, 33174, 33144, and 33165; and its SSA consists of zip codes 33175, 33166, 33155, 33182, and 33184. Zip codes 33166 and 33182 were in the original JW PSA, and zip code 33165 was in the original JW SSA. As such, JW’s home zip code should actually be in its SSA. JW health planners call this illogical, but it demonstrates that the JW site is located within a zip code that has almost no population of potential patients. JHS is developing an FSED and outpatient/ambulatory facilities on the JW site regardless of whether its CON application for a hospital is approved. Construction has begun on the JW site, and JHS is actually building a “shelled in” structure intended to house a future hospital, notwithstanding lack of CON approval for the hospital. There is no contingency plan for use of the shelled-in hospital space if CON approval is not obtained. JHS executives unequivocally stated that they intend to continue pursuing CON approval for the JW hospital, even if the proposed DMC hospital is approved. Indeed, JHS has filed third and fourth CON applications for its proposed JW hospital. The budget for the JW campus is $252 million. Sixty to $70 million is being funded from a bond issuance approved by voters in Miami-Dade County. Notably, the bond referendum approved by voters made no mention of a new hospital. The remaining $180 to $190 million is being funded by JHS, which has chosen to only keep 50 days cash-on-hand, and put any surplus toward capital projects. This is well below the number of days cash-on-hand ws advisable for a system like JHS. The specific programs and services to be offered at JW have not been finalized, but it is clear that JW will be a small community hospital that will not offer anything unique or different from any of the existing hospitals in the area, nor will it operate NICU beds. Patients presenting to JW in need of specialized or tertiary services will need to be transferred to another hospital with the capability of serving them, most likely JMH. The Applicants’ Arguments Doral Medical Center (DMC) DMC’s arguments in support of its proposed hospital may be summarized as follows: Geographic features surrounding Doral create transportation access barriers for the residents of the area; Doral is a densely-populated community that is growing quickly and lacks a readily accessible hospital; KRMC, which is the provider of choice for Doral residents, is a growing tertiary facility that cannot sufficiently expand to meet its future demands. DMC will serve much of the same patient population currently served by KRMC and help decompress KRMC’s acute care load so KRMC can focus on its tertiary service lines; From a geographic standpoint, the Doral community and its patients are isolated from much of Miami-Dade County to the north, west, and east, and the nearest hospitals. East Florida-DMC is a subsidiary of HCA and would be a part of the HCA EFD. Michael Joseph is the president of the EFD, which includes 15 hospitals and other facilities from Miami north through the Treasure Coast. Mr. Joseph authorized the filing of the DMC CON application, which proposes an 80-bed basic acute care hospital that includes 72 medical surgical and eight OB beds. As noted, there will be neither unique services at DMC nor any tertiary services, such as a NICU. HCA anticipates that DMC patients needing tertiary services would be referred and treated at KRMC. The proposed hospital would be built on 41st Street, between Northwest 109th Avenue and Northwest 112th Avenue. This site is located on the western edge of Doral, just east of the Everglades. When the consultants were retained to write the first DMC CON application, HCA had already made the decision to go forward with the project. Mr. Joseph described Miami-Dade County as one of the most competitive markets in the country for hospital services. There is robust competition in the Miami-Dade market from the standpoints of payors, physicians, and the many hospitals located in the county, including Jackson, HCA, Tenet, Baptist and others. HCA is not proposing this project because any of the existing hospitals in the area do not provide good quality care. HCA is currently building an FSED on the DMC site that will open regardless of whether the DMC hospital is approved. Mr. Joseph acknowledged that there is a trend toward outpatient rather than inpatient care. Inpatient occupancy of acute care hospitals in Miami-Dade County has been declining in recent years. Managed care has added further pressure on reducing inpatient admissions. Surgical advances have also resulted in fewer inpatient admissions. Surgeries that formerly required an inpatient stay are now often done on an outpatient basis. Mr. Joseph agreed that 30 minutes is a reasonable travel time to access an acute care hospital. The home zip code for the proposed DMC hospital is 33178. KRMC’s market share for that zip code is 20%. Individuals in that zip code are currently accessing a wide variety of hospitals. PGH is only 6.7 miles away and has the fourth highest market share in that zip code. HCA’s healthcare planning expert, Dan Sullivan, acknowledged that, if approved, DMC would likely have an adverse financial impact on KRMC and other area hospitals. Several witnesses testified that the travel time from the DMC site to KRMC is about 10 minutes, and that an ambulance could do it in as little as five minutes. As to the argument that the residents of Doral face geographic access barriers, the evidence did not indicate that there is anything unique about Doral from a traffic standpoint compared to other parts of Miami-Dade County. People come in and out of Doral on a daily basis in significant numbers for work and other reasons via various access points. Witnesses agreed that 25 to 30 minutes is a reasonable drive time for non-tertiary acute care services, and the evidence showed that residents of Doral, and the DMC service area, are well within 30 minutes of multiple hospitals providing more intensive services than are proposed by DMC. Indeed, many residents of DMC’s service area are closer to other hospitals than to the DMC site. None of the DMC witnesses were able to identify any patient in Doral who had been unable to access acute care services, or had suffered a bad outcome because of travel from Doral to an area hospital. The evidence did not establish that there currently exists either geographic or financial access barriers within the service area proposed to be served by DMC. Jackson West As in its Batch One application, JW advances six arguments as to why its proposed hospital should be approved. They are: It will serve a significant amount of indigent and Medicaid patients. JHS already serves residents of the proposed service area, which JW characterizes as “fragmented,” in that residents go to a number of different hospitals to receive services. Development of the freestanding ED and ambulatory center is under way. JW would provide an additional opportunity to partner with UM and FIU. There is physician and community support for the project. JW will add to the financial viability of JHS and its ability to continue its mission. JW presented very little analysis of the types of factors typically considered in evaluating need for a new hospital. JW did not discuss existing providers and their programs and services, the utilization of existing hospitals, and whether they have excess capacity, or other important considerations. Instead, JW advanced the six arguments noted above, for approval of its proposed hospital, none of which truly relate to the issue of need. First, JW states that its proposed hospital will serve a significant level of Medicaid and indigent patients. While it is true that JHS serves a significant amount of Medicaid and indigent patients, there are a number of reasons why this is not a basis to approve its proposed hospital. As an initial matter, JW treads a fine line in touting its service to Medicaid and indigent patients, while also targeting Doral for its better payer mix and financial benefit to JHS. JHS also receives an enormous amount of tax dollars to provide care to indigent and underserved patients. While other hospitals in Miami-Dade County provide care to such patients, they do not receive taxpayer dollars, as does JHS, although they pay taxes, unlike JHS. Also, Medicaid is a good payer for JHS. With its substantial supplement, JHS actually makes money from Medicaid patients, and it costs the system more for a Medicaid patient to be treated at a JHS hospital than elsewhere. More significantly, there is not a large Medicaid or indigent population in Doral, nor evidence of financial access issues in Doral. Second, JW argues that its CON application should be approved because JHS already serves patients from the Doral area, which JW characterizes as “fragmented” because area residents go to several different hospitals for care. This so- called “fragmentation” is not unique to Doral, and is not unusual in a densely-populated urban market with several existing hospitals. The same phenomenon occurs in other areas of Miami-Dade County, some of which actually have a hospital in the localized area. The fact that Doral residents are accessing several different hospitals demonstrates that there are a number of existing providers that are accessible to them. As discussed in greater detail below, residents of the Doral area have choices in every direction (other than to the west, which is the Everglades). JHS itself already serves patients from the Doral area. If anything, this tells us that patients from Doral currently have access to the JHS hospitals. Third, JW argues that its CON application should be approved because development of the JW campus is under way. This is irrelevant to the determination of need, and is simply a statement of JHS’s intent to build an FSED and outpatient facilities on a piece of land that was acquired for that purpose, regardless of CON approval. Fourth, JW argues for approval of its proposed hospital because it would provide an additional opportunity to partner with UM and Florida International University (FIU). However, the statutory criteria no longer addresses research and teaching concerns, and JHS’s relationship with UM or FIU has no bearing on whether there is a need for a new hospital in the Doral area. Moreover, JW did not present any evidence of how it would partner with UM or FIU at JW, and there does not seem to be any set plans in this regard. Fifth, JW claims that there is physician and community support for its proposed hospital, but it is very common for CON applicants to obtain letters in support for applications. Indeed, the DMC application was also accompanied by letters of support. Sixth and finally, JW argues that its proposed hospital will add to the financial viability of HSA and allow it to continue its mission. However, JW provided no analysis of the projected financial performance of its proposed hospital to substantiate this. The only financial analysis in the record is from KSA, a consulting firm that JHS hired to analyze the programs and services to be developed at JW. The KSA analysis posits that the JW FSED project will lose millions of dollars and not achieve break-even unless there is an inpatient hospital co-located there so that JW can take advantage of the more lucrative hospital-based billing and reimbursement. The sixth “need” argument relates to the issue of JHS’s historical financial struggles, which bear discussion. Only a handful of years ago, the entire JHS was in dire financial trouble, so much so that selling all or parts of it was considered. Days cash-on-hand was in the single digits, and JHS fell out of compliance with bond covenants. JHS’s financial difficulties prompted the appointment of an outside monitor to oversee JHS’s finances. Price Waterhouse served in that role, and made several recommendations for JHS to improve its revenue cycle, make accounting adjustments, and improve its staffing and efficiency. As a result of these recommendations, JHS went through a large reduction in force, and began to more closely screen the income and residency of its patients. As a result of these measures, overall financial performance has since improved. Despite its improved financial position, JHS still consistently loses money on operations, including a $362,000,915 loss as of June 30, 2018. JHS clearly depends upon the hundreds of millions of non-operating tax-based revenues it receives annually. JHS’s CEO expressed concerns over decreases in the system’s non-operating revenue sources, and claimed that JHS needs to find ways to increase its operating revenue to offset this. JW is being proposed as part of this strategy. However, JHS’s chief financial officer testified that “the non-operating revenues are a fairly stable source of income.” In fact, JHS’s tax revenues have gone up in the last few years. JHS sees the more affluent Doral area as a source of better paying patients that will enhance the profitability of its new hospital. Beyond this aspiration however, there is no meaningful analysis of the anticipated financial performance of its proposed hospital. This is a glaring omission given that a significant impetus for spending millions of public dollars on a new hospital is to improve JHS’s overall financial position. The KSA analysis referenced above determined that changes to the Hospital Outpatient Prospective Payment System rule would result in the JW campus losing hundreds of millions of dollars and never reaching “break even,” absent an inpatient hospital on the campus for “hospital based” billing and reimbursement. Though a financial benefit to the system, the increased reimbursement JHS would receive by having an inpatient hospital on the JW campus would be a financial burden on the healthcare delivery system since it would cost more for the same patient to receive the same outpatient services in a hospital- based facility. Reports by KSA also state that a strategic purpose of JW is to attract patients that would otherwise go to nearby facilities like PGH and Hialeah, and to capture tertiary or higher complexity cases which would then be sent to JMH. JW’s witnesses and healthcare planning experts fully expect this to happen. In 2015, and again in 2017, JHS conducted a “Community Health Needs Assessment,” which is required by law to be performed by public safety net hospitals. The assessments were conducted by gathering responses to various questions from a wide array of community leaders and stakeholders, including the CEOs of JHS’s hospitals, about the healthcare needs of the community. The final Community Health Needs Assessment documents are lengthy and cover a variety of health-related topics, but most notable for this case is that: (1) nowhere in either the 2015 or 2017 assessment is the development of a new hospital recommended; and (2) expansion into western Miami-Dade County scored by far the lowest on a list of priorities for JHS. In its application and at hearing, JW took the position that JW can enter the Doral area market without impacting existing providers to any meaningful extent. While JW acknowledges that its proposed hospital would impact the Tenet Hospitals, it argues that the impact is not significant. The evidence established that the financial impact to the Tenet Hospitals (calculated based upon lost contribution margin) would total roughly $3 million for lost inpatients, and $5.2 million including lost outpatients. While these losses will not put the Tenet Hospitals in financial peril, they are nonetheless significant and material. The Existing Healthcare Delivery System Miami-Dade County is home to 18 freestanding acute care hospitals, comprising a total of 7,585 licensed and approved acute care beds. With an average annual occupancy of 53.8% in calendar year 2017, there were, on average, approximately 3,500 unoccupied acute care beds in the county on any given day. While the countywide occupancy rate fluctuates from year to year, it has been on a downward trend in the past several years. As pointed out by several witnesses, the lack of a hospital in Doral is not itself an indication of need. In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. The population of Doral currently is only about 59,000 people. It is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. As set forth in JW’s CON application, the better payer mix in Doral was a significant factor behind its decision to file its CON application. Although there is not a hospital within the Doral city limits, there are a number of healthcare providers in Doral and several hospitals nearby. PGH and Palm Springs Hospital are just north of Doral. KRMC is just south of Doral. Hialeah is northeast of Doral. CGH, Westchester General, and NCH are southeast of Doral. JMH and all of its facilities are east of Doral. And there are others within reasonable distance. KRMC is only six miles due south of the proposed DMC site, and PGH is just eight miles north of the DMC site. As to the JW site, PGH is 6.9 miles distant, CGH is 8.6 miles distant, and Hialeah is 7.4 miles distant. Residents of the Doral area have many choices in hospitals with a wide array of services, and they are accessing them. The parties to this case, as well as other existing hospitals, all have a share of the Doral area market. JW calls this “fragmentation” of the market and casts it in a negative light, but the evidence showed this to be a normal phenomenon in an urban area like Miami, with several hospitals in healthy competition with each other. Among the experts testifying at the hearing, it was undisputed that inpatient acute care hospital use rates are on the decline. There are different reasons for this, but it was uniformly recognized that decreasing use rates for inpatient services, and a shift toward outpatient services, are ongoing trends in the market. Recognizing the need for outpatient services in the Doral area, both JW and DMC (or, more accurately, their related entities) have proposed outpatient facilities and services to be located in Doral. Kendall Regional Medical Center KRMC is currently the dominant hospital provider in the Doral area. Regarding his motivation for filing the DMC application, Mr. Joseph readily admitted “it’s as much about protecting what I already currently provide, number one.” KRMC treats Medicaid and indigent patients. KRMC has never turned away a patient because it did not have a contract with a Medicaid-managed care company. The CEO agreed that there is no access problem for Medicaid or charity patients justifying a new hospital. It was argued that KRMC is crowded, and the DMC hospital would help “decompress” KRMC, but the evidence showed that KRMC has a number of licensed beds that are not being used for inpatients. In addition, its ED has never gone on diversion, and no patient has ever been turned away due to the lack of a bed. Moreover, the census at KRMC has been declining. It had 25,324 inpatient admissions in 2015, 24,649 admissions in 2016, and 23,301 in 2017. The most recent data available at the time of hearing reflected that KRMC has been running at a little less than 75% occupancy, before its planned bed additions. KRMC is between an eight to 10 minute drive from Doral, and currently has the largest market share within the applicants’ defined service areas. KRMC is readily available and accessible to the residents of Doral. KRMC currently has a $90 million dollar expansion project under way. It involves adding beds and two new floors to the West Tower--a new fifth floor which will add 24 ICU beds and 24 step-down beds, and a new sixth floor which will house the relocated pediatric unit and 12 new medical-surgical beds. KRMC is also adding a new nine-story, 765 parking space garage and other ancillary space. This expansion will reduce the occupancy rate of KRMC’s inpatient units, and in particular its ICUs. These bed additions, in conjunction with increasing emphasis on outpatient services and the resultant declining inpatient admissions, will alleviate any historical capacity constraints KRMC may have had. There are also a number of ways KRMC could be further expanded in the future if needed. The West Tower is designed so it could accommodate a seventh floor, and the East Tower is also designed so that an additional floor could also be added to it. In addition, KRMC recently completed construction of a new OR area that is built on pillars. The new construction includes a third floor of shelled-in space that could house an additional 12 acute care beds. Moreover, this new OR tower was designed to go up an additional two to three floors beyond the existing shelled-in third floor. It is clear that KRMC has implemented reasonable strategies for addressing any bed capacity issues it may have experienced in the past. Decompression of KRMC is not a reason to approve DMC. Palmetto General Hospital Evidence regarding PGH was provided by its CEO Ana Mederos. Ms. Mederos is a registered nurse and has lived in Miami-Dade County for many years. She has a master of business education from Nova University and has worked in several different hospitals in the county. Specifically, she was the chief operating officer (COO) at Cedars Medical Center, the CEO at North Shore Medical Center, the CEO at Hialeah Hospital, and has been the CEO at PGH since August of 2006. Ms. Mederos is one of the few witnesses that actually lives in Doral. She travels in and out of the area on a daily basis. Her average commute is only about 15 minutes, and she has multiple convenient options in and out of Doral. PGH is located just off the Palmetto Expressway at 68th Street. It opened in the early 1970s and has 368 licensed beds, including 52 ICU beds. The hospital employs about 1,800 people and has over 600 physicians on its medical staff. PGH’s occupancy has declined from 79.8% in 2015 to 64% in 2016, and even further to 56.7% in 2017. There are many reasons for this decline, including pressure from managed care organizations, the continued increase in the use of outpatient procedures, improvements in technology, and increased competition in the Miami-Dade County market. Ms. Mederos expects that inpatient demand will continue to decline into the foreseeable future. PGH recently activated 31 observation beds to help improve throughput and better accommodate the increasing number of observation patients. PGH offers high-quality care and uses various metrics and indicators to measure and monitor what is going on in the hospital. The hospital has also been recognized with numerous awards. Through its parent, Tenet, PGH has contracts with just about every insurance and managed care company that serves the community. The hospital treats Medicaid and indigent patients. PGH’s Medicaid rate of $3,580 per patient is significantly lower than the rate paid to JMH. PGH has an office dedicated to helping patients get qualified for Medicaid or other financial resources, which not only helps the hospital get paid for its services, it also assists patients and families to make sure that they have benefits on an ongoing basis. Roughly 9-10% of PGH’s patients annually are completely unfunded. PGH only transfers patients if there is a need for a service not provided at the hospital, or upon the patient’s request. PGH does not transfer patients just because they cannot pay. PGH pays physicians to take calls in the ED which also obligates those physicians to provide care to patients that are seen at the hospital. PGH is a for-profit hospital that pays income taxes and property taxes, and does not receive any taxpayer subsidies like those received by JHS. Ms. Mederos reviewed the applications of JW and DMC, and articulated a number of reasons why, in her opinion, neither application should be approved. She sees no delays in providing care to anyone in the area, as there are hospitals serving Doral in every direction. There are a multitude of FSEDs available and additional FSEDs are being built in Doral by both applicants. There is another FSED being built close to PGH by Mount Sinai Medical Center. NCH has also opened an FSED that has negatively affected the volume of pediatric patients seen at PGH. There are also multiple urgent care centers. It was Ms. Mederos’ firm belief that persons living in Doral have reasonable geographic access to both inpatient and outpatient medical services. Ms. Mederos’ testimony in this regard is credited. There are no programs or services being proposed by either applicant that are not already available in the area. Ms. Mederos also noted that there is currently no problem with access to OB services in the area. However, she has a particular concern in that both applicants propose to offer OB services, but neither is proposing to offer NICU services. The evidence showed that most all of the hospitals that provide OB services to the Doral area offer at least Level II and some Level III NICU services. Thus, in terms of OB care, both proposed hospitals would be a step below what has developed as the standard of care for OB patients in the county. Ms. Mederos acknowledged that PGH does not have a huge market share in the zip codes that the applicants are proposing to serve, but that does not mean that the impact from either would not be real and significant. If a hospital is built by either applicant, it will need physicians, with some specialists in short supply. There are tremendous shortages in certain medical fields, such as orthopedics and neurology. In addition, there will be additional competition for nurses and other staff, which will increase the cost of healthcare. The loss of $1.3 to $2 million in contribution margin, as projected by Tenet’s healthcare planner, is a negative impact on PGH as hospital margins become thinner, and those numbers do not include costs like those needed to recruit and retain staff. PGH is again experiencing a nursing shortage, and losing nurses, incurring the higher cost for contract labor, paying overtime, and essentially not having the staff to provide the required services is a serious potential adverse impact from either proposed new hospital. JHS also tends to provide more lucrative benefits than PGH, and a nearby JW hospital is a threat in that regard. As a final note, Ms. Mederos stated that her conviction that there is no need for either proposed hospital in Doral is even more resolute than when she testified in the Batch One Case. With continued declines in admissions, length of stay and patient days, the development of more services for the residents of Doral, the shortages of doctors and nurses, the ever increasing role of managed care that depresses the demand for inpatient hospital services and other factors, she persuasively explained why no new hospitals are needed in the Doral area. Coral Gables Hospital (CGH) Maria Cristina Jimenez testified on behalf of CGH, where she has worked in a variety of different capacities since 1985. She was promoted to CEO in March 2017. She has lived in Miami her entire life. Ms. Jimenez has been involved in initiatives to make her hospital more efficient. She is supportive of efforts to reduce inpatient hospitalizations and length of stay, as this is what is best for patients. Overall, the hospital length of stay is dropping, which adds to the decreasing demand for inpatient services. CGH is accredited by the Joint Commission, has received multiple awards, and provides high-quality care to its patients. It also has contracts with a broad array of managed care companies as do the other Tenet hospitals. CGH treats Medicaid patients, and its total Medicaid rate is less than $3,500 per inpatient. The hospital has a program similar to PGH to help patients get qualified for Medicaid and other resources. CGH also provides services to indigent patients, and self-pay/charity is about 6% of the hospital’s total admissions. The hospital does not transfer patients just because they are indigent. Physicians are compensated to provide care in the emergency room and are expected to continue with that care if the patients are admitted to the hospital, even if they do not have financial resources. CGH also pays income and property taxes, but does not receive any taxpayer support. CGH generally serves the Little Havana, Flagami, Miami, and Coral Gables communities, and its service area overlaps with those of the applicants. In order to better serve its patients and to help it compete in the highly competitive Miami-Dade County marketplace, CGH is developing a freestanding ED at the corner of Bird Road and Southwest 87th Avenue, which is scheduled to open in January 2020. This will provide another resource for patients in the proposed service areas. Ms. Jimenez had reviewed the CON applications at issue in this case. She does not believe that either hospital should be approved because it will drain resources from CGH, not only from a financial standpoint, but also physician and nurse staffing. CGH experiences physician shortages. Urologists are in short supply, as are gastrointestinal physicians that perform certain procedures. Hematology, oncology, and endocrinology are also specialty areas with shortages. The addition of another hospital will exacerbate those shortages at CGH. While CGH does not have a large market share in the proposed PSA of either applicant, anticipated impact from approval of either is real and substantial. A contribution margin loss of $1.2 to $2.2 million per year, as projected by Tenet’s healthcare planner, would be significant. The drain on resources, including staff and physicians, is also of significant concern. Hialeah Hospital Dr. Jorge Perez testified on behalf of Hialeah. Dr. Perez is a pathologist and medical director of laboratory at the hospital. More significantly, Dr. Perez has been on the hospital’s staff since 2001 and has served in multiple leadership roles, including chair of the Performance Improvement Council, chief of staff; and since 2015, chair of the Hialeah Hospital Governing Board. Hialeah offers obstetrics services and a Level II NICU with 12 beds. Approximately 1,400 babies a year are born there. Hialeah’s occupancy has been essentially flat for the past three years, at below 40%, and it clearly has ample excess capacity. On an average day, over 200 of Hialeah’s beds are unoccupied. Like other hospitals in the county, Hialeah has a number of competitors. The growth of managed care has affected the demand for inpatient beds and services at Hialeah. Hialeah treats Medicaid and indigent patients. Approximately 15% of Hialeah’s admissions are unfunded. As with its sister Tenet hospitals, Hialeah is a for- profit hospital that pays taxes and does not receive tax dollars for providing care to the indigent. Dr. Perez succinctly and persuasively identified a variety of reasons why no new hospital is needed in Doral. First and foremost, there is plenty of capacity at the existing hospitals in the area, including Hialeah. Second, both inpatient admissions and length of stay continue trending downward. Care continues to shift toward outpatient services, thereby reducing the demand for inpatient care. According to Dr. Perez, if a new hospital is approved in Doral it will bring with it adverse impacts on existing hospitals, including Hialeah. A new hospital in Doral will attract patients, some of which would have otherwise gone to Hialeah. Moreover, Doral has more insured patients, meaning the patients that would be lost would be good payors. There would also be a significant risk of loss of staff to a new hospital. Dr. Perez’s testimony in this regard is credible. Statutory and Rule Review Criteria In 2008, the Florida Legislature streamlined the review criteria applicable for evaluating new hospital applications. Mem’l Healthcare Grp. v. AHCA, Case No. 12- 0429CON, RO at 32 (Fla. DOAH Dec. 7, 2012). The criteria specifically eliminated included quality of care, availability of resources, financial feasibility, and the costs and methods of proposed construction. Lee Mem’l Health System v. AHCA, Case No. 13-2508CON, RO at 135 (Fla. DOAH Mar. 28, 2014). The remaining criteria applicable to new hospital projects are set forth at section 408.035(1), Florida Statutes. Section 408.035(1)(a): The need for the healthcare facilities and health services being proposed. Generally, CON applicants are responsible for demonstrating need for new acute care hospitals, typically in the context of a numeric need methodology adopted by AHCA. However, AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. Florida Administrative Code Rule 59C-1.008(2)(e) provides that if no agency need methodology exists, the applicant is responsible for demonstrating need through a needs assessment methodology, which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict, or both; Medical treatment trends; and Market conditions. Both applicants propose to build small community hospitals providing basic acute care and OB services in the Doral area of western Miami-Dade County. Both applicants point to the increasing population and the lack of an acute care hospital in Doral as evidence of need for a hospital. The DMC application focuses largely on geographic access concerns, while the JW application is premised upon six arguments as to why JHS contends its proposed JW hospital should be approved. The lack of a hospital in Doral is not itself an indication of need.3/ In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals, and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. Doral is in the west/northwest part of Miami-Dade County, in between the Miami International Airport (to the east) and the Everglades (to the west). It is surrounded by major roadways, with US Highway 27/Okeechobee Road running diagonally to the north, US Highway 836/Dolphin Expressway running along its southern edge, US Highway 826/Palmetto Expressway running north-south to the east, and the Florida Turnpike running north- south along the western edge of Doral. To the west of the Turnpike is the Everglades, where there is minimal population and very limited development possible in the future. The City of Doral itself has an area of about 15 square miles, and is only two or three times the size of the Miami International Airport, which sits just east of Doral. Much of Doral is commercial and industrial, with the largest concentration of residential areas being in the northwest part of the city. While there is unquestionably residential growth in Doral, the population of Doral is currently only about 59,000 people. Doral is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. JW proposes to locate its hospital on the eastern side of Doral, just west of Miami International Airport, while the DMC site is on the western side of Doral, just east of the Everglades. JW’s site is located in an industrial area with few residents, while the DMC site is located in an area where future growth is likely to be limited. Both sites have downsides for development of a hospital, with both applicants spending considerable time at hearing pointing out the flaws of each other’s chosen location. Both applicants define their service areas to include the City of Doral, but also areas outside of Doral. Notably, the entire DMC service area is contained within KRMC’s existing service area, with the exception of one small area. While the population of Doral itself is only 59,000 people, there are more concentrated populations in areas outside of Doral (except to the west). However, the people in these areas are closer to existing hospitals like PGH, Hialeah, KRMC, and others. For the population inside Doral, there are several major roadways in and out of Doral, and area residents can access several existing hospitals with plenty of capacity within a 20-minute drive time, many closer than that. It was undisputed that inpatient acute care hospital use rates continue to decline. There are different reasons for this, but it was uniformly recognized that decreasing inpatient use rates, and a shift toward outpatient services, are ongoing trends in the market. These trends existed at the time of the Batch One Case. As observed by Tenet’s healthcare planner at hearing: “The occupancy is lower today than it was two years ago, the use rates are lower, and the actual utilization is lower.” Both applicants failed to establish a compelling case of need. While there is growth in the Doral area, it remains a relatively small population, and there was no evidence of community needs being unmet. Sound healthcare planning, and the statutory criteria, require consideration of existing hospitals, their availability, accessibility, and extent of utilization. These considerations weigh heavily against approval of either CON application, even more so than in the prior case. Section 408.035(1)(b): The availability, accessibility, and extent of utilization of existing healthcare facilities and health services in the service district of the applicant; and Section 408.035(1)(e): The extent to which the proposed services will enhance access to healthcare for residents of the service district. As stated above, there are several existing hospitals in close proximity to Doral. Thus, the question is whether they are accessible and have capacity to serve the needs of patients from the Doral area. The evidence overwhelmingly answers these questions in the affirmative. Geographic access was a focal point of the DMC application, which argued that there are various barriers to access in and around Doral, such as a canal that runs parallel to US Highway 27/Okeechobee Road, train tracks and a rail yard, industrial plants, and the airport. While the presence of these things is undeniable, as is the fact that there is traffic in Miami, based upon the evidence presented, they do not present the barriers that DMC alleges. Rather, the evidence was undisputed that numerous hospitals are accessible within 20 minutes of the proposed hospital sites, and some within 10 to 15 minutes. All of Doral is within 30 minutes of multiple hospitals. These are reasonable travel times and are not indicative of a geographic access problem, regardless of any alleged “barriers.” In addition, existing hospitals clearly have the capacity to serve the Doral community, and they are doing so. Without question, there is excess capacity in the Miami-Dade County market. With approximately 7,500 hospital beds in the county running at an average occupancy just over 50%, there are around 3,500 beds available at any given time. Focusing on the hospitals closest to Doral (those accessible within 20 minutes), there are hundreds of beds that are available and accessible from the proposed service areas of the applicants. KRMC is particularly noteworthy because of its proximity to, and market share in, the Doral area. The most recent utilization and occupancy data for KRMC indicate that it has, on average, 100 vacant beds. This is more than the entire 80-bed hospital proposed in the DMC application (for a service area that is already served and subsumed by KRMC). Moreover, KRMC is expanding, and will soon have even more capacity at its location less than a 10-minute drive from the DMC site. From a programmatic standpoint, neither applicant is proposing any programs or services that are not already available at numerous existing hospitals, and, in fact, both would offer fewer programs and services than other area hospitals. As such, patients in need of tertiary or specialized services will still have to travel to other hospitals like PGH, KRMC, or JMH. Alternatively, if they present to a small hospital in Doral in need of specialized services, they will then have to be transferred to an appropriate hospital that can treat them. The same would be true for babies born at either DMC or JW in need of a NICU. Similarly, there are bypass protocols for EMS to take cardiac, stroke, and trauma patients to the closest hospital equipped to treat them, even if it means bypassing other hospitals not so equipped, like JW and DMC. Less acute patients can be transported to the closest ED. And since both applicants are building FSEDs in Doral, there will be ample access to emergency services for residents of Doral. This criterion does not weigh in favor of approval of either hospital. To the contrary, the evidence overwhelmingly established that existing hospitals are available and accessible to Doral area residents. Section 408.035(1)(e), (g) and (i): The extent to which the proposed services will enhance access to healthcare, the extent to which the proposal will foster competition that promotes quality and cost-effectiveness, and the applicant’s past and proposed provision of healthcare services to Medicaid patients and the medically indigent. It goes without saying that any new hospital is going to enhance access to the people closest to its location; but as explained above, there is no evidence of an access problem, or any pressing need for enhanced access to acute care hospital services. Rather, the evidence showed that Doral area residents are within very reasonable travel times to existing hospitals, most of which have far more extensive programs and services than either applicant is proposing to offer. Indeed, the proposed DMC service area is contained within KRMC’s existing service area, and KRMC is only 10 minutes from the DMC site. Neither applicant would enhance access to tertiary or specialized services, and patients in need of those services will still have to travel to other hospitals, or worse, be transferred after presenting to a Doral hospital with more limited programs and services. Although it was not shown to be an issue, access to emergency services is going to be enhanced by the FSEDs being built by both applicants. Thus, to the extent that a new hospital would enhance access, it would be only for non-emergent patients in need of basic, non-tertiary level care. Existing hospitals are available and easily accessible to these patients. In addition, healthy competition exists between several existing providers serving the Doral area market. That healthy competition would be substantially eroded by approval of the DMC application, as HCA would likely capture a dominant share of the market. While approval of the JW application might not create a dominant market share for one provider, it would certainly not promote cost-effectiveness given the fact that it costs the system more for the same patient to receive services at a JHS hospital than other facilities. Indeed, approval of JW’s application would mean that the JW campus will have the more expensive hospital-based billing rates. Florida Medicaid diagnosis related group (DRG) payment comparisons among hospitals are relevant because both DMC and JW propose that at least 22% of their patients will be Medicaid patients. Data from the 2017-18 DRG calculator provided by the Medicaid program office was used to compare JHS to the three Tenet hospitals, KRMC, and Aventura Hospital, another EFD hospital in Miami-Dade County. The data shows that JHS receives the highest Medicaid rate enhancement per discharge for the same Medicaid patients ($2,820.06) among these six hospitals in the county. KRMC receives a modest enhancement of $147.27. Comparison of Medicaid Managed Care Reimbursement over the period of fiscal years 2014-2016 show that JHS receives substantially more Medicaid reimbursement per adjusted patient day than any of the hospitals in this proceeding, with the other hospitals receiving between one-third and one-half of JHS reimbursement. In contrast, among all of these hospitals, KRMC had the lowest rate for each of the three years covered by the data, which means KRMC (and by extension DMC) would cost the Medicaid program substantially less money for care of Medicaid patients. Under the new prospective payment system instituted by the State of Florida for Medicaid reimbursement of acute care hospital providers, for service between July 1, 2018, and March 31, 2019, JHS is the beneficiary of an automatic rate enhancement of more than $8 million. In contrast, KRMC’s rate enhancement is only between $16,000 and $17,000. Thus, it will cost the Medicaid program substantially more to treat a patient using the same services at JW than at DMC. Furthermore, rather than enhance the financial viability of the JHS system, the evidence indicates that the JW proposal will be a financial drain on the JHS system. Finally, JHS’s past and proposed provision of care to Medicaid and indigent patients is noteworthy, but not a reason to approve its proposed hospital. JW is proposing this hospital to penetrate a more affluent market, not an indigent or underserved area, and it proposes to provide Medicaid and indigent care at a level that is consistent with the existing hospitals. JHS also receives the highest Low Income Pool (LIP) payments per charity care of any system in the state, and is one of only a handful of hospital systems that made money after receipt of the LIP payments. HCA-affiliated hospitals, by comparison, incur the second greatest cost in the state for charity care taking LIP payments into consideration. Analysis of standardized net revenues per adjusted admission (NRAA) among Miami-Dade County acute care hospitals, a group of 16 hospitals, shows JHS to be either the second or the third highest hospital in terms of NRAA. KRMC, in contrast, part of the EFD/HCA hospitals, is about 3% below the average of the 16 hospitals for NRAA. DMC’s analysis of standardized NRAA using data from 2014, 2015, and 2016, among acute care hospitals receiving local government tax revenues, shows JHS receives more net revenue than any of the other hospitals in this grouping. Using data from FY 2014 to FY 2016, DMC compared hospital costs among the four existing providers that are parties to this proceeding and JMH as a representative of JHS. Standardizing for case mix, fiscal year end, and location, an analysis of costs per adjusted admission shows that the hospitals other than JMH have an average cost of between a half and a third of JMH’s average cost. The same type of analysis of costs among a peer group of eight statutory teaching hospitals shows JHS’s costs to be the highest. It should also be noted that if JW were to fail or experience significant losses from operations, the taxpayers of Miami-Dade County will be at risk. In contrast, if DMC were to fail financially, EFD/HCA will shoulder the losses. When the two applications are evaluated in the context of the above criteria, the greater weight of the evidence does not mitigate in favor of approval of either. However, should AHCA decide to approve one of the applicants in its final order, preference should be given to DMC because of its lower costs per admission for all categories of payors, and in particular, the lower cost to the Florida Medicaid Program. In addition, the risk of financial failure would fall upon EFD/HCA, rather than the taxpayers of Miami-Dade County. Rule 59C-1.008(2)(e): Need considerations. Many of the considerations enumerated in rule 59C- 1.008(2)(e) overlap with the statutory criteria, but there are certain notable trends and market conditions that warrant mention. Specifically, while the population of Doral is growing, it remains relatively small, and does not itself justify a new hospital. And while there are some more densely populated areas outside of the city of Doral, they are much closer to existing hospitals having robust services and excess capacity. Doral is a more affluent area, and there was no evidence of any financial or cultural access issues supporting approval of either CON application. The availability, utilization, and quality of existing hospitals are clearly not issues, as there are several existing hospitals with plenty of capacity accessible to Doral area residents. In terms of medical treatment trends, it was undisputed that use rates for inpatient hospital services continue trending downward, and that trend is expected to continue. Concomitantly, there is a marked shift toward outpatient services in Miami-Dade County and elsewhere. Finally, both applicants are proposing to provide OB services without a NICU, which is below the standard in the market. While not required for the provision of obstetrics, NICU backup is clearly the most desirable and best practice. For the foregoing reasons, the considerations in rule 59C-1.008(2)(e) do not weigh in favor of approval of either hospital.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Healthcare Administration enter a final order denying East Florida-DMC, Inc.’s CON Application No. 10432 and denying The Public Health Trust of Miami-Dade County, Florida, d/b/a Jackson Hospital West’s CON Application No. 10433. DONE AND ENTERED this 30th day of April, 2019, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2019.
The Issue Whether Certificate of Need (CON) Application No. 9992, filed by Sun City Hospital, Inc., d/b/a South Bay Hospital to establish a 112-bed replacement hospital in Riverview, Hillsborough County, Florida, satisfies, on balance, the applicable statutory and rule review criteria for approval.
Findings Of Fact The Parties A. South Bay South Bay is a 112-bed general acute care hospital located at 4016 Sun City Center Boulevard, Sun City Center, Florida. It has served south Hillsborough County from that location since its original construction in 1982. South Bay is a wholly-owned for-profit subsidiary of Hospital Corporation of America, Inc. (HCA), a for-profit corporation. South Bay's service area includes the immediate vicinity of Sun City Center, the communities of Ruskin and Wimauma (to the west and east of Sun City Center, respectively), and the communities of Riverview, Gibsonton, and Apollo Beach to the north. See FOF 68-72. South Bay is located on the western edge of Sun City Center. The Sun City Center area is comprised of the age- restricted communities of Sun City Center, Kings Point, Freedom Plaza, and numerous nearby senior living complexes, assisted- living facilities, and nursing homes. This area geographically comprises the developed area along the north side of State Road (SR) 674 between I–75 and U.S. Highway 301, north to 19th Avenue and south to the Little Manatee River. South Bay predominantly serves the residents of the Sun City Center area. In 2009, Sun City Center residents comprised approximately 57% of all discharges from SB. South Bay had approximately 72% market share in Sun City Center zip code 33573. (Approximately 32% of all market service area discharges came from zip code 33573.) South Bay provides educational programs at the hospital that are well–attended by community residents. South Bay provides comprehensive acute care services typical of a small to mid-sized community hospital, including emergency services, surgery, diagnostic imaging, non-invasive cardiology services, and endoscopy. It does not provide diagnostic or therapeutic cardiac catheterization or open-heart surgery. Patients requiring interventional cardiology services or open-heart surgery are taken directly by Hillsborough County Fire Rescue or other transport to a hospital providing those services, such as Brandon Regional Hospital (Brandon) or SJH, or are transferred from SB to one of those hospitals. South Bay has received a number of specialty accreditations, which include accreditation by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), specialty accreditation as an advanced primary stroke center, and specialty accreditation by the Society for Chest Pain. South Bay has also received recognition for its quality of care and, in particular, for surgical infection prevention and outstanding services relating to heart attack, heart failure, and pneumonia. South Bay's 112 licensed beds comprise 104 general medical-surgical beds and eight Intensive Care Unit (ICU) beds. Of the general medical-surgical beds, 64 are in semi-private rooms, where two patient beds are situated side-by-side, separated by a curtain. Forty-eight are in private rooms. Semi- private rooms present challenges in terms of infection control and patient privacy, and are no longer the standard of care in hospital design and construction. Over the years, SB has upgraded its hospital physical plant to accommodate new medical technology, including an MRI suite and state-of-the-art telemetry equipment. South Bay is implementing automated dispensing cabinets on patient floors for storage of medications and an electronic medication administration record system that provides an extra safety measure for dispensing medications. Since 2009, SB has implemented numerous programmatic initiatives that have improved the quality of care. South Bay is converting one wing of the hospital to an orthopedic unit. In 2001, South Bay completed a major expansion of its ED and support spaces, but has not added new beds. Patients presenting to the ED have received high quality of care and timely care. Since 2009, SB has improved its systems of care and triage of patients in the ED to improve patient flow and reduce ED wait times. Overall, South Bay has a reputation of providing high- quality care in a timely manner, notwithstanding problems with its physical plant and location. South Bay's utilization has been high historically. From 2006 to 2009, SB's average occupancy has been 79.5%, 80.3%, 77.2%, and 77.7%, respectively. Its number of patient discharges also increased in that time, from 6,190 in 2006 to 6,540 in 2009, at an average annual rate increase of 1.9%. (From late November until May, the seasonal months, utilization is very high, sometimes at 100% or greater.) Despite its relatively high utilization, SB has also had marginal financial results historically. It lost money in 2005 and 2007, with operating losses of $644,259 in 2005 and $1,151,496 in 2007 and bottom-line net losses of $447,957 (2005) and $698,305 (2007). The hospital had a significantly better year in 2009, with an operating gain of $3,365,113 and a bottom- line net profit of $2,144,292. However, this was achieved largely due to a reduction in bad debt from $11,927,320 in 2008 to $7,772,889 in 2009, an event the hospital does not expect to repeat, and a coincidence of high surgical volume. Its 2010 financial results were lagging behind those of 2009 at the time of the hearing. South Bay's 2009 results amount to an aberration, and it is likely that 2010 would be considerably less profitable. South Bay's marginal financial performance is due, in part, to its disproportionate share of Medicare patients and a disproportionate percentage of Medicare reimbursement in its payor mix. Medicare reimburses hospitals at a significantly lower rate than managed care payors. As noted, SB is organizationally a part of HCA's West Florida Division, and is one of two HCA-affiliated hospitals in Hillsborough County; Brandon is the other. (There are approximately 16 hospitals in this division.) Brandon has been able to add beds over the past several years, and its services include interventional cardiology and open-heart surgery. However, SB and Brandon combined still have fewer licensed beds than either St. Joseph's Hospital or Tampa General Hospital, and fewer than the BayCare Health System- affiliated hospitals in Hillsborough in total. South Bay's existing physical plant is undersized and outdated. See discussion below. Whether it has a meaningful opportunity for expansion and renovation at its 17.5-acre site is a question for this proceeding to resolve. South Bay proposes the replacement and relocation of its facility to the community of Riverview. In 2005, SB planned to establish an 80-bed satellite hospital in Riverview, on a parcel owned by HCA and located on the north side of Big Bend Road between I-75 and U.S. Highway 301. SB filed CON Application No. 9834 in the February 2005 batching cycle. The application was preliminarily denied by AHCA, and SB initially contested AHCA's determination. South Bay pursued the satellite hospital CON at that time because of limited availability of intercompany financing from HCA. By the time of the August 2007 batching cycle, intercompany financing had improved, allowing SB to pursue the bigger project of replacing and relocating the hospital. South Bay dismissed its petition for formal administrative hearing, allowing AHCA's preliminary denial of CON Application No. 9834 to become final, and filed CON Application No. 9992 to establish a replacement hospital facility on Big Bend Road in Riverview. St. Joseph's Hospital St. Joseph's Hospital was founded by the Franciscan Sisters of Allegany, New York, as a small hospital in a converted house in downtown Tampa in 1934. In 1967, SJH opened its existing main hospital facility on Martin Luther King Avenue in Tampa, Florida. St. Joseph's Hospital, Inc., a not-for-profit entity, is the licensee of St. Joseph's Hospital, an acute care hospital located at 3001 West Martin Luther King, Jr., Boulevard, Tampa, Florida. As a not-for-profit organization, SJH's mission is to improve the health care of the community by providing high- quality compassionate care. St. Joseph's Hospital, Inc., is a Medicaid disproportionate share provider and provided $145 million in charity and uncompensated care in 2009. St. Joseph's Hospital, Inc., is licensed to operate approximately 883 beds, including acute care beds; Level II and Level III neonatal intensive care unit (NICU) beds; and adult and child-adolescent psychiatric beds. The majority of beds are semi-private. Services include Level II and pediatric trauma services, angioplasty, and open-heart surgery. These beds and services are distributed among SJH's main campus; St. Joseph's Women's Hospital; St. Joseph's Hospital North, a newer satellite hospital in north Tampa; and St. Joseph's Children's Hospital. Except for St. Joseph's Hospital North, these facilities are land-locked. Nevertheless, SJH has continued to invest in its physical plant and to upgrade its medical technology and equipment. In February 2010, SJH opened St. Joseph's Hospital North, a state-of-the-art, 76-bed satellite hospital in Lutz, north Hillsborough County, at a cost of approximately $225 million. This facility is approximately 14 miles away from the main campus. This followed the award of CON No. 9610 to SJH for the establishment of St. Joseph's Hospital North, which was unsuccessfully opposed by University Community Hospital and Tampa General Hospital, two existing hospital providers in Tampa. Univ. Cmty. Hosp., Inc., d/b/a Univ. Cmty. Hosp. v. Agency for Health Care Admin., Case Nos. 03-0337CON and 03-0338CON. St. Joseph's Hospital North operates under the same license and under common management. St. Joseph's Hospital, Inc., is also the holder of CON No. 9833 for the establishment of a 90-bed state-of-the-art satellite hospital on Big Bend Road, Riverview, Hillsborough County. These all private beds include general medical-surgical beds, an ICU, and a 10-bed obstetrical unit. On October 21, 2009, the Agency revised CON No. 9833 with a termination date of October 21, 2012. This project was unsuccessfully opposed by TG, SB, and Brandon. St. Joseph's Hosp., Inc. v. Agency for Health Care Admin., Case No. 05-2754CON, supra. St. Joseph's Hospital anticipates construction beginning in October 2012 and opening the satellite hospital, to be known as St. Joseph's Hospital South, in early 2015. This hospital will be operating under SJH's existing license and Medicare and Medicaid provider numbers and will in all respects be an integral component of SJH. The implementation of St. Joseph's Hospital South is underway. SJH has contracted with consultants, engineers, architects, and contractors and has funded the first phase of the project with $6 million, a portion of which has been spent. The application for CON No. 9833 refers to "evidence- based design" and the construction of a state-of-the-art facility. (The design of St. Joseph's Hospital North also uses "evidence-based design.") St. Joseph's Hospital South will have all private rooms, general surgery operating rooms as well as endoscopy, and a 10-bed obstetrics unit. Although CON No. 9833 is for a project involving 228,810 square feet of new construction, SJH intends to build a much larger facility, approximately 400,000 square feet on approximately 70 acres. St. Joseph's Hospital Main's physical plant is 43 years old. The majority of the patient rooms are semi–private and about 35% of patients admitted at this hospital received private rooms. Notwithstanding the age of its physical plant and its semi–private bed configuration, SJH has a reputation of providing high quality of care and is a strong competitor in its market. St. Joseph's Hospital, Inc., has two facility expansions currently in progress at its main location in Tampa: a new five-story building that will house SJH neonatal intensive care unit, obstetrical, and gynecology services; and a separate, two-story addition with 52 private patient rooms. Of the 52 private patient rooms, 26 will be dedicated to patients recovering from orthopedic surgery, and will be large enough to allow physical therapy to be done in the patient room itself. The other 26 rooms will be new medical-surgical ICU beds at the hospital. At the same time that SJH expands its main location, it is pursuing a strategic plan whereby the main location is the "hub" of its system, with community hospitals and health facilities located in outlying communities. As proposed in CON Application No. 9610, St. Joseph's Hospital North was to be 240,000 square feet in size. Following the award of CON No. 9610, SJH requested that AHCA modify the CON to provide for construction of a larger facility. In its modification request, SJH requested to establish a large, state- of-the-art facility with all private patient rooms, and the desirability of private patient rooms as a matter of infection control and patient preference. AHCA granted the modification. St. Joseph's Hospital, Inc., thereafter planned to construct St. Joseph's Hospital North to be four stories in height. The plan was opposed. St. Joseph's Hospital, Inc., offered to construct a three-story building, large enough horizontally to accommodate the CON square footage modification. The offer was accepted. St. Joseph's Hospital, Inc., markets St. Joseph's Hospital North as "The Hospital of the Future, Today." The hospital was constructed using "evidence-based design" to maximize operational efficiencies and enhance the healing process of its residents –- recognizing, among other things, the role of the patient's family and friends. The facility's patient care units are all state-of-the-art and include, for example, obstetrical suites in which a visiting family member can spend the night. A spacious, sunlit atrium and a "healing garden" are also provided. The hospital's dining facility is frequented by community residents. In addition, SJH owns a physician group practice under HealthPoint Medical Group, a subsidiary of St. Joseph's Health Care Center, Inc. The group practice has approximately 19 different office locations, including several within the service area for the proposed hospital. The group includes approximately 106 physicians. However, most of the office locations are in Tampa, and the group does not have an office in Riverview, although there are plans to expand locations to include the Big Bend Road site. St. Joseph's Hospital, Inc., anticipates having to establish a new medical staff for St. Joseph's Hospital South, and will build a medical office building at the site for the purpose of attracting physicians. It further anticipates that some number of physicians on SB's existing medical staff will apply for privileges at St. Joseph's Hospital South. St. Joseph's Hospital, Inc., is the market leader among Hillsborough County hospitals and is currently doing well financially, as it has historically. For 2010, St. Joseph's Hospital Main's operating income was approximately $78 million. Organizationally, SJH has a parent organization, St. Joseph's Health Care Center, Inc., and is one of eight hospitals in the greater Tampa Bay area affiliated with BayCare. On behalf of its member hospitals, BayCare arranges financing for capital projects, provides support for various administrative functions, and negotiates managed care contracts that cover its members as a group. St. Joseph's Hospital characterizes fees paid for BayCare services as an allocation of expenses rather than a management fee for its services. In 2009, SJH paid BayCare approximately $42 million for services. St. Joseph's Hospital is one of three BayCare affiliates in Hillsborough County. The other two are St. Joseph's Hospital North and South Florida Baptist Hospital, a community hospital in Plant City. St. Joseph's Hospital South would be the fourth BayCare hospital in the county. Tampa General The Hillsborough County Hospital Authority, a public body appointed by the county, operated Tampa General Hospital until 1997. In that year, TG was leased to Florida Health Sciences Center, Inc., a non-profit corporation and the current hospital licensee. Tampa General is a 1,018-bed acute care hospital located at 2 Columbia Drive, Davis Island, Tampa, Florida. In addition to trauma surgery services, TG provides tertiary services, such as angioplasty, open-heart surgery, and organ transplantation. Tampa General operates the only burn center in the area. A rehabilitation hospital is connected to the main hospital, but there are plans to relocate this facility. Tampa General owns a medical office building. Tampa General is JCAHO accredited and has received numerous honors. Tampa General provides high-quality of care. Approximately half of the beds at TG are private rooms. Tampa General's service area for non-tertiary services includes all of Hillsborough County. Tampa General is also the teaching hospital for the University of South Florida's College of Medicine. As a statutory teaching hospital, TG has 550 residents and funds over 300 postgraduate physicians in training. Tampa General is the predominant provider of services to Medicaid recipients and the medically indigent of Hillsborough County. It is considered the only safety-net hospital in Hillsborough County. (A safety net hospital provides a disproportionate amount of care to indigent and underinsured patients in comparison to other hospitals.) A high volume of indigent (Medicaid and charity) patients are discharged from TG. In 2009, the costs TG incurred treating indigent patients exceeded reimbursement by $56.5 million. Approximately 33% of Tampa General's patients are Medicare patients and 25% commercial. Tampa General has grown in the past 10 years. It added 31 licensed acute care beds in 2004 and 82 more since SB's application was filed in 2007. In addition, the Bayshore Pavilion, a $300-million project, was recently completed. The project enlarged TG's ED, and added a new cardiovascular unit, a new neurosciences and trauma center, a new OB-GYN floor, and a new gastrointestinal unit. Facility improvements are generally ongoing. Tampa General's capital budget for 2011 is approximately $100 million. In 2010, TG's operating margin was approximately $43 million and a small operating margin in 2011. AHCA AHCA is the state agency that administers the CON law. Jeff Gregg testified that during his tenure, AHCA has never preliminarily denied a replacement hospital CON application or required consideration of alternatives to a replacement hospital. Mr. Gregg opined that the lack of alternatives or options is a relevant consideration when reviewing a replacement hospital CON application. T 468. The Agency's State Agency Action Report (SAAR) provides reasons for preliminarily approving SB's CON application. During the hearing, Mr. Gregg testified, in part, that the primary reasons for preliminary approval were issues related to quality of care "because the facility represents itself as being unable to expand or adapt significantly to the rapidly changing world of acute care. This is consistent with what [he has] heard about other replacement hospitals." T 413. Mr. Gregg also noted that SB focused on improving access "[a]nd as the years go by, it is reasonable to expect that the population outside of Sun City Center, the immediate Sun City Center area, will steadily increase and improve access for more people, and that's particularly true because this application includes both a freestanding emergency department and a shuttle service for the people in the immediate area. And that was intended to address their concerns based upon the fact that they have had this facility very conveniently located for them in the past at a time when there was little development in the general south Hillsborough area. But the applicant wants to position itself for the expected growth in the future, and we think has made an excellent effort to accommodate the immediate interests of Sun City Center residents with their promises to do the emergency, freestanding emergency department and the shuttle service so that the people will continue to have very comfortable access to the hospital." T 413-14. Mr. Gregg reiterated "that the improvements in quality outweigh any concerns that [the Agency] should have about the replacement and relocation of this facility; that if this facility were to be forced to remain where it is, over time it would be reasonable to expect that quality would diminish." T 435. For AHCA, replacement hospital applications receive the same level of scrutiny as any other acute care hospital applications. T 439-40. South Bay's existing facility and site South Bay is located on the north side of SR 674, an east-west thoroughfare in south Hillsborough County. The area around the hospital is "built out" with predominantly residential development. Sun City Center, an age-restricted (55 and older) retirement community, is located directly across SR 674 from the hospital as well as on the north side of SR 674 to the east of the hospital. Other residential development is immediately to the west of the hospital on the north side of SR 674. See FOF 3-6. Sun City Center is flanked by two north-south arterial roadways, I-75 to the west and U.S. Highway 301 to the east, both of which intersect with SR 674. The community of Ruskin is situated generally around the intersection of SR 674 and U.S. 41, west of I-75. The community of Wimauma is situated along SR 674 just east of U.S. Highway 301. South Bay is located in a three-story building that is well–maintained and in relatively good repair. The facility is well laid out in terms of design as a community hospital. Patients and staff at SB are satisfied with the quality of care and scope of acute care services provided at the hospital. Notwithstanding current space limitations, and problems in the ICU, see FOF 77-82, patients receive a high quality of care. One of the stated reasons for replacement is with respect to SB's request to have all private patient rooms in order to be more competitive with St. Joseph's Hospital South. South Bay's inpatient rooms are located within the original construction. The hospital is approximately 115,800 square feet, or a little over 1,000 square feet per inpatient bed. By comparison, small to mid-sized community hospitals built today are commonly 2,400 square feet per inpatient bed on average. All of SB's patient care units are undersized by today's standards, with the exception of the ED. ICU patients, often not ambulatory, require a higher level of care than other hospital patients. The ICU at SB is not adequate to meet the level of care required by the ICU patient. SB's ICU comprises eight rooms with one bed apiece. Eight beds are not enough. As Dr. Ksaibati put it at hearing: "Right now we have eight and we are always short . . . double . . . the number of beds, that's at least [the] minimum [t]hat I expect we are going to have if we go to a new facility." T 198-99 (emphasis added). The shortage of beds is not the only problem. The size of SB's ICU rooms is too small. (Problems with the ICU have existed at least since 2006.) Inadequate size prohibits separate, adjoining bathrooms. For patients able to leave their beds, therefore, portable bathroom equipment in the ICU room is required. Inadequate size, the presence of furniture, and the presence of equipment in the ICU room creates serious quality of care issues. When an EKG is conducted, the nurse cannot be present in the room. Otherwise, there would be no space for the EKG equipment. It is difficult to intubate a patient and, at times, "extremely dangerous." T 170. A major concern is when a life-threatening problem occurs that requires emergency treatment at the ICU patient's bedside. For example, when a cardiac arrest "code" is called, furniture and the portable bathroom equipment must be removed before emergency cardiac staff and equipment necessary to restore the function of the patient's heart can reach the patient for the commencement of treatment. Comparison to ICU rooms at other facilities underscores the inadequate size of SB's ICU rooms. Many of the ICU rooms at Brandon are much larger -- more than twice the size of SB's ICU rooms. Support spaces are inadequate in most areas, resulting in corridors (at times) being used for inappropriate storage. In addition, the hospital's general storage is inadequate, resulting in movable equipment being stored in mechanical and electrical rooms. Of the medical-surgical beds at SB, 48 are private and 64 are semi-private. The current standard in hospital design is for acute care hospitals to have private rooms exclusively. Private patient rooms are superior to semi-private rooms for infection control and patient well-being in general. The patient is spared the disruption and occasional unpleasantness that accompanies sharing a patient room –- for example, another patient's persistent cough or inability to use the toilet (many of SB's semi-private rooms have bedside commodes). Private rooms are generally recognized as promoting quality of care. South Bay's site is approximately 17.5 acres, bordered on all sides by parcels not owned by either SB or by HCA- affiliated entities. The facility is set back from SR 674 by a visitor parking lot. Proceeding clockwise around the facility from the visitor parking lot, there is a small service road on the western edge of the site; two large, adjacent ponds for stormwater retention; the rear parking lot for ED visitors and patients; and another small service road which connects the east side of the site to SR 674, and which is used by ambulances to access the ED. Dedicated parking for SB's employees is absent. A medical office building (MOB), which is not owned by SB, is located to the north of the ED parking lot. The MOB houses SB's Human Resources Department as well as medical offices. Most of SB's specialty physicians have either full or part-time offices in close proximity to SB. Employee parking is not available in the MOB parking lot. Some of SB's employees park in a hospital-owned parking lot to the north of the MOB, and then walk around the MOB to enter the hospital. South Bay's CEO and management employees park on a strip of a gravel lot, which is rented from the Methodist church to the northeast of the hospital's site. In 2007, as part of the CON application to relocate, SB commissioned a site and facility assessment (SFA) of the hospital. The SFA was prepared for the purpose of supporting SB's replacement hospital application and has not been updated since its preparation in 2007. The architects or engineers who prepared the SFA were not asked to evaluate proposed options for expansion or upgrade of SB on-site. However, the SFA concludes that the SB site has been built out to its maximum capacity. On the other hand, the SFA concluded that the existing building systems at SB met codes and standards in force when constructed and are in adequate condition and have the capacity to meet the current needs of the hospital. The report also stated that if SB wanted to substantially expand its physical plant to accommodate future growth, upgrades to some of the existing building systems likely would be required. Notwithstanding these reports and relative costs, expansion of SB at its existing site is not realistic or cost- effective as compared to a replacement hospital. Vertical expansion is complicated by two factors. First, the hospital's original construction in 1982 was done under the former Southern Standard Building Code, which did not contain the "wind-loading" requirements of the present-day Florida Building Code. Any vertical expansion of SB would not only require the new construction to meet current wind-loading requirements, but would also require the original construction to be retrofitted to meet current wind-loading requirements (assuming this was even possible as a structural matter). Second, if vertical expansion were to meet current standards for hospital square footage, the new floor or floors would "overhang" the smaller existing construction, complicating utility connections from the lower floor as well as the placement of structural columns to support the additional load. The alternative (assuming feasibility due to current wind-loading requirements) would be to vertically stack patient care units identical to SB's existing patient care units, thereby perpetuating its undersized and outdated design. Vertical expansion at SB has not been proposed by the Gould Turner Group (Gould Turner), which did a Master Facility Plan for SB in May 2010, but included a new patient bed tower, or by HBE Corporation (HBE). Horizontal expansion of SB is no less complicated. The hospital would more than double in size to meet the modern-day standard of 2,400 square feet per bed, and its site is too small for such expansion. It is apparent that such expansion would displace the visitor parking lot if located to the south of the existing building, and likely have to extend into SR 674 itself. South Bay's architectural consultant expert witness substantiated that replacing SB is justified as an architectural matter, and that the facility cannot be brought up to present-day standards at its existing location. According to Mr. Siconolfi, the overall building at SB is approximately half of the total size that would normally be in place for a new hospital meeting modern codes and industry standards. The more modest expansions offered by Gould Turner and HBE are still problematic, if feasible at all. Moreover, with either proposal, SB would ultimately remain on its existing 17.5-acre site, with few opportunities to expand further. Gould Turner's study was requested by SB's CEO in May 2010, to determine whether and to what extent SB would be able to expand on-site. (Gould Turner was involved with SB's recent ED expansion project area.) The resulting Master Facility Plan essentially proposes building a new patient tower in SB's existing visitor parking lot, to the left and right of the existing main entrance to SB. This would require construction of a new visitor parking lot in whatever space remained in between the new construction and SR 674. The Master Facility Plan contains no discussion of the new impervious area that would be added to the site and the consequential requirement of additional stormwater capacity, assuming the site can even accommodate additional stormwater capacity. This study also included a new 12-bed ICU and the existing ICU would be renovated into private patient rooms. For example, "[t]he second floor would be all telemetry beds while the third floor would be a combination of medical/surgical, PCU, and telemetry beds." In Gould Turner's drawings, the construction itself would be to the left and to the right of the hospital's existing main entrance. Two scenarios are proposed: in the first, the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 114 licensed beds (including two new beds), all private; in the second, some of the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 146 licensed beds (adding 34 beds), of which 32 would be semi-private. South Bay did not consider Gould Turner's alternative further or request additional, more detailed drawings or analysis, and instead determined to pursue the replacement hospital project, in part, because it was better not to "piecemeal" the hospital together. Mr. Miller, who is responsible for strategic decisions regarding SB, was aware of, but did not review the Master Facility Plan and believes that it is not economically feasible to expand the hospital. St. Joseph's Hospital presented testimony of an architect representing the hospital design/build firm of HBE, to evaluate SB's current condition, to provide options for expansion and upgrading on-site, and to provide a professional cost estimate for the expansion. Mr. Oliver personally inspected SB's site and facility in October 2010 and reviewed numerous reports regarding the facility and other documents. Mr. Oliver performed an analysis of SB's existing physical plant and land surrounding the hospital. HBE's analysis concluded that SB has the option to expand and upgrade on-site, including the construction of a modern surgical suite, a modern 10-bed ICU, additional elevators, and expansion and upgrading of the ancillary support spaces identified by SB as less than ideal. HBE's proposal involves the addition of 50,000 square feet of space to the hospital through the construction of a three-story patient tower at the south side of the hospital. The additional square footage included in the HBE proposal would allow the hospital to convert to an all-private bed configuration with either 126 private beds by building out both second and third floors of a new patient tower, or to 126 private beds if the hospital chose to "shell in" the third floor for future expansion. Under the HBE proposal, SB would have the option to increase its licensed bed capacity 158 beds by completing the second and third floors of the new patient tower (all private rooms) while maintaining the mix of semi-private and private patient rooms in the existing bed tower. The HBE proposal also provides for a phased renovation of the interior of SB to allow for an expanded post-anesthesia care unit, expanded laboratory, pharmacy, endoscopy, women's center, prep/hold/recovery areas, central sterile supply and distribution, expanded dining, and a new covered lobby entrance to the left side of the hospital. Phasing of the expansion would permit the hospital to remain in operation during expansion and renovation with minimal disruption. During construction the north entrance of the hospital would provide access through the waiting rooms that are currently part of the 2001 renovated area of the hospital with direct access to the circulation patterns of the hospital. The HBE proposal also provides for the addition of parking to bring the number of parking spaces on-site to 400. The HBE proposal includes additional stormwater retention/detention areas that could serve as attractive water features and, similar to the earlier civil engineering reports obtained by SB, proposes the construction of a parking garage at the rear of the facility should additional parking be needed in the future. However, HBE essentially proposes the alternative already rejected by SB: construction of a new patient tower in front of the existing hospital. Similar to Gould Turner, HBE proposes new construction to the left and right of the hospital's existing lobby entrance and the other changes described above. HBE's proposal recognizes the need for additional stormwater retention: the stand of trees that sets off the existing visitor parking lot from SR 674 would be uprooted; in their place, a retention pond would be constructed. Approval of the Southwest Florida Water Management District (SWFWMD) would be required for the proposal to be feasible. Assuming the SWFWMD approved the proposal, the retention pond would have to be enclosed by a fence. This would then be the "face" of the hospital to the public on SR 674. HBE's proposal poses significant problems. The first floor of the three-story component would be flush against the exterior wall of the hospital's administrative offices, where the CEO and others currently have windows with a vista of the front parking lot and SR 674. Since the three-story component would be constructed first in the "phased" construction, and since the hospital's administration has no other place to work in the existing facility, the CEO and other management team would have to work off-site until the new administrative offices (to the left of the existing hospital lobby entrance) were constructed. The existing main entrance to the hospital, which faces SR 674, would be relocated to the west side of the hospital once construction was completed in its entirety. In the interim, patients and visitors would have to enter the facility from the rear, as the existing main entrance would be inaccessible. This would be for a period of months, if not longer. For the second and third floors, HBE's proposal poses two scenarios. Under the first, SB would build the 24 general medical-surgical beds on the tower's second floor, but leave the third floor as "shelled" space. This would leave SB with a total of 106 licensed beds, six fewer than it has at present. Further, since HBE's proposal involves a second ICU at SB, 18 of the 106 beds are ICU beds, leaving 88 general medical-surgical beds. By comparison, SB currently has 104 general medical- surgical beds, meaning that it loses 16 general medical-surgical beds under HBE's first scenario. In the second scenario, SB would build 24 general medical-surgical beds on the third floor as well, and would have a total of 126 licensed beds. Since 18 of those beds would be ICU beds, SB would have 108 general medical-surgical beds, or only four more than it has at present. Further, the proposal does not make SB appreciably bigger. The second and third floors in HBE's proposal are designed in "elongated" fashion such that several rooms may be obscured from the nursing station's line of sight by a new elevator, which is undesirable as a matter of patient safety and security. Further, construction of the second and third floors would be against the existing second and third floors above the lobby entrance's east side. This would require 12 existing private patient rooms to be taken out of service due to loss of their vista windows. At the same time, the new second and third floors would be parallel to, but set back from, existing semi- private patient rooms and their vista windows along the southeast side of the hospital. This means that patients and visitors in the existing semi-private patient rooms and patients and visitors in the new private patient rooms on the north side of the new construction may be looking into each other's rooms. HBE's proposal also involves reorganization and renovation of SB's existing facility, and the demolition and disruption that goes with it. To accommodate patient circulation within the existing facility from the ED (at the north side of the hospital) to the new patient tower (at the south side of the hospital), two new corridors are proposed to be routed through and displace the existing departments of Data Processing and Medical Records. Thus, until the new administrative office space would be constructed, Data Processing and Medical Records (along with the management team) would have to be relocated off-site. Once the new first floor of the three-story component is completed, the hospital's four ORs and six PACU beds will be relocated there. In the existing vacated surgical space, HBE proposes to relocate SB's existing cardiology unit, thus requiring the vacated surgical space to be completely reconfigured (building a nursing station and support spaces that do not currently exist in that location). In the space vacated by the existing cardiology unit, HBE proposed expanding the hospital's clinical laboratory, meaning extensive demolition and reconfiguration in that area. The pharmacy is proposed to be relocated to where the existing PACU is located, requiring the building of a new pharmacy with a secure area for controlled substances, cabinets for other medications, and the like. The vacated existing pharmacy is in turn proposed to be dedicated to general storage, which involves still more construction and demolition, tearing out the old pharmacy to make the space suitable for general storage. HBE's proposal is described as a "substantial upgrade" of SB, but it was stated that a substantial upgrade could likewise be achieved by replacing the facility outright. This is SB's preference, which is not unreasonable. There have been documented problems with other hospital expansions, including patient infection due to construction dust. South Bay's proposal South Bay proposes to establish a 112-bed replacement hospital on a 39-acre parcel (acquired in 2005) located in the Riverview community, on the north side of Big Bend Road between I-75 and U.S. Highway 301. The hospital is designed to include 32 observation beds built to acute care occupancy standards, to be available for conversion to licensed acute care beds should the need arise. The original total project cost of $215,641,934, calculated when the application was filed in October 2007 has been revised to $192,967,399. The decrease in total project cost is largely due to the decrease in construction costs since 2007. The parties stipulated that SB's estimated construction costs are reasonable. The remainder of the project budget is likewise reasonable. The budgeted number for land, $9,400,000, is more than SB needs: the 39-acre parcel is held in its behalf by HCA Services of Florida, Inc., and was acquired in March 2005 for $7,823,100. An environmental study has been done, and the site has no environmental development issues. The original site preparation budgeted number of $5 million has been increased to $7 million to allow for possible impact fees, based on HCA's experience with similar projects. Building costs, other than construction cost, flow from the construction cost number as a matter of percentages and are reasonable. The equipment costs are reasonable. Construction period interest as revised from the original project budget is approximately $4 million less, commensurate with the revised project cost. Other smaller numbers in the budget, such as contingencies and start-up costs, were calculated in the usual and accepted manner for estimated project costs and are reasonable. South Bay's proposed service area (PSA) comprises six zip codes (33573 (Sun City Center), 33570 (Ruskin), 33569 (Riverview), 33598 (Wimauma), 33572 (Apollo Beach), and 33534 (Gibsonton)) in South Hillsborough County. These six zip codes accounted for 92.2% of SB's discharges in 2006. The first three zip codes, which include Riverview (33569), accounted for 76.1% of the discharges. Following the filing of the application in 2007, the U.S. Postal Service subdivided the former zip code 33569 into three zip codes: 33569, 33578, and 33579. (The proposed service area consists of eight zip codes.) The same geographic area comprises the three Riverview zip codes taken together as the former zip code 33569. In 2009, the three Riverview zip codes combined accounted for approximately 504 to 511/514 of SB's discharges, with 589 discharges in 2006 from the zip code 33569. Of SB's total discharges in 2009, approximately 8 to 9% originated from these three zip codes. In 2009, approximately 7,398 out of 14,424 market/service-area discharges, or approximately 51% of the total market discharges came from the three southern zip codes, 33573 (Sun City Center), 33570 (Ruskin), and 33598 (Wimauma). Also, approximately 81% of SB's discharges in 2009 originated from the same three zip codes. (The discharge numbers for SB for 2009 presented by St. Joseph's Hospital and SB are similar. See SB Ex. 9 at 11 and SJH Ex. 4 at 8-9. See also TG Ex. 4 at 3-4.) In 2009, SB and Brandon had an approximate 68% market share for the eight zip codes. See FOF 152-54 and 162-65 for additional demographic data. St. Joseph's Hospital had an approximate 5% market share within the service area and using 2009-2010 data, TG had approximately 6% market share in zip code 33573 and an overall market share in the three Riverview zip codes of approximately 19% and a market share of approximately 23% in zip code 33579. South Bay's application projects 37,292 patient days in year 1; 39,581 patient days in year 2; and 41,563 patient days in year 3 for the proposed replacement hospital. The projection was based on the January 2007 population for the service area as reflected in the application, and what was then a projected population growth rate of 20.8% for the five-year period 2007 to 2012. These projections were updated for the purposes of hearing. See FOF 246-7. The application also noted a downturn in the housing market, which began in 2007 and has continued since then. The application projected a five-year (2007-2012) change of 20.8% for the original five zip codes. At hearing, SB introduced updated utilization projections for 2010-2015, which show the service area population growing at 15.3% for that five-year period. South Bay's revised utilization projections for 2015- 2017 (projected years 1-3 of the replacement hospital) are 28,168 patient days in year 1; 28,569 patient days in year 2; and 29,582 patient days in year 3. The lesser utilization as compared with SB's original projections is partly due to slowed population growth, but predominantly due to SB's assumption that St. Joseph's Hospital will build its proposed satellite hospital in Riverview, and that SB will accordingly lose 20% of its market share. The revised utilization projections are conservative, reasonable, and achievable. With the relocation, SB will be more proximate to the entirety of its service area, and will be toward the center of population growth in south Hillsborough County. In addition, it will have a more viable and more sustainable hospital operation even with the reduced market share. Its financial projections reflect a better payor mix and profitability in the proposed location despite the projection of fewer patient days. Conversely, if SB remains in Sun City Center, it is subject to material operating losses even if its lost market share in that location is the same 20%, as compared to the 30 to 40% it estimates that it would lose in competition with St. Joseph's Hospital South. South Bay's medical staff and employees support the replacement facility, notwithstanding that their satisfaction with SB is very high. The proposal is also supported by various business organizations, including the Riverview Chamber of Commerce and Ruskin Chamber of Commerce. However, many of the residents of Sun City Center who testified opposed relocation of SB. See FOF 210-11. South Bay will accept several preconditions on approval of its CON application: (1) the location of SB on Big Bend Road in Riverview; (2) combined Medicaid and charity care equal to 7.0% of gross revenues; and (3) operating a free- standing ED at the Sun City location and providing a shuttle service between the Sun City location and the new hospital campus ("for patients and visitors"). SB Ex. 46, Schedule C. In its SAAR, the Agency preliminarily approved the application including the following: This approval includes, as a component of the proposal: the operation of a freestanding emergency department on a 24-hour, seven-day per week basis at the current Sun City location, the provision of extended hours shuttle service between the existing Sun City Center and the new campuses to transport patients and visitors between the facilities to locations; and the offering of primary care and diagnostic testing at the Sun City Center location. These components are required services to be provided by the replacement hospital as approved by the Agency. Mr. Gregg explained that the requirement for transport of patients and visitors was included based on his understanding of the concerns of the Sun City Center community for emergency as well as routine access to hospital services. Notwithstanding the Agency statement that the foregoing elements are required, the Agency did not condition approval on the described elements. See SB Ex. 12 at 39 and 67. Instead, the Agency only required SB, as a condition of approval, to provide a minimum of 7.0% of the hospital's patient days to Medicaid and charity care patients. (As noted above, SB's proposed condition says 7.0% of gross revenues.) Because conditions on approval of the CON are generally subject to modification, there would be no legal mechanism for monitoring or enforcement of the aspects of the project not made a condition of approval. If the Agency approves SB's CON application, the Agency should condition any approval based on the conditions referenced above, which SB set forth in its CON application. SB Ex. 12 at 39 and 67. See also T 450 ("[The Agency] can take any statement made in the application and turn that into a condition," although conditions may be modified.1 St. Joseph's Hospital and Tampa General are critical of SB's offer of a freestanding ED and proposed shuttle transportation services. Other than agreeing to condition its CON application by offering these services, SB has not evaluated the manner in which these services would be offered. South Bay envisions that the shuttle service (provided without charge) would be more for visitors than it would be for patients and for outpatients or patients that are ambulatory and able to ride by shuttle. Other patients would be expected to be transported by EMS or other medical transport. As of the date of hearing, Hillsborough County does not have a protocol to address the transport of patients to a freestanding ED. South Bay contacted Hillsborough County Fire Rescue prior to filing its CON application and was advised that they would support SB's establishment of a satellite hospital on Big Bend Road, but did not support the closure and relocation of SB, even with a freestanding ED left behind. See FOF 195-207. At hearing, SB representatives stated that SB would not be closed if the project is denied. Compliance with applicable statutory and rule criteria Section 408.035(1): The need for the health care facilities and health services being proposed The need for SB itself and at its current location is not an issue in this case. That need was demonstrated years ago, when SB was initially approved. For the Agency, consideration of a replacement hospital application "diminishes the concept of need in [the Agency's] weighing and balancing of criteria in this case." There is no express language in the CON law, as amended, which indicates that CON review of a replacement hospital application does not require consideration of other statutory review criteria, including "need," unless otherwise stipulated. Replacement hospital applicants, like SB, may advocate the need for replacement rather than expansion or renovation of the existing hospital, but a showing of "need" is still required. Nevertheless, institution-specific factors may be relevant when "need" is considered. The determination of "need" for SB's relocation involves an analysis of whether the relocation of the hospital as proposed will enhance access or quality of care, and whether the relocation may result in changes in the health care delivery system that may adversely impact the community, as well as options SB may have for expansion or upgrading on-site. In this case, the overall "need" for the project is resolved, in part, by considering, in conjunction with weighing and balancing other statutory criteria, including quality of care, whether the institution-specific needs of SB to replace the existing hospital are more reasonable than other alternatives, including renovation and whether, if replacement is recommended, the residents of the service area, including the Sun City Center area, will retain reasonable access to general acute care hospital services. The overall need for the project has not been proven. See COL 360-70 for ultimate conclusions of law regarding the need for this project. Section 408.035(2): The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant The "service district" in this case is acute care subdistrict 6-1, Hillsborough County. See Fla. Admin. Code R. 59C-2.100. The acute care hospital services SB proposes to relocate to Big Bend Road are available to residents of SB's service area. Except as otherwise noted herein with respect to constraints at SB, there are no capacity constraints limiting access to acute care hospital services in the subdistrict. The availability of acute care services for residents of the service area, and specifically the Riverview area, will increase with the opening of St. Joseph's Hospital South. All existing providers serving the service area provide high quality of care. Within the service district as a whole, SB proposes to relocate the existing hospital approximately 5.7 linear miles north of its current location and approximately 7.7 miles using I-75, one exit north. South Bay would remain in south Hillsborough County, as well as the southernmost existing health care facility in Hillsborough County, along with St. Joseph's Hospital South when it is constructed. The eight zip codes of SB's proposed service area occupy a large area of south Hillsborough County south of Tampa (to the northwest) and Brandon (to the northeast). Included are the communities of Gibsonton, Riverview, Apollo Beach, Ruskin, Sun City Center, and Wimauma. The service area is still growing despite the housing downturn, with a forecast of 15.3% growth for the five-year period 2010 to 2015. The service area's population is projected to be 168,344 in 2015, increasing from 145,986 in 2010. The service area is currently served primarily by SB, which is the only existing provider in the service area, and Brandon. For non-tertiary, non-specialty discharges from the service area in 2009, SB had approximately 40% market share, including market share in the three Riverview zip codes of approximately 10% (33569), 6% (33578), and 16% (33579). Brandon had approximately 28% of the market in the service area, and a market share in the three Riverview zip codes of approximately 58% (33569), 46% (33578), and 40% (33579). Thus, SB and Brandon have approximately a 61% market share in the Riverview zip codes and approximately a 68% market share service area-wide. The persuasive evidence indicates that Riverview is the center of present and future population in the service area. It is the fastest-growing part of the service area overall and the fastest-growing part of the service area for patients age 65 and over. Of the projected 168,334 residents in 2015, the three Riverview zip codes account for 80,779 or nearly half the total population. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County. At the same time, it will be between seven and eight minutes farther away from Sun City Center. In conjunction with St. Joseph's Hospital South when constructed, SB's proposed relocation will enhance the availability and accessibility of existing health care facilities and health services in south Hillsborough County, especially for the Riverview-area residents. However, it is likely that access will be reduced for the elderly residents of the Sun City Center area needing general acute care hospital services. St. Joseph's Hospital and Tampa General contend that: (1) it would be problematic to locate two hospitals in close proximity in Riverview (those being St. Joseph's Hospital South and the relocated SB hospital) and (2) SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. St. Joseph's Hospital seems to agree that the utilization projections for SB's replacement hospital are reasonable. Also, St. Joseph's Hospital expects St. Joseph's Hospital South to reach its utilization as projected in CON Application No. 9833, notwithstanding the decline in population growth and the proposed establishment of SB's proposed replacement hospital, although the achievement of projected utilization may be extended. There are examples of Florida hospitals operating successfully in close proximity. The evidence at hearing included examples where existing unaffiliated acute care hospitals in Florida operate within three miles of each another; in two of those, the two hospitals are less than one-half mile apart. These hospitals have been in operation for years. However, some or all of the examples preceded CON review. There are also demographic differences and other unique factors in the service areas in the five examples that could explain the close proximity of the hospitals. Also, in three of the five examples, at least one of the hospitals had an operating loss and most appeared underutilized. One such example, however, is pertinent in this case: Tallahassee Memorial Hospital and Capital Regional Medical Center (CRMC) in Tallahassee, which are approximately six minutes apart by car. CRMC was formerly Tallahassee Community Hospital (TCH), a struggling, older facility with a majority of semi-private patient rooms, similar to South Bay. Sharon Roush, SB's current CEO, became CEO at TCH in 1999. As she explained at hearing, HCA was able to successfully replace the facility outright on the same parcel of land. TCH was renamed CRMC and re-opened as a state-of-the-art hospital facility with all private rooms. The transformation improved the hospital's quality of care and its attractiveness to patients, better enabling it to compete with Tallahassee Memorial Hospital. St. Joseph's Hospital and Tampa General also contend that SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. When the application was filed in 2007, Sun City Center residents in zip code 33573 accounted for approximately 52% of all acute care discharges to SB and SB had a 69% market share. By 2009, Sun City Center residents accounted for approximately 57% of all SB discharges and SB had approximately 72% market share. Approximately half of the age 65-plus residents in the service area reside within the Sun City Center area. This was true in 2010 and will continue to be true in 2015. The projected percentage of the total population in the Sun City Center zip code over 65 for 2009-2010 is approximately 87%. This percentage is expected to grow to approximately 91% by 2015. Sun City Center also has a high percentage of residents who are over the age of 75. Demand for acute care hospital services is largely driven by the age of the population. The age 65-plus population utilizes acute-care hospital services at a rate that is approximately two to three times that of the age 64 and younger population. South Bay plans to relocate its hospital from the Sun City Center zip code 33573 much closer to an area (Riverview covering three zip codes) that has a less elderly population. Elderly patients are known to have more transportation difficulties than other segments of the population, particularly with respect to night driving and congested traffic in busy areas. Appropriate transportation services for individuals who are transportation disadvantaged typically require door-to- door pickup, but may vary from community to community. At the time of preliminary approval of SB's proposed relocation, the Agency was not provided and did not take into consideration data reflecting the percentage of persons in Sun City Center area who are aged 65 or older or aged 75 and older. The Agency was not provided data reflecting the number of residents within the Sun City Center area who reside in nursing homes or assisted living facilities. In general, the 2010 median household incomes and median home values for the residents of Sun City Center, Ruskin, and Gibsonton are materially less than the income and home values for the residents from the other service areas. Freedom Village is located near Sun City Center and within walking distance to SB. Freedom Village is comprises a nursing home, assisted living, and senior independent living facilities, and includes approximately 120 skilled nursing facility beds, 90 assisted living beds, and 30 Alzheimer's beds. Freedom Village is home to approximately 1,500 people. There are additional skilled nursing and assisted living facilities within one to two miles of SB comprising approximately an additional 400 to 500 skilled nursing facility beds and approximately 1,500 to 2,000 residents in assistant or independent living facilities. Residents in skilled nursing facilities and assisted living facilities generally require a substantial level of acute- care services on an ongoing basis. Many patients 65 and older requiring admission to an acute-care facility have complex medical conditions and co-morbidities such that immediate access to inpatient acute care services is of prime importance. Area patients and caregivers travel to SB via a golf cart to access outpatient health care services and to obtain post-discharge follow-up care. Although there are some crossing points along SR 674, golf carts are not allowed on SR 674 itself, and the majority of Sun City Center residents who utilize SB in its existing location do not arrive by golf cart -– rather, they travel by automobile. The Sun City Center area has a long–established culture of volunteerism. Residents of Sun City Center provide a substantial number of man-hours of volunteer services to community organizations, including SB. Among the many services provided by community volunteers is the Sun City Center Emergency Squad, an emergency medical transport service that operates three ambulances and provides EMT and basic life support transport services in Sun City Center 24-hours a day, seven days a week. The Emergency Squad provides emergency services free of charge, but charges patients for transport which is deemed a non-emergency. Most patients transported by the Emergency Squad are taken to the SB ED. It is customary for specialists to locate their offices adjacent to an acute-care hospital. Most of the specialty physicians on the medical staff of SB have full-time or part-time offices adjacent to SB. The location of physician offices adjacent to the hospital facilitates access to care by patients in the provision of care on a timely basis by physicians. The relocation of SB may result in the relocation of physician offices currently operating adjacent to SB in Sun City Center, which may cause additional access problems for local residents. In 2009, the SB ED had approximately 22,000 patient visits. Approximately 25% of the patients that visit the South Bay ED are admitted for inpatient care. South Bay recently expanded its ED to accommodate approximately 34,000 patient visits annually. The average age of patients who visit the South Bay ED is approximately 70. Patients who travel by ambulance may or may not experience undue transportation difficulties as a result of the proposed relocation of SB; however, patients also arrive at the South Bay ED by private transportation. But, most patients are transported to the ED by automobile or emergency transport. In October 2010, the Board of Directors of the Sun City Center Association adopted a resolution on behalf of its 11,000 members opposing the closure of SB. The Board of Directors and membership of Federation of Kings Point passed a similar resolution on behalf of its members. Residents of the Sun City Center area currently enjoy easy access to SB in part because the roadways are low-volume, low-speed, accessible residential streets. SR 674 is the only east-west roadway connecting residents of the Sun City Center area to I-75 and U.S. Highway 301. The section of SR 674 between I-75 and U.S. Highway 301 is a four-lane divided roadway with a speed limit of 40-45 mph. To access Big Bend Road from the Sun City Center area, residents travel east on SR 674 then north on U.S. Highway 301 or west on SR 674 then north on I-75. U.S. Highway 301 is a two-lane undivided roadway from SR 674 north to Balm Road, with a speed limit of 55 mph and a number of driveways and intersections accessing the roadway. (Two lanes from Balm Road South, then widened to six lanes from Balm Road North.) U.S. Highway 301 is a busy and congested roadway, and there is a significant backup of traffic turning left from U.S. Highway 301 onto Big Bend Road. A portion of U.S. Highway 301 is being widened to six lanes, from Balm Road to Big Bend Road. The widening of this portion of U.S. Highway 301 is not likely to alleviate the backup of traffic at Big Bend Road. I-75 is the only other north-south alternative for residents of the Sun City Center area seeking access to Big Bend Road. I-75 is a busy four-lane interstate with a 70 mph speed limit. The exchange on I-75 and Big Bend Road is problematic not only because of traffic volume, but also because of the unusual design of the interchange, which offloads all traffic on the south side of Big Bend Road, rather than divide traffic to the north and south as is typically done in freeway design. The design of the interchange at I-75 in Big Bend Road creates additional backup and delays for traffic seeking to exit onto Big Bend Road. St. Joseph's Hospital commissioned a travel (drive) time study that compared travel times to SB's existing location and to its proposed location from three intersections within Sun City Center. This showed an increase of between seven and eight minutes' average travel time to get to the proposed location as compared to the existing location of SB. The study corroborated SB's travel time analysis, included in its CON application, which shows four minutes to get to SB from the "centroid" of zip code 33573 (Sun City Center) and 11 minutes to get to SB's proposed location from that centroid, or a difference of seven minutes. The St. Joseph's Hospital travel time study also sets forth the average travel times from the three Sun City Center intersections to Big Bend Road and Simmons Loop, as follows: Intersection Using I-75 Using U.S. 301 South Pebble Beach Blvd. and Weatherford Drive 12 min. 17 secs. 14 min. 19 secs. Kings Blvd. and Manchester Woods Drive 15 min. 44 secs. 20 min. 39 secs. North Pebble Beach Blvd. and Ft. Dusquesna Drive 13 min. 15 secs. 15 min. 41 secs. The average travel time from Wimauma (Center Street and Delia Street) to Big Bend Road and Simmons Loop was 15 minutes and 16 seconds using I-75 and 13 minutes and 52 seconds using U.S. Highway 301, an increase of more than six minutes to the proposed site. The average travel time from Ruskin (7th Street and 4th Avenue SW) to Big Bend Road and Simmons Loop was 15 minutes and 22 seconds using U.S. 41 and 14 minutes and 15 seconds using I-75, an increase of more than five minutes to the proposed site. Currently, the average travel time from Sun City Center to Big Bend Road using U.S. Highway 301 is approximately to 16 minutes. The average travel time to Big Bend Road via I-75 assuming travel with the flow of traffic is approximately 13 minutes. The incremental increase in travel time to the proposed site for SB for residents of the Sun City Center area, assuming travel with the flow of traffic, ranges from nine to 11 minutes. For residents who currently access SB in approximately five to 10 minutes, travel time to Big Bend Road is approximately 15 to 20 minutes. As the area develops, traffic is likely to continue to increase. There are no funded roadway improvements beyond the current widening of U.S. Highway 301 north of Balm Road. Most of the roadways serving Sun City Center, Ruskin, and Wimauma have a county-adopted Level of Service (LOS) of "D." LOS designations range from "A" to "F", with "F" considered gridlock. Currently, Big Bend Road from Simmons Loop Road (the approximate location of SB's propose replacement hospital) to I-75 is at LOS "F" with an average travel speed of less than mph. Based on a conservative analysis of the projected growth in traffic volume, SR 674 east of U.S. Highway 301 is projected to degrade from LOS "C" to "F" by 2015. By 2020, several additional links on SR 674 will have degraded to LOS "F." The LOS of I-75 is expected to drop to "D" in the entirety of Big Bend Road between U.S. Highway 301 and I-75 is projected to degrade to LOS "F" by 2020. The Hillsborough County Fire Rescue Department (Rescue Department) opposes the relocation of SB to Big Bend Road. The Rescue Department supports SB's establishment of a satellite hospital on Big Bend Road, but does not support the closure of SB in Sun City Center. The Rescue Department anticipates that the relocation of SB will result in a reduction in access to emergency services for patients and increased incident response times for the Rescue Department. The Rescue Department would support a freestanding ED should SB relocate. David Travis, formerly (until February 2010) the rescue division chief of the Rescue Department, testified against SB's proposal. The basis of his opposition is his concern that relocating the hospital from Sun City Center to Riverview would tend to increase response times for rescue units operating out of the Sun City Center Fire Station. The term response time refers to the time from dispatch of the rescue unit to its arrival on the scene for a given call. Mr. Travis noted that rescue units responding from the Sun City Center Fire Station would make a longer drive (perhaps seven to eight minutes) to the new location in Riverview to the extent that hospital services are needed, and during the time of transportation would necessarily be unavailable to respond to another call. However, Mr. Travis had not specifically quantified increases in response times for Sun City Center's rescue units in the event that SB relocates. Further, SB is not the sole destination for the Rescue Department's Sun City Center rescue units. While a majority of the patients were transported to SB, out of the total patient transports from the greater Sun City Center area in 2009, approximately one-third went to other hospitals other than SB, including St. Joseph's Hospital, Tampa General, and Brandon. The Rescue Department is the only advanced life support (ALS) ground transport service in the unincorporated areas of Hillsborough County responding to 911 calls. The ALS vehicles provide at least one certified paramedic on the vehicle, cardiac monitors, IV medications, advanced air way equipment, and other services. The Rescue Department has two rescue units in south Hillsborough County - Station 17 in Ruskin and Station 28 in Sun City Center. (Station 22 is in Wimauma, but does not have a rescue unit.) Stations 17 and 28 run the majority of their calls in and around the Sun City Center area, with the majority of transports to the South Bay ED. The Rescue Department had 3,643 transports from the Sun City Center area in 2009, with 54.5% transports to SB. If SB is relocated to Big Bend Road, the rescue units for Stations 17 and 28 are likely to experience longer out-of- service intervals and may not be as readily available for responding to calls in their primary service area. The Rescue Department seeks to place an individual on the scene within approximately seven minutes, 90% of the time (an ALS personnel goal) in the Sun City Center area. Relocation of SB out of Sun City Center may make it difficult for the Rescue Department to meet this response time, notwithstanding the proximity of I-75. A rapid response time is critical to providing quality care. The establishment of a freestanding ED in Sun City Center would not completely alleviate the Rescue Department's concerns, including a subset of patients who may need to be transported to a general acute care facility. There are other licensed emergency medical service providers in Hillsborough County, with at least one basic life support EMS provider in Sun City Center. The shuttle service proposed by SB may not alleviate the transportation difficulties experienced by the patients and caregivers of Sun City Center. Also, SB has not provided a plan for the scope or method of the provisional shuttle services. Six residents of Sun City Center testified against SB's proposed relocation to Riverview, including Ed Barnes, president of the Sun City Center Community Association. Mr. Barnes and two other Sun City Center residents (including Donald Schings, president of the Handicapped Club, Sun City Center) spoke in favor of St. Joseph's Hospital's proposed hospital in Riverview at a public land-use meeting in July 2010, thus demonstrating their willingness to travel to Riverview for hospital services. Mr. Barnes supported St. Joseph's Hospital's proposal for a hospital in Riverview since its inception in 2005, when St. Joseph's Hospital filed CON Application No. 9833 and thought that St. Joseph's Hospital South would serve the Sun City Center area. There are no public transportation services per se available within the Sun City Center area. Volunteer transportation services are provided. In part, the door-to-door services are provided under the auspices of the Samaritan Services, a non-profit organization supported by donations and staffed by Sun City Center volunteers. It is in doubt whether these services would continue if SB is relocated. There is a volunteer emergency squad using a few vehicles that responds to emergency calls within the Sun City Center area, with SB as the most frequent destination. Approval of SB's project will not necessarily enhance financial access to acute care services. The relocation of SB is more likely than not to create some access barriers for low- income residents of the service area. The relocation would also be farther away from communities such as Ruskin and Wimauma as there are no buses or other forms of public transportation available in Ruskin, Sun City Center, or Wimauma. However, it appears that the Sun City Center residents would travel not only to Riverview, but north of Riverview for hospital services following SB's relocation, notwithstanding the fact that Sun City Center residents are transportation- disadvantaged. The Hillsborough County Board of County Commissioners recently amended the Comprehensive Land-Use Plan and adopted the Greater Sun City Center Community Plan, which, in part, lists the retention of an acute care hospital in the Sun City Center area as the highest health care planning priority. For Sun City Center residents who may not want to drive to SB's new location, SB will provide a shuttle bus, which can convey both non-emergency patients and visitors. South Bay has made the provision of the shuttle bus a condition of its CON. As noted herein, the CON's other conditions are the establishment of the replacement hospital at the site in Riverview; combined Medicaid and charity care in the amount of 7.0% of gross revenues; and maintaining a freestanding ED at SB. SB Ex. 46, Schedule C. Section 408.035(3): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care South Bay has a record of providing high quality of care at its existing hospital. It is accredited by JCAHO, and also accredited as a primary stroke center and chest pain center. In the first quarter of 2010, SB scored well on "core measures" used by the Centers for Medicare and Medicaid Services (CMS) as an indicator of the quality of patient safety. South Bay received recognition for its infection control programs and successfully implemented numerous other quality initiatives. Patient satisfaction is high at SB. AHCA's view of the need for a replacement hospital is not limited according to whether or not the existing hospital meets broad quality indicators, such as JCAHO accreditation. Rather, AHCA recognizes the degree to which quality would be improved by the proposed replacement hospital -– and largely on that basis has consistently approved CON applications for replacement hospitals since at least 1991. See FOF 64-66. South Bay would have a greater ability to provide quality of care in its proposed replacement hospital. Private patient rooms are superior in terms of infection control and the patient's general well-being. The conceptual design for the hospital, included in the CON application, is the same evidence- based design that HCA used for Methodist Stone Oak Hospital, an award-winning, state-of-the-art hospital in San Antonio, Texas. Some rooms at SB are small, but SB staff and physicians are able, for the most part, to function appropriately and provide high quality of care notwithstanding. (The ICU is the exception, although it was said that patients receive quality of care in the ICU. See FOF 77-82.) Most of the rooms in the ED "are good size." Some residents are willing to give up a private room in order to have better access of care and the convenience of care to family members at SB's existing facility. By comparison, the alternative suggested by St. Joseph's Hospital does not use evidence-based design and involves gutting and rearranging roughly one-third of SB's existing interior; depends upon erecting a new patient tower that would require parking and stormwater capacity that SB currently does not have; requires SB's administration to relocate off-site during an indeterminate construction period; and involves estimated project costs that its witnesses did not disclose the basis of, claiming that the information was proprietary. South Bay's physicians are likely to apply for privileges at St. Joseph's Hospital South. Moreover, if SB remains at its current site, it is reasonable to expect that some number of those physicians would do less business at SB or leave the medical staff. Many of SB's physicians have their primary medical offices in Brandon, or otherwise north of Sun City Center. Further, many of the specialists at SB are also on staff at Brandon. St. Joseph's Hospital South would be more convenient for those physicians, in addition to having the allure of a new, state-of-the-art hospital. South Bay is struggling with its nursing vacancy rate, which was 12.3% for 2010 at the time of the hearing and had increased from 9.9% in 2009. The jump in nursing vacancies in 2010 substantially returned the hospital to its 2008 rate, which was 12.4%. As with its physicians, SB's nurses generally do not reside in the Sun City Center area giving its age restrictions as a retirement community; instead, they live further north in south Hillsborough County. In October 2007 when the application was filed, SB had approximately 105 employees who lived in Riverview. It is reasonable to expect that SB's nurses will be attracted to St. Joseph's Hospital South, a new, state-of-the-art hospital closer to where they live. Thus, if it is denied the opportunity to replace and relocate its hospital, SB could also expect to lose nursing staff to St. Joseph's Hospital South, increasing its nursing vacancy rate. Section 408.035(4): The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation The parties stipulated that Schedule 2 of SB's CON application was complete and required no proof at hearing. South Bay will not have to recruit nursing or physician staff for its proposed replacement hospital. Its existing medical and nursing staff would not change, and would effectively "travel" with the hospital to its new location. Conversely, the replacement hospital should enhance SB's ability to recruit specialty physicians, which is currently a challenge for SB in its existing facility. The parties stipulated to the reasonableness of SB's proposed staffing for the replacement hospital as set out in Schedule 6A, but SJH and TG contend that the staffing schedule should also include full-time equivalent positions (FTEs) for the freestanding ED that SB proposes to maintain at its existing hospital. This contention is addressed in the Conclusions of Law, concerning application completeness under section 408.037, at COL 356-57. South Bay has sufficient funds for capital and operating expenditures for project accomplishment and operation. The project cost will be underwritten by HCA, which has adequate cash flow and credit opportunities. It is reasonable that SB's project will be adequately funded if the CON is approved. Section 408.035(5): The extent to which the proposed services will enhance access to health care for residents of the service district The specific area that SB primarily serves, and would continue to serve, is the service area in south Hillsborough County as identified in its application and exhibits. The discussion in section IV.B., supra, is applicable to this criterion and incorporated herein. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County; will be available to serve Sun City Center, Ruskin, and Wimauma; and will be between seven and eight minutes farther away from Sun City Center than it is at present. However, while the relocated facility will be available to the elderly residents of the Sun City Center area, access for these future patients will be reduced from current levels given the increase in transportation time, whether it be by emergency vehicle or otherwise. Section 408.035(6): The immediate and long-term financial feasibility of the proposal Immediate or "short-term" financial feasibility is the ability of the applicant to secure the funds necessary to capitalize and operate the proposed project. The project cost for SB's proposed replacement hospital is approximately $200 million. The costs associated with the establishment and operation of the freestanding ED and other services were not included in the application, but for the reasons stated herein, were not required to be projected in SB's CON application. South Bay demonstrated the short-term financial feasibility of the proposal. The estimated project cost has declined since the filing of the application in 2007, meaning that SB will require less capital than originally forecast. While Mr. Miller stated that he does not have authority to bind HCA to a $200 million capital project, HCA has indicated that it will provide full financing for the project, and that it will go forward with the project if awarded the CON. Long-term financial feasibility refers to the ability of a proposed project to generate a profit in a reasonable period of time. AHCA has previously approved hospital proposals that showed a net profit in the third year of pro forma operation or later. See generally Cent. Fla. Reg. Hosp., Inc. v. Agency for Health Care Admin. & Oviedo HMA, Inc., Case No. 05-0296CON (Fla. DOAH Aug. 23, 2006; Fla. AHCA Jan. 1, 2007), aff'd, 973 So. 2d 1127 (Fla. 1st DCA 2008). To be conservative, SB's projections, updated for purposes of hearing, take into account the slower population growth in south Hillsborough County since the application was originally filed. South Bay also assumed that St. Joseph's Hospital South will be built and operational by 2015. The net effect, as accounted for in the updated projections, is that SB's replacement hospital will have 28,168 patient days in year 1 (2015); 28,569 patient days in year 2 (2016); and 29,582 patient days in year 3 (2017). That patient volume is reasonable and achievable. With the updated utilization forecast, SB projects a net profit for the replacement hospital of $711,610 in 2015; $960,693 in 2016; and $1,658,757 in 2017. The financial forecast was done, using revenue and expense projections appropriately based upon SB's own most recent (2009) financial data. Adjustments made were to the payor mix and the degree of outpatient services, each of which would change due to the relocation to Riverview. The revenue projections for the replacement hospital were tested for reasonableness against existing hospitals in SB's peer group, using actual financial data as reported to AHCA. St. Joseph's Hospital opposed SB's financial projections. St. Joseph's Hospital's expert did not take issue with SB's forecasted market growth. Rather, it was suggested that there was insufficient market growth to support the future patient utilization projections for St. Joseph's Hospital South and SB at its new location and, as a result, they would have a difficult time achieving their volume forecasts and/or they would need to draw patients from other hospitals, such as Brandon, in order to meet utilization projections. St. Joseph's Hospital's expert criticized the increase in SB's projected revenues in its proposed new location as compared to its revenues in its existing location. However, it appears that SB's payor mix is projected to change in the new location, with a greater percentage of commercial managed care, thus generating the greater revenue. South Bay's projected revenue in the commercial indemnity insurance classification was also criticized because SB's projected commercial indemnity revenues were materially overstated. That criticism was based upon the commercial indemnity insurance revenues of St. Joseph's Hospital and Tampa General, which were used as a basis to "adjust" SB's projected revenue downward. St. Joseph's Hospital and Tampa General's fiscal-year 2009 commercial indemnity net revenue was divided by their inpatient days, added an inflation factor, and then multiplied the result by SB's year 1 (2015) inpatient days to recast SB's projected commercial indemnity net revenue. The contention is effectively that SB's commercial indemnity net revenue would be the same as that of St. Joseph's Hospital and Tampa General. There is no similarity between the three hospitals in the commercial indemnity classification. The majority of SJH's and TG's commercial indemnity net revenue comes from inpatients rather than outpatient cases; whereas the majority of SB's commercial indemnity net revenue comes from outpatient cases rather than inpatients. This may explain why SB's total commercial indemnity net revenue is higher than SJH or TG, when divided by inpatient days. The application of the lower St. Joseph's Hospital-Tampa General per-patient-day number to project SB's experience does not appear justified. It is likely that SB's project will be financially feasible in the short and long-term. Section 408.035(7): The extent to which the proposal will foster competition that promotes quality and cost-effectiveness South Bay and Brandon are the dominant providers of health care services in SB's service area. This dominance is likely to be eroded once St. Joseph's Hospital South is operational in and around 2015 (on Big Bend Road) if SB's relocation project is not approved. The proposed relocation of SB's facility will not change the geography of SB's service area. However, it will change SB's draw of patients from within the zip codes in the service area. The relocation of SB is expected to increase SB's market share in the three northern Riverview zip codes. This increase can be expected to come at the expense of other providers in the market, including TG and SJH, and St. Joseph's Hospital South when operational. The potential impact to St. Joseph's Hospital may be approximately $1.6 million based on the projected redirection of patients from St. Joseph's Hospital Main to St. Joseph's Hospital South, population growth in the area, and the relocation of SB. Economic impacts to TG are of record. Tampa General estimates a material impact of $6.4 million if relocation is approved. Notwithstanding, addressing "provider-based competition," AHCA in its SAAR noted: Considering the current location is effectively built out at 112 beds (according to the applicant), this project will allow the applicant to increase its bed size as needed along with the growth in population (the applicant's schedules begin with 144 beds in year one of the project). This will shield the applicant from a loss in market share caused by capacity issues and allow the applicant and its affiliates the opportunity to maintain and/or increase its dominant market share. SB Ex. 12 at 55. AHCA's observation that replacement and relocation of SB "will shield the applicant from a loss in market share caused by capacity issues" has taken on a new dimension since the issuance of the SAAR. At that time, St. Joseph's Hospital did not have final approval of CON No. 9833 for the establishment of St. Joseph's Hospital South. It is likely that St. Joseph's Hospital South will be operational on Big Bend Road, and as a result, SB, at its existing location, will experience a diminished market share, especially from the Riverview zip codes. In 2015 (when St. Joseph's Hospital proposes to open St. Joseph's Hospital South), SB projects losing $2,669,335 if SB remains in Sun City Center with a 20% loss in market share. The losses are projected to increase to $3,434,113 in 2016 and $4,255,573 in 2017. It follows that the losses would be commensurately more severe at the 30% to 40% loss of market share that SB expects if it remains in Sun City Center. St. Joseph's Hospital criticized SB's projections for its existing hospital if it remains in Sun City Center with a 20% loss in market share; however, the criticism was not persuasively proven. It was assumed that SB's expenses would decrease commensurately with its projected fewer patient days, thus enabling it to turn a profit in calendar year 2015 despite substantially reduced patient service revenue. However, it was also stated that expenses such as hospital administration, pharmacy administration, and nursing administration, which the analysis assumed to be variable, in fact have a substantial "fixed" component that does not vary regardless of patient census. South Bay would not, therefore, pay roughly $5 million less in "Administration and Overhead" expenses in 2015 as calculated. To the contrary, its expenses for "Administration and Overhead" would most likely remain substantially the same, as calculated by Mr. Weiner, and would have to be paid, notwithstanding SB's reduced revenue. The only expenses that were recognized as fixed by SJH's expert, and held constant, were SB's calendar year 2009 depreciation ($3,410,001) and short-term interest ($762,738), shown in the exhibit as $4,172,739 both in 2009 and 2015. Other expenses in SJH's analysis are fixed, but were inappropriately assumed to be variable: for example, "Rent, Insurance, Other," which is shown as $1,865,839 in 2009, appears to decrease to $1,462,059 in 2015. The justification offered at hearing, that such expenses can be re-negotiated by a hospital in the middle of a binding contract, is not reasonable. St. Joseph's Hospital's expert opined that SB's estimate of a 30 to 40% loss of market share (if SB remained in Sun City Center concurrent with the operation of St. Joseph's Hospital South) was "much higher than it should be," asserting that the loss would not be that great even if all of SB's Riverview discharges went to St. Joseph's Hospital South. (Mr. Richardson believes the "10 to 20 percent level is likely reasonable," although he opines that a 5 to 10% impact will likely occur.) However, this criticism assumes that a majority of the patients that currently choose SB would remain at SB at its existing location. The record reflects that Sun City Center area residents actively supported the establishment of St. Joseph's Hospital South, thus suggesting that they might use the new facility. Further, SB's physicians are likely to join the medical staff of St. Joseph's Hospital South to facilitate that utilization or to potentially lose their patients to physicians with admitting privileges at St. Joseph's Hospital South. Tampa General's expert also asserted that SB would remain profitable if it remained in its current location, notwithstanding the establishment of St. Joseph's Hospital South. It was contended that SB's net operating revenues per adjusted patient day increased at an annual rate of 5.3% from 2005 to 2009, whereas the average annual increase from 2009 to 2017 in SB's existing hospital projections amounts to 1.8%. On that basis, he opined that SB should be profitable in 2017 at its existing location, notwithstanding a loss in market share to St. Joseph's Hospital South. However, the 5.3% average annual increase from 2005 to 2009 is not necessarily predictive of SB's future performance, and the evidence indicated the opposite. Tampa General's expert did not examine SB's performance year-by-year from 2005 to 2009, but rather compared 2005 and 2009 data to calculate the 5.3% average annual increase over the five-year period. This analysis overlooks the hospital's uneven performance during that time, which included operating losses (and overall net losses) in 2005 and 2007. Further, the evidence showed that the biggest increase in SB's net revenue during that five-year period took place from 2008 to 2009, and was largely due to a significant decrease in bad debt in 2009. SB Ex. 16 at 64. (Bad debt is accounted for as a deduction from gross revenue: thus, the greater the amount of bad debt, the less net revenue all else being equal; the lesser the amount of bad debt, the greater the amount of net revenue all else being equal.) The evidence further showed that the 2009 reduction in bad debt and the hospital's profitability that year, is unlikely to be repeated. Overall, approval of the project is more likely to increase competition in the service area between the three health care providers/systems. Denial of the project is more likely to have a negative effect on competition in the service area, although it will continue to make general acute care services available and accessible to the Sun City Center area elderly (and family and volunteer support). Approval of the project is likely to improve the quality of care and cost-effectiveness of the services provided by SB, but will reduce access for the elderly residents of the Sun City Center area needing general acute care hospital services who will be required to be transported by emergency vehicle or otherwise to one of the two Big Bend Road hospitals, unless needed services, such as open heart surgery, are only available elsewhere. For example, if a patient presents to SB needing balloon angioplasty or open heart surgery, the patient is transferred to an appropriate facility such as Brandon. The presence of an ED on the current SB site may alleviate the reduction in access somewhat for some acute care services, although the precise nature and extent of the proposed services were not explained with precision. If its application is denied, SB expects to remain operational so long as it remains financially viable. Section 408.035(8): The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the costs and methods of the proposed construction, including the costs and methods of energy provision, were reasonable. St. Joseph's Hospital and Tampa General did not stipulate concerning the availability of alternative, less costly, or more effective methods of construction, and take the position that SB should renovate and expand its existing facility rather than replace and relocate the facility. Whether section 408.035(8) requires consideration (weighing and balancing with other statutory criteria) of potential renovation costs as alternatives to relocation was hotly debated in this case. For the reasons stated herein, it is determined that this subsection, in conjunction with other statutory criteria, requires consideration of potential renovation versus replacement of an existing facility. St. Joseph's Hospital offered expert opinion that SB could expand and upgrade its existing facility for approximately $25 million. These projected costs include site work; site utilities; all construction, architectural, and engineering services; chiller; air handlers; interior design; retention basins; and required movable equipment. This cost is substantially less than the approximate $200 million cost of the proposed relocation. It was proven that there are alternatives to replacing SB. There is testimony that if SB were to undertake renovation and expansion as proposed by SJH, such upgrades would improve SB's competitive and financial position. But, the alternatives proposed by SJH and TG are disfavored by SB and are determined, on this record, not to be reasonable based on the institutional- specific needs of SB. Section 408.035(9): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Approval of SB's application will not significantly enhance access to Medicaid, charity, or underserved population groups. South Bay currently provides approximately 4% of its patient days to Medicaid beneficiaries and about 1% to charity care. South Bay's historic provision of services to Medicaid patients and the medically indigent is reasonable in view of its location in Sun City Center, which results in a disproportionate share of Medicare in its current payor mix. South Bay also does not offer obstetrics, a service which accounts for a significant degree of Medicaid patient days. South Bay proposes to provide 7% of its "gross patient revenue" to Medicaid and charity patients as part of its relocation. South Bay's proposed service percentage is reasonable. Section 408.035(10): The applicant's designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility The parties stipulated that this criterion is not applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying CON Application No. 9992. DONE AND ENTERED this 8th day of August, 2011, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 2011.
Findings Of Fact The Parties The Applicant, LMHS The applicant, LMHS, is a public, not-for-profit health care system, created in 1968 by special act of the Legislature. A ten-member publicly elected board of directors is responsible for overseeing LMHS on behalf of the citizens of Lee County. LMHS does not have taxing power. LMHS is the dominant provider of hospital services in Lee County. LMHS operates four hospital facilities under three separate hospital licenses. The four hospital campuses are dispersed throughout Lee County: borrowing the sub-county area descriptors adopted by LMHS’s health planning expert, LMHS operates one hospital in northwest Lee County, one hospital in central Lee County, and two hospitals in south Lee County.1/ At present, the four hospital campuses are licensed to operate a total of 1,423 hospital beds. The only non-LMHS hospital in Lee County is 88-bed Lehigh Regional Medical Center (Lehigh Regional) in northeast Lee County, owned and operated by a for-profit hospital corporation, Health Management Associates, Inc. (HMA). LMHS has a best-practice strategy of increasing and concentrating clinical specialties at each of its existing hospitals. The LMHS board has already approved which specialty service lines will be the focus at each of its four hospitals. Although there is still some duplication of specialty areas, LMHS has tried to move more to clinical specialization concentrated at a specific hospital to lower costs, better utilize resources, and also to concentrate talent and repetitions, leading to improved clinical outcomes. Currently licensed to operate 415 hospital beds, Lee Memorial Hospital (Lee Memorial) is located in downtown Fort Myers in central Lee County. The hospital was initially founded in 1916 and established at its current location in the 1930s. In the 1960s, a five-story clinical tower was constructed on the campus, to which three more stories were added in the 1970s. The original 1930s building was demolished and its site became surface parking. Today, Lee Memorial provides a full array of acute care services, plus clinical specialties in such areas as orthopedics, neurology, oncology, and infectious diseases. Lee Memorial’s licensed bed complement includes 15 adult inpatient psychiatric beds (not in operation), and 60 beds for comprehensive medical rehabilitation (CMR), a tertiary health service.2/ Lee Memorial is a designated stroke center, meaning it is a destination to which EMS providers generally seek to transport stroke patients, bypassing any closer hospital that lacks stroke center designation. Lee Memorial operates the only verified level II adult trauma center in the seven-county region designated AHCA district 8. Lee Memorial also is home to a new residency program for medical school graduates. At its peak, Lee Memorial operated as many as 600 licensed beds at the single downtown Fort Myers location. In 1990, when hospital beds were still regulated under the CON program, Lee Memorial transferred its right to operate 220 beds to establish a new hospital facility to the south, HealthPark Medical Center (HealthPark). One reason to shift some of its regulated hospital beds to the south was because of the growing population in the southern half of Lee County. Another reason was to ensure a paying patient population by moving beds away from Lee Memorial to a more affluent area. That way, LMHS would have better system balance, and be better able to bear the financial burden of caring for disproportionately high numbers of Medicaid and charity care patients at the downtown safety-net hospital. That was a reasonable and appropriate objective. HealthPark, located in south Lee County ZIP code 33908, to the south and a little to the west of Lee Memorial, now operates 368 licensed beds--320 general acute care and 48 neonatal intensive care beds. HealthPark’s specialty programs and services include cardiac care, open heart surgery, and urology. HealthPark is a designated STEMI3/ (heart attack) center, a destination to which EMS providers generally seek to transport heart attack patients, bypassing any closer hospital lacking STEMI center designation. HealthPark also concentrates in specialty women’s and children’s services, offering obstetrics, neonatal intensive care, perinatal intensive care, and pediatrics. HealthPark is a state-designated children’s cancer center. HealthPark’s open heart surgery, neonatal and perinatal intensive care, and pediatric oncology services are all tertiary health services. In 1996, LMHS acquired its third hospital, Cape Coral Medical Center (Cape Coral), from another entity.4/ The acquisition of Cape Coral was another step in furtherance of the strategy to improve LMHS’s overall payer mix by establishing hospitals in affluent areas. Cape Coral is located in northwest Lee County, and is licensed to operate 291 general acute care beds. Cape Coral’s specialty concentrations include obstetrics, orthopedics, gastroenterology, urology, and stroke treatment. Cape Coral recently achieved primary stroke center designation, making it an appropriate destination for EMS transport of stroke patients, according to Lee County EMS transport guidelines. The newest LMHS hospital, built in 2007-2008 and opened in 2009, is Gulf Coast Medical Center (Gulf Coast) in south Lee County ZIP code 33912.5/ With 349 licensed beds, Gulf Coast offers tertiary services including kidney transplantation and open heart surgery, and specialty services including obstetrics, stroke treatment, surgical oncology, and neurology. Gulf Coast is both a designated primary stroke center and a STEMI center. NCH NCH is a not-for-profit system operating two hospital facilities with a combined 715 licensed beds in Collier County, directly to the south of Lee County. Naples Community Hospital (Naples Community) is in downtown Naples. NCH North Naples Hospital Campus (North Naples) is located in the northernmost part of Collier County, near the Collier-Lee County line.6/ The Petitioner in this case is NCH doing business as North Naples. North Naples is licensed to operate 262 acute care beds. It provides an array of acute care hospital services, specialty services including obstetrics and pediatrics, and tertiary health services including neonatal intensive care and CMR. AHCA AHCA is the state health planning agency charged with administering the CON program pursuant to the Health Facility and Services Development Act, sections 408.031-408.0455, Florida Statutes (2013).7/ AHCA is responsible for the coordinated planning of health care services in the state. To carry out its responsibilities for health planning and CON determinations, AHCA maintains a comprehensive health care database, with information that health care facilities are required to submit, such as utilization data. See § 408.033(3), Fla. Stat. AHCA conducts its health planning and CON review based on “health planning service district[s]” defined by statute. See § 408.032(5), Fla. Stat. Relevant in this case is district 8, which includes Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry, and Collier Counties. Additionally, by rule, AHCA has adopted acute care sub-districts, originally utilized in conjunction with an acute care bed need methodology codified as Florida Administrative Code Rule 59C-1.038. The acute care bed need rule was repealed in 2005, following the deregulation of acute care beds from CON review. However, AHCA has maintained its acute care sub-district rule, in which Lee County is designated sub-district 8-5. Fla. Admin. Code R. 59C-2.100(3)(h)5. The Proposed Project LMHS proposes to establish a new 80-bed general hospital on the southeast corner of U.S. Highway 41 and Coconut Road in Bonita Springs (ZIP code 34135),8/ in south Lee County. The CON application described the hospital services to be offered at the proposed new hospital in only the most general fashion--medical- surgical services, emergency services, intensive care, and telemetry services. Also planned for the proposed hospital are outpatient care, community education, and chronic care management --all non-hospital, non-CON-regulated services. At hearing, LMHS did not elaborate on the planned hospital services for the proposed new facility. Instead, no firm decisions have been made by the health system regarding what types of services will be offered at the new hospital. The proposed site consists of three contiguous parcels, totaling approximately 31 acres. LMHS purchased a 21-acre parcel in 2004, with a view to building a hospital there someday. LMHS later added to its holdings when additional parcels became available. At present, the site’s development of regional impact (DRI) development order does not permit a hospital, but would allow the establishment of a freestanding emergency department. The proposed hospital site is adjacent to the Bonita Community Health Center (BCHC). Jointly owned by LMHS and NCH, BCHC is a substantial health care complex described by LMHS President James Nathan as a “hospital without walls.” This 100,000 square-foot complex includes an urgent care center, ambulatory surgery center, and physicians’ offices. A wide variety of outpatient health care services are provided within the BCHC complex, including radiology/diagnostic imaging, endoscopy, rehabilitation, pain management, and lab services. Although LMHS purchased the adjacent parcels with the intent of establishing a hospital there someday, representatives of LMHS expressed their doubt that “someday” has arrived; they have candidly admitted that this application may be premature. CON Application Filing LMHS did not intend to file a CON application when it did, in the first hospital-project review cycle of 2013. LMHS did not file a letter of intent (LOI) by the initial LOI deadline to signify its intent to file a CON application. However, LMHS’s only Lee County hospital competitor, HMA, filed an LOI on the deadline day. LMHS learned that the project planned by HMA was to replace Lehigh Regional with a new hospital, which would be relocated to south Lee County, a little to the north of the Estero/Bonita Springs area. LMHS was concerned that if the HMA application went forward and was approved, that project would block LMHS’s ability to pursue a hospital in Bonita Springs for many years to come. Therefore, in reaction to HMA’s LOI, LMHS filed a “grace period” LOI, authorized under AHCA’s rules, to submit a competing proposal for a new hospital in south Lee County. But for the HMA LOI, there would have been no grace period for a competing proposal, and LMHS would not have been able to apply when it did. Two weeks later, on the initial application filing deadline, LMHS submitted a “shell” application. LMHS proceeded to quickly prepare the bulk of its application to file five weeks later by the omissions response deadline of April 10, 2013. Shortly before the omissions response deadline, Mr. Nathan met with Jeffrey Gregg, who is in charge of the CON program as director of AHCA’s Florida Center for Health Information and Policy Analysis, and Elizabeth Dudek, AHCA Secretary, to discuss the LMHS application. Mr. Nathan told the AHCA representatives that LMHS was not really ready to file a CON application, but felt cornered and forced into it to respond to the HMA proposal. Mr. Nathan also discussed with AHCA representatives the plan to transfer 80 beds from Lee Memorial, but AHCA told Mr. Nathan not to make such a proposal. Since beds are no longer subject to CON regulation, hospitals are free to add or delicense beds as they deem appropriate, and therefore, an offer to delicense beds adds nothing to a CON proposal. LMHS’s CON application was timely filed on the omissions deadline. A major focus of the application was on why LMHS’s proposal was better than the expected competing HMA proposal. However, HMA did not follow through on its LOI by filing a competing CON application. The LMHS CON application met the technical content requirements for a general hospital CON application, including an assessment of need for the proposed project. LMHS highlighted the following themes to show need for its proposed new hospital: South Lee County “should have its own acute care hospital” because it is a fast-growing area with an older population; by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population. The Estero/Bonita Springs community strongly supports the proposed new hospital. Approval of the proposed new hospital “will significantly reduce travel times for the service area’s residents and will thereby significantly improve access to acute care services,” as shown by estimated travel times to local hospitals for residents in the proposed primary service area and by Lee County EMS transport logs. LMHS will agree to a CON condition to delicense 80 beds at Lee Memorial, which are underutilized, so that there will be no net addition of acute care beds to the sub-district’s licensed bed complement. AHCA’s Preliminary Review and Denial AHCA conducted its preliminary review of the CON application in accordance with its standard procedures. As part of the preliminary review process for general hospital applications, the CON law now permits existing health care facilities whose established programs may be substantially affected by a proposed project to submit a detailed statement in opposition. Indeed, such a detailed statement is a condition precedent to the existing provider being allowed to participate as a party in any subsequent administrative proceedings conducted with respect to the CON application. See § 408.037(2), Fla. Stat. North Naples timely filed a detailed statement in opposition to LMHS’s proposed new hospital. LMHS timely filed a response to North Naples’ opposition submittal, pursuant to the same law. After considering the CON application, the North Naples opposition submittal, and the LMHS response, AHCA prepared its SAAR in accordance with its standard procedures. A first draft of the SAAR was prepared by the CON reviewer; the primary editor of the SAAR was AHCA CON unit manager James McLemore; and then a second edit was done by Mr. Gregg. Before the SAAR was finalized, Mr. Gregg met with the AHCA Secretary to discuss the proposed decision. The SAAR sets forth AHCA’s preliminary findings and preliminary decision to deny the LMHS application. Mr. Gregg testified at hearing as AHCA’s representative, as well as in his capacity as an expert in health planning and CON review. Through Mr. Gregg’s testimony, AHCA reaffirmed its position in opposition to the LMHS application, and Mr. Gregg offered his opinions to support that position. Statutory and Rule Review Criteria The framework for consideration of LMHS’s proposed project is dictated by the statutory and rule criteria that apply to general hospital CON applications. The applicable statutory review criteria, as amended in 2008 for general hospital CON applications, are as follows: The need for the health care facilities and health services being proposed. The availability, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant. * * * (e) The extent to which the proposed services will enhance access to health care for residents of the service district. * * * (g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness. * * * (i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent. § 408.035(1), Fla. Stat.; § 408.035(2), Fla. Stat. (identifying review criteria that apply to general hospital applications). AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. In the absence of a numeric need methodology promulgated by AHCA for the project at issue, Florida Administrative Code Rule 59C-1.008(2)(e) applies. This rule provides that the applicant is responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Florida Administrative Code Rule 59C-1.030 also applies. This rule elaborates on “health care access criteria” to be considered in reviewing CON applications, with a focus on the needs of medically underserved groups such as low income persons. LMHS’s Needs Assessment LMHS set forth its assessment of need for the proposed new hospital, highlighting the population demographics of the area proposed to be served. Theme: South Lee County’s substantial population The main theme of LMHS’s need argument is that south Lee County “should have its own acute care hospital” because it is a fast-growing area with a substantial and older population. (LMHS Exh. 3, p. 37). LMHS asserts that south Lee County’s population is sufficient to demonstrate the need for a new hospital because “by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population.” Id. LMHS identified eight ZIP codes--33908, 33912, 33913, 33928, 33931, 33967, 34134, and 34135--that constitute “south Lee County.” (LMHS Exh. 3, Table 4). Claritas population projections, reasonably relied on by the applicant, project that by 2018 these eight ZIP codes will have a total population of 200,492 persons, approximately 29 percent of the projected population of 687,795 for all of Lee County. The age 65-and-older population in south Lee County is projected to be 75,150, approximately 40 percent of the projected 65+ population of 185,655 for all of Lee County. A glaring flaw in LMHS’s primary need theme is that the eight-ZIP-code “south Lee County” identified by LMHS is not without its own hospital. That area already has two of the county’s five existing hospitals: Gulf Coast and HealthPark. In advancing its need argument, LMHS selectively uses different meanings of “south Lee County.” When describing the “south Lee County” that deserves a hospital of its own, LMHS means the local Estero/Bonita Springs community in and immediately surrounding the proposed hospital site in the southernmost part of south Lee County. However, when offering up a sufficient population to demonstrate need for a new hospital, “south Lee County” expands to encompass an area that appears to be half, if not more, of the entire county. The total population of the Estero/Bonita Springs community is 76,753, projected to grow to 83,517 by 2018--much more modest population numbers compared to those highlighted by the applicant for the expanded version of south Lee County. While the rate of growth for Estero/Bonita Springs is indeed fast compared to the state and county growth rates, this observation is misleading because the actual numbers are not large. LMHS also emphasizes the larger proportion of elderly in the Estero/Bonita Springs community, which is also expected to continue to grow at a fast clip. Although no specifics were offered, it is accepted as a generic proposition that elderly persons are more frequent consumers of acute care hospital services. By the same token, elderly persons who require hospitalization tend to be sicker, and to present greater risks of potential complications from comorbidities, than non-elderly patients. As a result, for example, as discussed below, Lee County EMS’s emergency transport guidelines steer certain elderly patients to hospitals with greater breadth of services than the very basic hospital planned by LMHS, “as a reasonable precaution.” Projections of a Well-Utilized Proposed Hospital Mr. Davidson, LMHS’s health planning consultant, was provided with the proposed hospital’s location and number of beds, and was asked to develop the need assessment and projections. No evidence was offered regarding who determined that the proposed hospital should have 80 beds, or how that determination was made. Mr. Davidson set about to define the proposed primary and secondary service areas, keeping in mind that section 408.037(2) now requires a general hospital CON application to specifically identify, by ZIP codes, the primary service area from which the proposed hospital is expected to receive 75 percent of its patients, and the secondary service area from which 25 percent of the hospital’s patients are expected. Mr. Davidson selected six ZIP codes for the primary service area. He included the three ZIP codes comprising the Estero/Bonita Springs community. He also included two ZIP codes that are closer to existing hospitals than to the proposed site, according to the drive-time information he compiled. In addition, he included one ZIP code in which there is already a hospital (Gulf Coast, in 33912). Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, primary service area was not persuasive;9/ the criticisms by the other expert health planning witnesses were more persuasive and are credited. Mr. Davidson selected six more ZIP codes for the secondary service area. These include: two south Lee County ZIP codes that are HealthPark’s home ZIP code (33908) and a ZIP code to the west of HealthPark (33931); three central Lee County ZIP codes to the north of HealthPark and Gulf Coast; and one Collier County ZIP code that is North Naples’ home ZIP code. Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, secondary service area was not persuasive; the criticisms by the other expert health planning witnesses were more persuasive and are credited. As noted above, the existing LMHS hospitals provide tertiary-level care and a number of specialty service lines and designations that have not been planned for the proposed new hospital. Conversely, there are no services proposed for the new hospital that are not already provided by the existing LMHS hospitals. In the absence of evidence that the proposed new hospital will offer services not available at closer hospitals, it is not reasonable to project that any appreciable numbers of patients will travel farther, and in some instances, bypass one or more larger existing hospitals with greater breadth of services, to obtain the same services at the substantially smaller proposed new hospital. As aptly observed by AHCA’s representative, Mr. Gregg, the evidence to justify such an ambitious service area for a small hospital providing basic services was lacking: So if we were to have been given more detail[:] here’s the way we’re going to fit this into our system, here’s -- you know, here’s why we can design this service area as big as we did, even though it would require a lot of people to drive right by HealthPark or right by Gulf Coast to go to this tiny basic hospital for some reason. I mean, there are fundamental basics about this that just make us scratch our head. (Tr. 1457). The next step after defining the service area was to develop utilization projections, based on historic utilization data for service area residents who obtained the types of services to be offered by the proposed hospital. In this case, the utilization projections suffer from a planning void. Mr. Nathan testified that no decisions have been made regarding what types of services, other than general medical- surgical services, will be provided at the proposed new hospital. In lieu of information regarding the service lines actually planned for the proposed hospital, Mr. Davidson used a subtractive process, eliminating “15 or so” service lines that the proposed hospital either “absolutely wasn’t going to provide,” or that, in his judgment, a small hospital of this type would not provide. The service lines he excluded were: open heart surgery; trauma; neonatal intensive care; inpatient psychiatric, rehabilitation, and substance abuse; and unnamed “others.” His objective was to “narrow the scope of available admissions down to those that a smaller hospital could reasonably aspire to care for.” (Tr. 671-672). That objective is different from identifying the types of services expected because they have been planned for this particular proposed hospital. The testimony of NCH’s health planner, as well as Mr. Gregg, was persuasive on the point that Mr. Davidson’s approach was over-inclusive. The historic data he used included a number of service lines that are not planned for the proposed hospital and, thus, should have been subtracted from the historic utilization base. These include clinical specialties that are the focus of other LMHS hospitals, such as infectious diseases, neurology, neurosurgery, orthopedics, and urology; cardiac care, such as cardiac catheterization and angioplasty that are not planned for the proposed hospital; emergency stroke cases that will be directed to designated stroke centers; pediatric cases that will be referred to HealthPark; and obstetrics, which is not contemplated for the proposed hospital according to the more credible evidence.10/ Mr. Davidson’s market share projections suffer from some of the same flaws as the service area projections: there is no credible evidence to support the assumption that the small proposed new hospital, which has planned to offer only the most basic hospital services, will garner substantial market shares in ZIP codes that are closer to larger existing hospitals providing a greater breadth of services. In addition, variations in market share projections by ZIP code raise questions that were not adequately explained.11/ Overall, the “high-level” theme offered by LMHS’s health planner--that it is unnecessary to know what types of services will be provided at the new hospital in order to reasonably project utilization and market share--was not persuasive. While it is possible that utilization of the proposed new hospital would be sufficient to suggest it is filling a need, LMHS did not offer credible evidence that that is so. Bed Need Methodology for Proposed Service Area Mr. Davidson projected bed need for the proposed service area based on the historic utilization by residents of the 12 ZIP codes in the service lines remaining after his subtractive process, described above. Other than using an over-inclusive base (as described above), Mr. Davidson followed a reasonable approach to determine the average daily census generated by the proposed service area residents, and then applying a 75 percent occupancy standard to convert the average daily census into the number of beds supported by that population. The results of this methodology show that utilization generated by residents of the six-ZIP code primary service area would support 163 hospital beds; and utilization generated by residents of the six-ZIP code secondary service area would support 225 beds in the secondary service area. The total gross bed need for the proposed service area adds up to 388 beds. However, the critical next step was missing: subtract from the gross number of needed beds the number of existing beds, to arrive at the net bed need (or surplus). In the primary service area, 163 beds are needed, but there are already 349 beds at Gulf Coast. Thus, in the primary service area, there is a surplus of 186 beds, according to the applicant’s methodology. In the secondary service area, 225 beds are needed, but there are already 320 acute care beds at HealthPark and 262 acute care beds at North Naples. Thus, in the secondary service area, there is a surplus of 357 beds, according to the applicant’s methodology. While it is true that Gulf Coast and HealthPark use some of their beds to provide some tertiary and specialty services that were subtracted out of this methodology, and all three hospitals presumably provide services to residents outside the proposed service area, Mr. Davidson made no attempt to measure these components. Instead, the LMHS bed need methodology ignores completely the fact that there is substantial existing bed capacity--931 acute care beds--within the proposed service area. Availability and Utilization of Existing Hospitals LMHS offered utilization data for the 12-month period ending June 30, 2012, for Lee County hospitals. Cape Coral’s average annual occupancy rate was 57.6 percent; HealthPark’s was 77.5 percent; Lee Memorial’s was 55.9 percent; Lehigh Regional’s was 44 percent; and Gulf Coast’s was 79.8 percent. Mr. Davidson acknowledged that a reasonable occupancy standard to plan for a small hospital the size of the proposed hospital is 75 percent. For a larger operational hospital, 80 percent is a good standard to use, indicating it is well-utilized. Judged by these standards, only HealthPark and Gulf Coast come near the standard for a well-utilized hospital. As noted in the CON application, these annual averages do not reflect the higher utilization during peak season. According to the application, HealthPark’s occupancy was 88.2 percent and Gulf Coast’s was 86.8 percent for the peak quarter of January-March 2012. LMHS did not present utilization information for North Naples, even though that hospital is closest to the proposed hospital site and is within the proposed service area targeted by the applicant. For the same 12-month period used for the LMHS hospitals, North Naples’ average annual occupancy rate was 50.97 percent and for the January-March 2012 “peak season” quarter, North Naples’ occupancy was 60.68 percent. At the final hearing, LMHS did not present more recent utilization data, choosing instead to rely on the older information in the application. Based on the record evidence, need is not demonstrated by reference to the availability and utilization of existing hospitals in the proposed service area or in the sub-district. Community Support LMHS argued that the strong support by the Estero/Bonita Springs community should be viewed as evidence of need for the proposed new hospital. As summarized in the SAAR, approximately 2,200 letters of support were submitted by local government entities and elected officials, community groups, and area residents, voicing their support for the proposed hospital. LMHS chose not to submit these voluminous support letters in the record. The AHCA reviewer noted in the SAAR that none of the support letters documented instances in which residents of the proposed service area needed acute care hospital services but were unable to obtain them, or suffered poor or undesirable health outcomes due to the current availability of hospital services. Two community members testified at the final hearing to repeat the theme of support by Estero/Bonita Springs community residents and groups. These witnesses offered anecdotal testimony about traffic congestion during season, population growth, and development activity they have seen or heard about. They acknowledged the role their community organization has played in advocating for a neighborhood hospital, including developing and disseminating form letters for persons to express their support. Consistent with the AHCA reviewer’s characterization of the support letters, neither witness attested to any experiences needing acute care hospital services that they were unable to obtain, or any experiences in which they had poor or undesirable outcomes due to the currently available hospital services. There was no such evidence offered by any witness at the final hearing. Mr. Gregg characterized the expression of community support by the Estero/Bonita Springs community as typical “for an upper income, kind of retiree-oriented community where, number one, people anticipate needing to use hospitals, and number two, people have more time on their hands to get involved with things like this.” (Tr. 1433). Mr. Gregg described an extreme example of community support for a prior new hospital CON application, in which AHCA received 21,000 letters of support delivered in two chartered buses that were filled with community residents who wanted to meet with AHCA representatives. Mr. Gregg identified the project as the proposed hospital for North Port, which was ultimately denied following an administrative hearing. In the North Port case, the Administrative Law Judge made this apt observation with regard to the probative value of the overwhelming community support offered there: “A community’s desire for a new hospital does not mean there is a ‘need’ for a new hospital. Under the CON program, the determination of need for a new hospital must be based upon sound health planning principles, not the desires of a particular local government or its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04- 3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA April 11, 2006), RO at 26, ¶ 104, adopted in FO. That finding, which was adopted by AHCA in its final order, remains true today, and is adopted herein. Access The statutory review criteria consider access issues from two opposing perspectives: from the perspective of the proposed project, consideration is given to the extent to which the proposal will enhance access to health care services for the applicant’s service district; without the proposed project, consideration is given to the accessibility of existing providers of the health care services proposed by the applicant. Addressing this two-part access inquiry, LMHS contends that the proposed hospital would significantly reduce travel times and significantly enhance access to acute care services. Three kinds of access are routinely considered in CON cases: geographic access, in this case the drive times by individuals to hospitals; emergency access, i.e., the time it takes for emergency ground transport (ambulances) to deliver patients to hospitals; and economic access, i.e., the extent to which hospital services are provided to Medicaid and charity care patients. Geographic Access (drive times to hospitals) For nearly all residents of the applicable service district, district 8, the proposed new hospital was not shown to enhance access to health care at all. The same is true for nearly all residents of sub-district 8-5, Lee County. LMHS was substantially less ambitious in its effort to show access enhancement, limiting its focus on attempting to prove that access to acute care services would be enhanced for residents of the primary service area. LMHS did not attempt to prove that there would be any access enhancement to acute care services for residents of the six-ZIP code secondary service area. As set forth in the CON application, Mr. Davidson used online mapping software to estimate the drive time from each ZIP code in the primary service area to the four existing LMHS hospitals, the two NCH hospitals, and another hospital in north Collier County, Physicians Regional-Pine Ridge. The drive-time information offered by the applicant showed the following: the drive time from ZIP code 33912 was less to three different existing LMHS hospitals than to the proposed new hospital; the drive time from ZIP code 33913 was less to two different existing LMHS hospitals than to the proposed new hospital; and the drive time from ZIP code 33967 was less to one existing LMHS hospital than to the proposed hospital site. Thus, according to LMHS’s own information, drive times would not be reduced at all for three of the six ZIP codes in the primary service area. Not surprisingly, according to LMHS’s information, the three Estero/Bonita Springs ZIP codes are shown to have slightly shorter drive times to the proposed neighborhood hospital than to any existing hospital. However, the same information also suggests that those residents already enjoy very reasonable access of 20-minutes’ drive time or less to one or more existing hospitals: the drive time from ZIP code 33928 is between 14 and 20 minutes to three different existing hospitals; the drive time from ZIP code 34134 is between 18 and 20 minutes to two different existing hospitals; and the drive time from ZIP code 34135 is 19 minutes to one existing hospital. In terms of the extent of drive time enhancement, the LMHS information shows that drive time would be shortened from 14 minutes to seven minutes for ZIP code 33928; from 18 minutes to 12 minutes for ZIP code 34134; and from 19 minutes to 17 minutes for ZIP code 34135. There used to be an access standard codified in the (now-repealed) acute care bed need rule, providing that acute care services should be accessible within a 30-minute drive time under normal conditions to 90 percent of the service area’s population. Mr. Davidson’s opinion is that the former rule’s 30-minute drive time standard remains a reasonable access standard for acute care services. Here, LMHS’s drive time information shows very reasonable access now, meeting an even more rigorous drive-time standard of 20 minutes. The establishment of a new hospital facility will always enhance geographic access by shortening drive times for some residents. For example, if LMHS’s proposed hospital were established, another proposed hospital could demonstrate enhanced access by reducing drive times from seven minutes to four minutes for residents of Estero’s ZIP code 33928. But the question is not whether there is any enhanced access, no matter how insignificant. Instead, the appropriate consideration is the “extent” of enhanced access for residents of the service district or sub-district. Here, the only travel time information offered by LMHS shows nothing more than insignificant reductions of already reasonable travel times for residents of only three of six ZIP codes in the primary service area. The drive-time information offered in the application and at hearing was far from precise, but it was the only evidence offered by the applicant in an attempt to prove its claim that there would be a significant reduction in drive times for residents of the primary service area ZIP codes. No travel time expert or traffic engineer offered his or her expertise to the subject of geographic accessibility in this case. No evidence was presented regarding measured traffic conditions or planned roadway improvements. Anecdotal testimony regarding “congested” roads during “season” was general in nature and insufficient to prove that there is not reasonable access now to basic acute care hospital services for all residents of the proposed service area. The proposed new hospital is not needed to address a geographic access problem. Consideration of the extent of access enhancement does not weigh in favor of the proposed new hospital. Emergency Access LMHS also sought to establish that emergency access via EMS ambulance transport was becoming problematic during the season because of traffic congestion. In its CON application, LMHS offered Lee County EMS transport logs as evidence that ambulance transport times from the Estero/Bonita Springs community to an existing hospital were higher during season than in the off-season months. LMHS represented in its CON application that the voluminous Lee County EMS transport logs show average transport times of over 22 minutes from Bonita Springs to a hospital in March 2012 compared to 15 minutes for June 2012, and average transport times of just under 22 minutes from Estero to a hospital in March 2012 compared to over 17 minutes for June 2012. LMHS suggested that these times were not reasonable because these were all emergency transports at high speeds with flashing lights and sirens. LMHS did not prove the accuracy of this statement. The Lee County EMS ordinance limits the use of sirens and flashing lights to emergency transports, defined to mean transports of patients with life- or limb-threatening conditions. According to Lee County EMS Deputy Chief Panem, 90 to 95 percent of ambulance transports do not involve such conditions. Contrary to the conclusion that LMHS urges should be drawn from the EMS transport logs, the ambulance transport times summarized by LMHS in its application do not demonstrate unreasonable emergency access for residents of Estero/Bonita Springs. The logs do not demonstrate an emergency access problem for the local residents during the season, as contended by LMHS; nor did LMHS offer sufficient evidence to prove that the proposed new hospital would materially improve ambulance transport times. LMHS’s opinion that the ambulance logs show a seasonal emergency access problem for Estero/Bonita Springs residents cannot be credited unless the travel times on the logs reflect patient transports to the nearest hospital, such that establishing a new hospital in Bonita Springs would result in faster ambulance transports for Estero/Bonita Springs residents. Deputy Chief Panem testified that ambulance transport destination is dictated in the first instance by patient choice. In addition, for the “most serious calls,” the destination is dictated by emergency transport guidelines with a matrix identifying the most “appropriate” hospitals to direct patients. For example, as Deputy Chief Panem explained: In the case of a stroke or heart attack, we want them to go to a stroke facility or a heart attack facility[;] or trauma, we have a trauma center in Lee County as well . . . Lee Memorial Hospital downtown is a level II trauma center. (Tr. 378). The emergency transport matrix identifies the hospitals qualified to handle emergency heart attack, stroke, or trauma patients. In addition, the matrix identifies the “most appropriate facility” for emergency pediatrics, obstetrics, pediatric orthopedic emergencies, and other categories involving the “most serious calls.” Of comparable size to the proposed new hospital, 88-bed Lehigh Regional is not identified as an “appropriate facility” to transport patients with any of the serious conditions shown in the matrix. Similar to Lehigh Regional, the slightly smaller proposed new hospital is not expected to be identified as an appropriate facility destination for patients with any of the conditions designated in the Lee County EMS emergency transport matrix. The Lee County EMS transport guidelines clarify that all trauma alert patients “will be” transported to Lee Memorial as the Level II Trauma Center. In addition, the guidelines provide as follows: “Non-trauma alert patients with a high index of suspicion (elderly, etc.) should preferentially be transported to the Trauma Center as a reasonable precaution.” (emphasis added). For the elderly, then, a condition that would not normally be considered one of the most serious cases to be steered to the most appropriate hospital may be reclassified as such, as a reasonable precaution because the patient is elderly. The Lee County EMS transport logs do not reflect the reason for the chosen destination. The patients may have requested transport to distant facilities instead of to the nearest facilities. Patients with the most serious conditions may have accepted the advice of ambulance crews that they should be transported to the “most appropriate facility” with special resources to treat their serious conditions; or those patients may have been unable to express their choice due to the seriousness of their condition, in which case the patients would be taken to the most appropriate facility, bypassing closer facilities. Elderly patients may have been convinced to take the reasonable precaution to go to an appropriate facility even if their condition did not fall into the most serious categories. Since the transport times on the EMS logs do not necessarily reflect transport times to the closest hospital, it is not reasonable to conclude that the transport times would be shorter if there were an even closer hospital, particularly where the closer hospital is not likely to be designated as an appropriate destination in the transport guidelines matrix. The most serious cases, categorized in the EMS transport matrix, are the ones for which minutes matter. For those cases, a new hospital in Estero/Bonita Springs, which has not planned to be a STEMI receiving center, a stroke center, or a trauma center, is not going to enhance access to emergency care, even for the neighborhood residents. The evidence at hearing did not establish that ambulance transport times are excessive or cause an emergency access problem now.12/ In fact, Deputy Chief Panem did not offer the opinion, or offer any evidence to prove, that the drive time for ambulances transporting patients to area hospitals is unreasonable or contrary to any standard for reasonable emergency access. Instead, Lee County EMS recently opposed an application for a certificate of public convenience and necessity by the Bonita Springs Fire District to provide emergency ground transportation to hospitals, because Lee County EMS believed then, and believes now, that it is providing efficient and effective emergency transport services to the Bonita Springs area residents. At hearing, LMHS tried a different approach by attempting to prove an emergency access problem during season, not because of the ambulance drive times, but because of delays at the emergency departments themselves after patients are transported there. The new focus at hearing was on EMS “offload” times, described as the time between ambulance arrival at the hospital and the time the ambulance crews hand over responsibility for a patient to the emergency department staff. According to Deputy Chief Panem, Lee County hospitals rarely go on “bypass,” a status that informs EMS providers not to transport patients to a hospital because additional emergency patients cannot be accommodated. No “bypass” evidence was offered, suggesting that “bypass” status is not a problem in Lee County and that Lee County emergency departments are available to EMS providers. Deputy Chief Panem also confirmed that North Naples does not go on bypass. The North Naples emergency department consistently has been available to receive patients transported by Lee County EMS ambulances, during seasonal and off- season months. Offload times are a function of a variety of factors. Reasons for delays in offloading patients can include inadequate capacity or functionality of the emergency department, or inadequate staffing in the emergency department such that there may be empty treatment bays, but the bays cannot be filled with patients because there is no staff to tend to the patients. Individual instances of offload delays can occur when emergency department personnel prioritize incoming cases, and less-emergent cases might have to wait while more-emergent cases are taken first, even if they arrived later. Offload times are also a function of “throughput” issues. Approximately 20 to 25 percent of emergency department patients require admission to the hospital, but there can be delays in the admission process, causing the patient to be held in a treatment bay that could otherwise be filled by the next emergency patient. There can be many reasons for throughput delays, including the lack of an available acute care bed, or inadequate staffing that prevents available acute care beds from being filled. No evidence was offered to prove the actual causes of any offload delays. Moreover, the evidence failed to establish that offload times were unreasonable or excessive. Deputy Chief Panem offered offload time data summaries that reflect very good performance by LMHS hospitals and by North Naples. Deputy Chief Panem understandably advocates the shortest possible offload time, so that Lee County EMS ambulances are back in service more quickly. Lee County EMS persuaded the LMHS emergency departments to agree to a goal for offload times of 30 minutes or less 90 percent of the time, and that is the goal he tracks. Both Lee Memorial and North Naples have consistently met or exceeded that goal in almost every month over the last five years, including during peak seasonal months. Cape Coral and Gulf Coast sometimes fall below the goal in peak seasonal months, but the evidence did not establish offload times that are excessive or unreasonable during peak months. HealthPark is the one LMHS hospital that appears to consistently fall below Lee County EMS’s offload time goal; in peak seasonal months, HealthPark’s offload times were less than 30 minutes in approximately 70 percent of the cases. No evidence was offered to prove the extent of offload delays at HealthPark for the other 30 percent of emergency cases, nor was evidence offered to prove the extent of offload delays at any other hospital. Deputy Chief Panem referred anecdotally to offload times that can sometimes reach as high as two to three hours during season, but he did not provide specifics. Without documentation of the extent and magnitude of offload delays, it is impossible to conclude that they are unreasonable or excessive. There is no persuasive evidence suggesting that this facet of emergency care would be helped by approval of the proposed new hospital, especially given the complicated array of possible reasons for each case in which there was a delayed offload.13/ Staffing/professional coverage issues likely would be exacerbated by approving another hospital venue for LMHS. Pure physical plant issues, such as emergency department capacity and acute care bed availability, might be helped to some degree, at least in theory, by a new hospital, but to a lesser degree than directly addressing any capacity issues at the existing hospitals. For example, HealthPark’s emergency department has served as a combined destination for a wide array of adult and pediatric emergencies. However, HealthPark is about to break ground on a new on-campus children’s hospital with its own dedicated emergency department. There will be substantially expanded capacity both within the new dedicated pediatric emergency department, and in the existing emergency department, where vacated space used for pediatric patients will be freed up for adults. Beyond the emergency departments themselves, there will be substantial additional acute care bed capacity, with space built to accommodate 160 dedicated pediatric beds in the new children’s hospital. The existing hospital will have the ability to add more than the 80 acute care beds proposed for the new hospital. This additional bed capacity could be in place within roughly the same timeframe projected for opening the proposed new hospital. To the extent additional capacity would improve emergency department performance, Cape Coral is completing an expansion project that increases its treatment bays from 24 to 42, and Lee Memorial is adding nine observation beds to its emergency department. No current expansion projects were identified for Gulf Coast, which just began operations in 2009, but LMHS has already invested in design and construction features to enable that facility to expand by an additional 252 beds. In Mr. Kistel’s words, Gulf Coast has a “tremendous platform for growth[.]” (Tr. 259). Mr. Gregg summarized AHCA’s perspective in considering the applicant’s arguments of geographic and emergency access enhancement, as follows: [I]n our view, this community is already well served by existing hospitals, either within the applicant’s system or from the competing Naples system, and we don’t think that the situation would be improved by adding another very small, extremely basic hospital. And to the extent that that would mislead people into thinking that it’s a full-service hospital that handles time-sensitive emergencies in the way that the larger hospitals do, that’s another concern. (Tr. 1425). * * * The fact that this hospital does not plan to offer those most time-sensitive services means that any – on the surface, as I said earlier, the possible improvement in emergency access offered by any new hospital is at least partially negated in this case because it has been proposed as such a basic hospital, when the more sophisticated services are located not far away. (Tr. 1431). Mr. Gregg’s opinion is reasonable and is credited. Economic Access The Estero/Bonita Springs community is a very affluent area, known for its golf courses and gated communities. As a result of the demographics of the proposed hospital’s projected service area, LMHS’s application offers to accept as a CON condition a commitment to provide 10 percent of the total annual patient days to a combination of Medicaid, charity, and self-pay patients. This commitment is less than the 2011-2012 experience for the primary service area, where patient days attributable to residents in these three payer classes was a combined 16.3 percent; and the commitment is less than the 2011- 2012 experience for the total proposed service area, where patient days in these three categories was a combined 14.4 percent. Nonetheless, LMHS’s experts reasonably explained that the commitment was established on the low side, taking into account the uncertainties of changes in the health care environment, to ensure that the commitment could be achieved. In contrast with the 10 percent commitment and the historic level of Medicaid/charity/self-pay patient days in the proposed service area, Lee Memorial historically has provided the highest combined level of Medicaid and charity patient days in district 8. According to LMHS’s financial expert, in 2012, Lee Memorial downtown and HealthPark, combined for reporting purposes under the same license, provided 31.5 percent of their patient days to Medicaid and charity patients--a percentage that would be even higher, it is safe to assume, if patient days in the “self- pay/other” payer category were added. At hearing, Mr. Gregg reasonably expressed concern with LMHS shifting its resources from the low-income downtown area where there is great need for economic access to a very affluent area where comparable levels of service to the medically needy would be impossible to achieve. Mr. Gregg acknowledged that AHCA has approved proposals in the past that help systems with safety-net hospitals achieve balance by moving some of the safety net’s resources to an affluent area. As previously noted, that sort of rationale was at play in the LMHS project to establish HealthPark, and again in the acquisitions of Cape Coral and Gulf Coast. However, LMHS now has three of its four hospitals thriving in relatively affluent areas. To move more LMHS resources from the downtown safety-net hospital to another affluent area would not be a move towards system balance, but rather, system imbalance, and would be contrary to the economic access CON review criteria in statute and rule. Missing Needs Assessment Factor: Medical Treatment Trends The consistent testimony of all witnesses with expertise to address this subject was that the trend in medical treatment continues to be in the direction of outpatient care in lieu of inpatient hospital care. The expected result will be that inpatient hospital usage will narrow to the most highly specialized services provided to patients with more serious conditions requiring more complex, specialized treatments. Mr. Gregg described this trend as follows: “[O]nly those services that are very expensive, operated by very extensive personnel” will be offered to inpatients in the future. (Tr. 1412). A basic acute care hospital without planned specialty or tertiary services is inconsistent with the type of hospital dictated by this medical treatment trend. Mr. Gregg reasonably opined that “the ability of a hospital system to sprinkle about small little satellite facilities is drawing to a close.” (Tr. 1413). Small hospitals will no longer be able to add specialized and tertiary services, because these will be concentrated in fewer hospitals. LMHS’s move to clinical specialization at its hospitals bears this out. Another trend expected to impact services within the timeframe at issue is the development of telemedicine as an alternative to inpatient hospital care. For patients who cannot be treated in an outpatient setting and released, an option will be for patients to recover at home in their own beds, with close monitoring options such as visual monitoring by video linking the patient with medical professionals, and use of devices to constantly measure and report vital signs monitored by a practitioner at a remote location. Telemedicine offers advantages over inpatient hospitalization with regard to infection control and patient comfort, as well as overall health care cost control by reducing the need for capital-intensive traditional bricks-and- mortar hospitals. A medical treatment trend being actively pursued by both LMHS and NCH is for better, more efficient management of inpatient care so as to reduce the average length of patient stays. A ten-year master planning process recently undertaken by LMHS included a goal to further reduce average lengths of stay by 0.65 days by 2021, and thereby reduce the number of hospital beds needed system-wide by 128 beds. LMHS did not address the subject of medical treatment trends as part of its needs assessment. The persuasive evidence demonstrated that medical treatment trends do not support the need for the proposed new facility; consideration of these trends weighs against approval. Competition; Market Conditions The proposed new hospital will not foster competition; it will diminish competition by expanding LMHS’s market dominance of acute care services in Lee County. AHCA voiced its reasonable concerns about Lee Memorial’s “unprecedented” market dominance of acute care services in a county as large as Lee, which recently ranked as the eighth most populous county in Florida. LMHS already provides a majority of hospital care being obtained by residents of the primary service area. LMHS will increase its market share if the proposed new hospital is approved. This increase will come both directly, via basic medical-surgical services provided to patients at the new hospital, and indirectly, via LMHS’s plan for the proposed new hospital to serve as a feeder system to direct patients to other LMHS hospitals for more specialized care.14/ The evidence did not establish that LMHS historically has used its market power as leverage to demand higher charges from private insurers. However, as LMHS’s financial expert acknowledged, the health care environment is undergoing changes, making the past less predictive of the future. The changing environment was cited as the reason for LMHS’s low commitment to Medicaid and charity care for the proposed project. There is evidence of LMHS’s market power in its high operating margin, more than six percent higher than NCH’s operating margin between 2009 and 2012. LMHS’s financial expert’s opinion that total margin should be considered instead of operating margin when looking at market power was not persuasive. Of concern is the market power in the field of hospital operations, making operating margin the appropriate measure. Overall, Mr. Gregg reasonably explained the lack of competitive benefit from the proposed project: I think that this proposal does less for competition than virtually any acute care hospital proposal that we’ve seen. As I said, it led the Agency to somewhat scratch [its] head in disbelief. There is no other situation like it. . . . This is the most basic of satellites. This hospital will be referring patients to the rest of the Lee Memorial system in diverse abundance because they are not going to be able to offer specialized services. And economies of scale are not going to allow it in the future. People will not be able to duplicate the expensive services that hospitals offer. So we do not see this as enhancing competition in any way at all. (Tr. 1416-1417). The proposed hospital’s inclusion of outpatient services, community education, and chronic care management presents an awkward dimension of direct competition with adjacent BCHC, the joint venture between LMHS and NCH. BCHC has been a money-losing proposition in a direct sense, but both systems remain committed to the venture, in part because of the indirect benefit they now share in the form of referrals of patients to both systems’ hospitals. Duplication of BCHC’s services, which are already struggling financially, would not appear to be beneficial competition. While this is not a significant factor, to the extent LMHS makes a point of the non-hospital outpatient services that will be available at the proposed new hospital, it must be noted that that dimension of the project does nothing to enhance beneficial competition. Adverse Impact NCH would suffer a substantial adverse financial impact caused by the establishment of the proposed hospital, if approved. A large part of the adverse financial impact would be attributable to lost patient volume at North Naples, an established hospital which is not well-utilized now, without a new hospital targeting residents of North Naples’ home zip code. The expected adverse financial impact of the proposed new hospital was reasonably estimated to be $6.4 million annually. Just as LMHS cited concerns about the unpredictability of the health care environment as a reason to lower its Medicaid/charity commitment for the proposed project, NCH has concerns with whether the substantial adverse impact from the proposed hospital will do serious harm to NCH’s viability, when added to the uncertain impacts of the Affordable Care Act, sequestration, Medicaid reimbursement, and other changes. LMHS counters with the view that if the proposed hospital is approved, in time population growth will offset the proposed hospital’s adverse impact. While consideration of medical treatment trends may dictate that an increasing amount of future population growth will be treated in settings other than a traditional hospital, Mr. Gregg opined that over time, the area’s population growth will still tend to drive hospital usage up. However, future hospital usage will be by a narrower class of more complex patients. Considering all of the competing factors established in this record, the likely adverse impact that NCH would experience if the proposed hospital is established, though substantial enough to support the standing of Petitioner North Naples, is not viewed as extreme enough to pose a threat to NCH’s viability. Institution/System-Specific Interests LMHS’s proposed condition to transfer 80 beds from Lee Memorial downtown is not a factor weighing in favor of approval of its proposed hospital. At hearing, LMHS defended the proposed CON condition as a helpful way to allow LMHS to address facility challenges at Lee Memorial. The evidence showed that to some extent, this issue is overstated in that, by all accounts, Lee Memorial provides excellent, award-winning care that meets all credentialing requirements for full accreditation. The evidence also suggested that to some extent, there are serious system issues facing LMHS that will need to be confronted at some point to answer the unanswered question posed by Mr. Gregg: What will become of Lee Memorial? Recognizing this, LMHS began a ten-year master planning process in 2011, to take a look at LMHS’s four hospitals in the context of the needs of Lee County over a ten-year horizon, and determine how LMHS could meet those needs. A team of outside and in-house experts were involved in the ten-year master planning process. LMHS’s strategic planning team looked at projected volumes and population information for all of Lee County over the next ten years and determined the number of beds needed to address projected needs. Recommendations were then developed regarding how LMHS would meet the needs identified for Lee County through 2021 by rearranging, adding, and subtracting beds among the four existing hospital campuses. A cornerstone of the master plan assessment by numerous outside experts and LMHS experts was that Lee Memorial’s existing physical plant was approaching the end of its useful life. Options considered were: replace the hospital building on the existing campus; downsize the hospital and relocate some of the beds and services to Gulf Coast; and the favored option, discontinue operations of Lee Memorial as an acute care hospital, removing all acute care beds and reestablishing those beds and services primarily at the Gulf Coast campus, with some beds possibly placed at Cape Coral. All of these options addressed the projected needs for Lee County through 2021 within the existing expansion capabilities of Gulf Coast and Cape Coral, and the expansion capabilities that HealthPark will have with the addition of its new on-campus children’s hospital. Somewhat confusingly, the CON application referred several times to LMHS’s “ten-year master plan for our long-term facility needs, which considers the changing geographic population trends of our region, the need for additional capacity during the seasonal months, and facility challenges at Lee Memorial[.]” (LMHS Exh. 3, pp. 12, 57). The implication given by these references was that the new hospital project was being proposed in furtherance of the ten-year master plan, as the product of careful, studied consideration in a long-range planning process to address the future needs of Lee County. To the contrary, although the referenced ten-year master plan process was, indeed, a long- range deliberative planning process to assess and plan for the future needs of Lee County, the ten-year master plan did not contemplate the proposed new hospital as a way to meet the needs in Lee County identified through 2021.15/ The ten-year master planning process was halted because of concerns about the options identified for Lee Memorial. Further investigation was to be undertaken for Lee Memorial and what services needed to be maintained there. No evidence was presented to suggest that this investigation had taken place as of the final hearing. The proposed CON condition to transfer 80 beds from Lee Memorial does nothing to address the big picture issues that LMHS faces regarding the Lee Memorial campus. According to different LMHS witnesses, either some or nearly all of those licensed beds are not operational or available to be put in service, so the license is meaningless and delicensing them would accomplish nothing. To the extent any of those beds are operational, delicensing them might cause Lee Memorial to suddenly have throughput problems and drop below the EMS offload time goal, when it has been one of the system’s best performers. The proposed piecemeal dismantling of Lee Memorial, without a plan to address the bigger picture, reasonably causes AHCA great concern. As Mr. Gregg explained, “[I]t raises a fundamental concern for us, in that the area around Lee Memorial, the area of downtown Fort Myers is the lower income area of Lee County. The area around the proposed facility, Estero, Bonita, is one of the upper income areas of Lee County.” (Tr. 1410). The plan to shift resources away from downtown caused Mr. Gregg to pose the unanswered question: “[W]hat is to become of Lee Memorial?” Id. Recognizing the physical plant challenges faced there, nonetheless AHCA was left to ask, “[W]hat about that population and how does [the proposed new hospital] relate? How does this proposed facility fit into the multihospital system that might exist in the future?” (Tr. 1410-1411). These are not only reasonable, unanswered questions, they are the same questions left hanging when LMHS interrupted the ten-year master planning process to react to HMA’s LOI with the CON application at issue here. Balanced Review of Pertinent Criteria In AHCA’s initial review, when it came time to weigh and balance the pertinent criteria, “It was difficult for us to come up with the positive about this proposal.” (Tr. 1432). In this case, AHCA’s initial review assessment was borne out by the evidence at hearing. The undersigned must agree with AHCA that the balance of factors weighs heavily, if not entirely, against approval of the application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a Final Order denying CON application no. 10185. DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.
Findings Of Fact In 1993, the US Health Care Financing Administration gave Respondent approval to design and implement a pilot program for the delivery of mental health services in part of Florida. The pilot program is limited to Medicaid Area 6, which consists of Hardee, Highlands, Hillsborough, Manatee, and Polk counties. The purpose of the pilot program is to change the way in which the State of Florida pays for mental health services under the Medicaid program. At present, the State makes "fee-for- service" payments based on predetermined fees for defined services. RFP, 1.1 KK. Under the new method, the State will make "capitation" payments consisting of a monthly fee paid in advance to the contractor for each enrolled Medicaid recipient, regardless whether the enrollee receives the services during the payment period. RFP, 1.1.H. On November 23, 1994, Respondent issued Request for Proposals 9501 (RFP). The purpose of RFP 9501 is to procure a contract with a "single, comprehensive mental health care provider on a prepaid, capitated basis, to provide mental health benefits to Medicaid recipients who are residents of Medicaid Area 6 . . .." RFP, 1.4. The second paragraph of RFP 1.4 identifies four goals of the procurement: that the procurement proceed in a timely manner, (2) that the . . . RFP . . . encourages free and open competition, (3) that the procurement effort and resulting new contract operations be completed in a timely manner without disruption of service to Medicaid clients, and (4) that the procure- ment result in a single contractor for Area 6 with sufficient resources to provide services to all AFDC related and SSI Without Medicare Medicaid eligibles in Area 6. Section 2.2 requires that the contractor provide "[i]npatient hospital care for psychiatric conditions," "[o]utpatient hospital care for psychiatric conditions," "[p]sychiatric physician services," "[c]ommunity mental health care," "Mental Health Targeted Case Management," and "Mental Health Intensive Case Management." Section 2.3 defines the six categories of services identified in the preceding paragraph. Referring to "Community mental health care" as "Community Mental Health Services," Section 2.3 states: Community Mental Health Services Community Mental Health Services are rehabil- itative services which are psychiatric in nature, rendered or recommended by a psychia- trist; or medical in nature, rendered or recommended by a psychiatrist or other physician. Such services must be provided in accordance with the policy and service provision specified in the Community Mental Health Services Provider Handbook. The term "Community Mental Health Services" is not intended to suggest that the following services must be provided by state funded "Community Mental Health Centers" or to preclude state funded "Community Mental Health Centers" from providing these services: There are eight categories of mental health care services provided under community mental health: Treatment planning and review; Evaluation and testing services; Counseling, therapy and treatment services provided by a psychiatrist or physician; Counseling, therapy and treatment services provided by a direct service mental health care provider; Rehabilitative services; Children's mental health services; Specialized therapeutic foster care, Level 1 and 2; and Day treatment programs. Community mental health services for children in specialized therapeutic foster care and resi- dential treatment will be provided by HRS District 6 Alcohol, Drug Abuse and Mental Health Program Office to the same degree as in the past. Services are limited to those covered services provided by or under the recommendation of a psychiatrist or physician and related to a plan of care provided or authorized by a psychiatrist or physician, as appropriate, based on the patient's diagnosis. Targeted Case Management The contractor shall adhere to the requirements of the Medicaid Case Management Services Provider Handbook, but will not be required to seek certifications from the HRS Districts' Alcohol, Drug Abuse and Mental Health Program Office in regard to clients, agency designation, or mental health care case manager qualifications. Case manager training materials will be made available through the agency for reproduction by the contractor. Intensive Case Management This is a new mandatory service which is intended to provide intensive, team case management to highly recidivistic persons who have severe and persistent mental illness. Section 2.5 requires that the contractor "adhere to the following minimum staffing, availability, and access standards": The contractor shall provide access to medically necessary mental health care (with the exceptions noted in section 2.4 B.) The contractor shall make available and accessible facilities, service locations, and service sites and personnel sufficient to provide the covered services (specifically, non-hospital outpatient, emergency and assessment services) throughout the geographic area, within thirty minutes typical travel time by public or private transportation of all enrolled recipients. (The typical travel time standard does not apply to waiting time for public transportation--it applies only to actual time in transit.) The contractor must allow enrollees to choose one of the capitated services, as provided in Section 5.1 F.1., when the plan offers another service, not reimbursed under the contract, as a downward substitution. The maximum amount of time between an enrollee's request for mental health services and the first point of service shall be as follows: For emergency mental health services as defined in section 1.1 BB., service shall be immediate. For persons initially perceived to need emergency mental health services, but upon assess- ment do not meet the criteria for emergency care, they are deemed to require crisis support and services must be provided within twenty-three hours. For routine outpatient intake, assessment shall be offered within seven calendar days. Follow-up service shall be offered within fourteen calendar days after assessment. Minimum staffing standards shall be as follows, and failure to adhere to these staffing standards, or the staffing standards indicated in the winning proposal, whichever are greater, may result in termination of the contract (if the contractor's "staff" person does not fill one of the "key staff" positions listed on page 81, the staff persons may be a subcontractor.): * * * The contractor's outpatient staff shall include at least one FTE direct service mental health care provider per 1,500 prepaid members. The Agency expects the contractor's staffing pattern for direct service providers to reflect the ethnic and racial composition of the community. The contractor's array of direct service mental health care providers for adults and children must include providers that are licensed or eligible for licensure, and demonstrate two years of clinical experience in the following specialty areas: Adoption, Separation and loss, Victims and perpetrators of sexual abuse, Victims and perpetrators of physical abuse, Court ordered evaluations, and Expert witness testimony. Mental health care case managers shall not be counted as direct service mental health care providers. The contractor shall provide Spanish speaking and Spanish literate direct service providers at each service location at which there are Spanish speaking enrollees. The contractor shall provide staff approp- riately trained and experienced to provide psychological testing. The contractor shall provide staff approp- riately trained and experienced to provide rehabilitation and support services to persons with severe and persistent mental illness. For all persons meeting the criteria for case management as specified in the Medicaid Case Management Provider Handbook, the contractor shall adhere to the staffing ratio of at least 1 FTE mental health care case manager per 20 children, and at least 1 FTE mental health care case manager per 40 adults. Direct service mental health care providers shall not be counted as mental health care case managers. * * * Section 2.10 provides, in part: The contractor shall be responsible for the coordination and management of mental health care and continuity of care for all enrolled Medicaid recipients through the following minimum functions: A. Minimizing disruption to the enrollee as a result of any change in service providers or mental health care case manager occurring as a result of the awarding of this contract. An offeror may not propose rates exceeding Medicaid's upper payment limit, which "is that amount which would have been paid, on an aggregate basis, by Medicaid under fee-for-service for the same services to a demographically similar population of recipients." 4.11. Section 1.1 TTT defines "Upper Payment Limit" similarly: "The maximum amount Medicaid will pay on a capitated basis for any group of services, based upon fee-for- service Medicaid expenditures for those same services." Section 4.11 sets the range of payment rates at 92-98 percent of the upper payment limit. Each offeror is required to propose a specific payment percentage within the range. Section 4.17 allows offerors to propose a risk corridor of up to 16 percentage points plus and minus the proposed range. The corridor must be equal above and below the capitation rate. The RFP illustrates the risk corridor by applying an 8 point corridor to a 95 percent capitation rate. In this case, the contractor absorbs any plan costs up to 4 percent over the actual payments made to the plan by Respondent or retains any excess plan payments up to 4 percent over the actual costs. Beyond the corridor, the contractor and Respondent share equally in the costs or savings, subject to Respondent's upper payment limit. In no event, however, shall the contractor be entitled to payment from Respondent for "start- up" or "phase-down" costs. Section 4.18 addresses subcontractors: The contractor is fully responsible for all work performed under the contract resulting from the RFP. The contractor may, with the consent of the agency, enter into written subcontract(s) for performance of certain of its functions under the contract. The contractor must have subcontracts with all administrative and service providers who are not salaried employees of the plan prior to the commencement of services under this contract. The contractor shall abide by the requirements of Section 1128A(b) of the Social Security Act prohibiting HMOs and other such providers from making payments directly or indirectly to a physician or other provider as an inducement to reduce or limit services provided to Medicaid enrollees. The contractor must submit signed subcontracts, for a complete provider network in order to obtain agency approval for operation in an area, within sixty days of the execution of this contract, for each proposed subcontracted service provider. Any additional subcontracts must be submitted to the agency twenty days prior to the subcontract effective date. Subcontracts must be approved in writing by the agency's Technical Project Manager prior to the effective date of any subcontract. No subcontract which the contractor enters into with respect to performance under the contract resulting from the RFP shall in any way relieve the contractor of any responsibility for performance of its duties. Amendments to subcontracts must be approved by the agency before taking effect. The contractor shall notify the agency in writing prior to termination of approved subcontracts. The contractor will agree to make payment to all subcontractors within 35 days of receipt of all invoices properly documented and submitted by the subcontractor to the plan. All subcontracts executed by the contractor under the resulting contract must meet the following requirements and be approved by the agency in advance of implementation. All subcontracts must adhere to the following requirements: Be in writing. Specify the functions of the subcontractor. Identify the population covered by the subcontract. Specify the amount, duration and scope of services to be provided by the subcontractor, including a requirement that the subcontractor continue to provide services through any post- insolvency period. Provide that the agency and DHHS may evaluate through inspection or other means the quality, appropriateness, and timeliness of services performed. Specify that the subcontractor has read and agreed to the subcontract and the service provision requirements under section 2 of RFP, for services to be provided under the subcontract, and to the contractor's admission and retention criteria for the services the subcontractor will provide as indicated in the subcontractor's response to section 5.1 F3.b,(5). Provide for inspections of any record pertinent to the contract by the agency and DHHS. Specify procedures and criteria for extension and renegotiation. Provide for prompt submission of information needed to make payment. Require an adequate record system be maintained for recording services, charges, dates and all other commonly accepted information elements for services rendered to recipients under the contract. Require that financial, administrative and medical records be maintained for a period of not less than five years from the close of the contract and retained further if the records are under review or audit until the review or audit is complete. Prior approval for the disposition of records must be requested and approved by the contractor if the subcontract is continuous. Require safeguarding of information about recipients according to 42 CFR, Part 431, Subpart F. Require an exculpatory clause, which survives the termination of the subcontract including breach of subcontract due to insolvency, that assures that recipients or the agency may not be held liable for any debts of the subcontractor. Provide for the monitoring of services rendered to recipients sponsored by the contractor. Specify the procedures, criteria and requirements for termination of the subcontract. Provide for the participation in any internal and external quality assurance, utilization review, peer review, and grievance procedures established by the contractor. Make full disclosure of the method and amount of compensation or other consideration to be received from the contractor. Provide for submission of all reports and clinical information required by the contractor. Make provisions for a waiver of terms of the subcontract, if appropriate. Contain no provision which provides incentive, monetary or otherwise, for the withholding of medically necessary care. Require adherence to the Medicaid policies expressed in applicable Medicaid provider handbooks. Require that the subcontractor secure and maintain during the life of the subcontract worker's compensation insurance for all of its employees connected with the work under this contract unless such employees are covered by the protection afforded by the provider. Such insurance shall comply with Florida's Workers' Compensation Law; and Contain a clause indemnifying, defending and holding the Agency and the plan members harmless from costs or expense, including court costs and reasonable attorney fees to the extent proximately caused by an negligent act or other wrongful conduct arising from the subcontract agreement. This clause must survive the termination of the subcontract, including breach due to insolvency. The contractor shall give the agency immediate notification in writing by certified mail of any action or suit filed and prompt notice of any claim made against the contractor by any subcontractor or vendor which in the opinion of the contractor may result in litigation related in any way to the contract with the agency. In the event of the filing of a petition in bankruptcy by or against a principal subcontractor or the insolvency of said subcontractor, the contractor shall immediately advise the agency. The contractor shall assure that all tasks related to the subcontract are performed in accordance with the terms of the contract. The contractor shall identify any aspect of service that may be further subcontracted by the subcon- tractor. Subcontractors shall not be considered agents of the agency. For evaluation purposes, the RFP divides proposals into two parts: technical and rate, including any rate corridor. The six categories under the technical part, with point values in parentheses, are: Management Summary (0 points), Organization and Corporate Capabilities (100 points), Proposed Staffing Pattern and Licensure of Staff and Facilities (250 points), Operational Functions (400 points), Mental Health Care Service Delivery (400 points), and Transition Workplan (100 points). RFP, 6.1. Section 5.1.C describes the 100-point Organization and Corporate Capabilities as follows: The proposer shall provide in this tab a descrip- tion of its organizational and corporate capabi- lities. The purpose of this section is to provide the agency with a basis for determining the contractor's, and its subcontractors', financial and technical capability for undertaking a project of this size. For the purpose of this tab, the term proposer shall refer to both the contractor and its major subcontractors. It does not refer to the plan's "parent company" unless specifically indicated. Section 5.1 D states the elements of the 250-point Proposed Staffing Pattern and Licensure of Staff and Facilities. Section 5.1 D.3 requires the offeror to disclose "actual and proposed" FTE professionals, including psychiatrists, case managers, psychologists, nurses, and social workers. Section 5.1D.4 requires the offeror to explain how the plan will allocate staff to meet various demands, such as for adoption, sexual and physical abuse counseling, and psychological testing of children. Section 5.1 D.5 requires the proposal to: Describe how the plan will ensure that it has the staff resources appropriately trained and experienced to provide rehabilitative and support services to low income adults with severe and persistent mental illness and, under separate heading, to children with severe and persistent mental illness. Denote the number and percent of total FTEs which will be filled by persons with this type of experience and who will be providing these types of services. Explain the contractor's rationale for the staffing levels indicated and provide a brief, one or two line, description of the training and exper- ience of such persons who will provide these services under the plan. Section 5.1.E describes the elements of the 400-point Operational Functions, in part, as follows: Within this tab, the proposer shall explicitly address its operational capacity to serve Medicaid recipients, and its previous history serving the Medicaid and other low income populations. Separately, the proposer shall address the member services the plan will offer, grievance procedures, quality assurance procedures, the contractor's proposed reporting systems, and the contractor's proposed handling of subcontracts. Service Area of Proposed Plan 42 CFR 434.36 Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement specified in section 2.5 A.1. Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement for child psychiatrists specified in Section 2.5 B.2. Describe, for each county, how the proposer will meet throughout the lifetime of the contract the 30 minute typical travel time requirement for adult psychiatrists specified in Section 2.5 B.1. * * * Section 5.1.F describes the 400-point Mental Health Care Service Delivery category. Section 5.1 F states, in relevant part: This section shall include a detailed discussion of the proposer's approach to providing mental health care. The proposer must be able to document a demonstrated ability to provide a comprehensive range of appropriate services for both children and adults who experience impairments ranging from mild to severe and persistent mental illness. Plans must provide services up to the limits specified by the RFP. They are encouraged to exceed these limits. However, in no instance may any service's limitations be more restrictive than those specified in the Florida Medicaid fee- for-service program. The plan cannot require payments from recipients for any mandatory services provided under this contract. Summary of Services * * * The following is a summary list of the services which may be provided . . . * * * Optional Services Crisis Stabilization Unit * * * z. Other Services (List) * * * Care Coordination 42 CFR 434.52; 10C-7.0524(16), F.A.C. Attach the plan's written protocol describing the plan's care coordination system, which should include the plan's approach to care coordination, utilization review, and assuring continuity of care, such as, verifying medical necessity, service planning, channeling to appropriate levels of treatment, and develop- ment of treatment alternatives when effective, less intensive services are unavailable. The protocol should also address the following questions: * * * 3. Indicate how the contractor will establish services in such a way as to minimize disruption of services, particularly to high risk populations currently served by the department, for children and, separately, for adults. * * * Section 6.3 describes the criteria for evaluating proposals. For Proposed Staffing Pattern and Licensure of Staff and Facilities, the evaluation criteria include, at 6.3 B.3.c: The ability of the proposer to ensure it has, and will continue to have, the resources necessary to provide mental health rehabilitation and support to children who are in the care and custody of the state or who have special needs, such as children who have been adopted or have been physically or sexually abused. About a year ago, Respondent issued RFP 9405, which also sought to procure mental health services on a capitated basis for Medicaid Area 6. Respondent received four proposals, which contained numerous deficiencies. Respondent later withdrew RFP 9405 for revisions to encourage more competition. Concerns over competition involve the role of Community Mental Health Centers (CMHC) in the procurement. CMHCs are publicly funded, not-for-profit entities that traditionally have provided five types of services: emergency, outpatient, day/night, inpatient, and prevention education. CMHCs now also operate crisis stabilization units and supply case management services, as well as specialized children's services, services for aged persons with severe and persistent mental illness, and services for persons with alcohol or drug dependencies. The RFP calls for a wide range of mental health care services, only part of which are community mental health services or other services presently provided by CMHCs. However, CMHCs constitute the only available network of existing providers of community mental health services to Medicaid clients in Medicaid Area 6. Medicaid payments account for about 30 percent of the revenue of Area 6 CMHCs. In late 1992, six CMHCs in Area 6 formed Florida Behavioral Health, Inc. in response to competition from one or more other provider networks, such as Charter. The competitive network of six CMHCs consisted of Manatee Glens Corp., Mental Health Care, Inc., Northside Mental Health Hospital, Peace River Center for Personal Development, Inc., Winter Haven Hospital, and Mental Health Services. Although the six CMHCs are not all of the CMHCs in Area 6, they provide nearly all of the community mental health services to Medicaid clients in Area 6. By early 1993, Florida Behavioral Health, Inc. formed Florida Health Partnership with Options Mental Health, Inc., which is a managed-care provider owned by First Hospital Corporation--a behavioral health management company. With the assistance of Florida Health Partnership, Options Mental Health, Inc. submitted a proposal in response to RFP 9405. An oral or written agreement between Florida Behavioral Health, Inc. and Options Mental Health, Inc. prohibited the six CMHCs from assisting any entity but Options Mental Health, Inc. in responding to RFP 9405. This agreement continues to prohibit the six CMHCs from assisting any entity but Options Mental Health, Inc. in responding to the RFP. The six CMHCs have shared with Options Mental Health, Inc. cost and utilization information. The importance of the unpublished cost information is unclear, and Petitioner has not yet made a public records request to obtain this information. The same is true of unpublished utilization information, which includes information on waiting lists for community mental health services. Any delay in providing community mental health services would have a bearing on the projected demand and thus the cost of a capitated plan. After withdrawing RFP 9405, Respondent revisited the requirement that offerors propose an existing network of providers. In an effort to encourage competition, Respondent deleted a requirement in RFP 9405 that proposals contain existing provider networks. Respondent substituted a requirement that proposals describe provider networks generally, without necessarily including names of subcontractors. Petitioner did not prove any fraudulent, illegal, arbitrary, or dishonest act by Respondent. The main thrust of Petitioner's case is that the effect of the RFP is illegal or arbitrary. Petitioner asserts that the RFP requires a sole source provider or, at minimum, precludes free and open competition. Petitioner argues that the RFP illegally and arbitrarily favors offerors of CMHCs, in partnership with CMHCs, or with subcontracts with CMHCs. Through testimony and argument, Petitioner asserts that various provisions of the RFP either exacerbate or fail to ameliorate the advantages enjoyed by CMHCs, especially due to RFP requirements of implementation of the new provider network in 60 days and with minimal disruption to Medicaid clients. RFP 1.4(2) encourages open and free competition. RFP 2.3 D disclaims any intent that only CMHCs may supply community mental health services. Petitioner's chief witness, Dr. Ronald Mihalick, testified that RFP 2.3 D favors CMHCs because state regulations have designated them the sole provider of community mental health services and government grants have funded their capital expenditures. Neither Dr. Mihalick, Petitioner's other witness, nor Petitioner's counsel has suggested a practical means by which to eliminate this advantage of CMHCs, which cannot, by executive or legislative fiat, be stripped of their buildings, equipment, or experienced staffs, nor of the advantages that may accrue to them by virtue of such assets. It would be counterproductive to eliminate CMHCs from direct or indirect participation in the subject procurement. Nor is Respondent required, if it were legally able, to assign to CMHCs the status of universal providers in order to eliminate illegality or arbitrariness from the RFP. The RFP seeks a broad range of mental health services, of which a substantial part are community mental health services. RFP 2.3 D represents a simple description of community mental health services and expressly negates the inference that only CMHCs may provide such services. RFP 2.3 E and F describes two of the five categories of mental health services: targeted case management and intensive case management, respectively. Intensive case management is a new service, and nothing suggests that Area 6 CMHCs have any direct experience that would give them an advantage in providing this new service, Targeted case management is an existing service provided by CMHCs. There is some doubt whether the RFP provides detailed cost information, including information about targeted case management. However, Petitioner has never made a public records request for such information from any of the CMHCs or Respondent. In any event, Petitioner has hardly presented sufficient evidence regarding targeted case management that the inclusion of such a service in the RFP is arbitrary or illegal. RFP 2.5 prescribes standards for minimum staffing, availability, and access. The minimum staffing standards do not require that existing service providers supply the specified services. For instance, "direct service mental health care providers" must be "licensed or eligible for licensure," as provided in RFP 2.5 B.3.a. Petitioner's objection is that the RFP expresses staffing standards in accordance with Medicaid guidelines, under which the CMHCs are already operating. This objection is puzzling because the procurement is for Medicaid services. In any event, the presence of such a provision does not render the RFP illegal or arbitrary for the reasons already stated. RFP 2.5 B.4 requires staffing ratios of one fulltime equivalency (FTE) per 20 mental health care case managers for children and one FTE per 40 mental health care case managers for adults. Again, though, the RFP does not require that such case managers must be currently employed by a CMHC or even currently providing such services. Petitioner legitimately objects to specifications expressed in terms of FTEs when applied to non-administrative services. The use of FTEs applies to fulltime employees, not to individual therapists who may see Medicaid clients on an occasional basis. The requirement that non-administrative services be expressed in FTEs unduly emphasizes process over product or outcome and is inconsistent with the spirit of the RFP. However, the use of FTEs in RFP 2.5 B.4 does not rise to the level of arbitrariness or illegality. As Respondent's chief witness, Marilyn Reeves, testified, an offeror may convert individual therapists to FTEs, even though the contractor may bear the risk of a faulty conversion formula. RFP 2.10 requires that the contractor implement the new capitated plan with minimal disruption to Medicaid clients, whose mental conditions may worsen from such disruption. Petitioner does not challenge this sensible provision. Petitioner instead argues that other pro-CMHC provisions preclude the implementation of a new plan with minimal disruption. Petitioner has failed to prove that the pro-CMHC provisions, except for 4.18 as discussed below, necessitate more than minimal disruption during the transition. RFP 4.17 provides that Respondent shall not pay the contractor's start-up or phase-down costs. Petitioner's objection is that government grants have paid for the capital expenditures of the CMHCs. For the reasons discussed in connection with RFP 2.3 D, Petitioner has failed to prove how this provision is arbitrary or illegal. RFP 5.1 D assigns 250 points for the proposed staffing pattern and requires the offeror to disclose "actual and proposed" FTE professionals, such as psychiatrists, case managers, and social workers. An offeror that has already identified its personnel may be able to provide a more detailed description and earn more points than another offeror that has yet to find its subcontractors. Likewise, RFP 5.1 D.5 requires a discussion of FTEs, although an offeror with as yet unidentified subcontractors probably can satisfy this section with a more generic discussion and not lose points. In any event, to the extent that the specification in terms of FTEs favors CMHCs, such a provision is not so onerous or unnecessary as to be arbitrary or illegal, as discussed in connection with 2.5 B.4. RFP 5.1 E assigns 400 points for operational functions and requires the offeror to "explicitly address its operational capacity to serve Medicaid recipients, and its previous history serving the Medicaid and other low income populations." Unlike RFP 5.1 C, which requires a proposal to address the contractor and its "major subcontractors," 5.1 E does not mention subcontractors, so this provision favors CMHCs even less than the other provisions of 5 and 6. Perhaps for this reason, neither Petitioner's witnesses nor Petitioner's proposed recommended order addressed RFP 5.1 E. RFP 5.1 F requires an offeror to provide a "detailed discussion," in which it shall "document a demonstrated ability to provide a comprehensive range of appropriate services . . .." An offeror with as yet unidentified subcontractors will likely be unable to supply nearly as much detail as an offeror with subcontractors already in place, but this provision would, if challenged, not be deemed arbitrary or illegal. However, Petitioner challenges only RFP 5.1 F.1 (Optional Services) and 5.1 F.4.a.3. Section 5.1 F.4.a.3 reiterates the requirement that the new capitated plan be implemented so as to "minimize disruption of services." As noted above, Petitioner of course does not object to this requirement, but uses it to show how other provisions are arbitrary or illegal. Petitioner objects to the portion of 5.1 F.1 identifying crisis stabilization units as an Optional Service. Although only CMHCs are licensed to operate crisis stabilization units, the same services are available from other sources, although often not as economically. Moreover, the crisis stabilization unit is only an Optional Service, which Respondent mentioned only for illustrative purposes. The last-cited option, "Other Services (List)," encourages offerors to devise creative options that may not involve such traditional providers as crisis stabilization units. RFP 6.3 B.3.c requires the offeror to ensure that "it has, and will continue to have, the resources necessary to provide mental health rehabilitation and support . . .." Satisfaction of the criteria of 6.3 B, like 5.1 C, D, and F, is easier for CMHCs and harder for contractors with as yet unidentified subcontractors. However, the advantage conferred upon CMHCs is not so great as to render 6.3 B arbitrary or illegal. To varying degrees, RFP 5.1 D.5, E.1, and F.1 (Optional Services) and 6.3 B.3.c prefer CMHCs or offerors affiliated with CMHCs. These provisions potentially conflict with the RFP provisions encouraging free and open competition and prohibiting more than minimal disruptions in service. The potential conflicts are partially attenuated by the ability of an offeror, prior to submitting a proposal, to identify subcontractors that may provide similar services to non-Medicaid clients or provide similar services to Medicaid clients in other areas of Florida or other states. RFP 5.1 D.5, E.1, and F.1 (Optional Services) and 6.3B impose qualitative standards upon the contractor and any subcontractors, whose employees have direct contact with the Medicaid clients. Non-CMHC offerors may nonetheless be able to identify, at the proposal stage, their subcontractors so as to earn the maximum points in these categories. For instance, offerors may find non-CMHC subcontractors providing community mental health services to non- Medicaid clients or to Medicaid clients elsewhere in Florida or the United States. With greater difficulty, non-CMHC offerors with as yet unidentified subcontractors may be able to project, at the proposal stage, features of their subcontractors. They may not be able to score as well as CMHCs and other offerors with already identified networks of community mental health service providers. However, to the extent that non-CMHCs are disadvantaged by these provisions, Petitioner has not shown that the inclusion of these provisions is arbitrary or illegal. These provisions ensure the delivery of quality mental health services. As likely as not, Petitioner has included these provisions after careful consideration of the benefits of further competitiveness and the costs of further limitations upon the participation of CMHCs. The final provision challenged by Petitioner is RFP 4.18, which acknowledges that the contractor may not itself provide the mental health services, but may contract with subcontractors for the provision of these services. Requiring that the contractor have subcontracts prior to the commencement of services under the new capitated plan, Section 4.18 adds that the contractor must submit for Respondent's written approval: signed subcontracts, for a complete provider network in order to obtain agency approval for operation in an area, within sixty days of the execution of this contract, for each proposed subcontracted service provider. Petitioner's challenge to RFP 2.3 D, E, and F; 2.5 A and B.3 and 4; and 4.17 fails because these provisions confer upon CMHCs an insignificant advantage, an advantage upon that could not be removed without eliminating CMHCs from the procurement, or an advantage while specifying an important substantive requirement. Petitioner's challenge to RFP 5.1 D.5, 5.1 E.1, 5.1F.1, and 6.3 B.3.c fails because these provisions, even if conferring significant advantages upon CMHCs, impose important qualitative requirements upon the delivery of mental health services to Medicaid clients. However, RFP 4.18 is different from these other provisions. It does not involve the actual delivery of mental health services to Medicaid clients. Section 4.18 dictates only how long after signing the contract with Respondent the contractor has to implement the new capitation contract. The advantage conferred by 4.18 upon CMHCs is neither trivial nor necessary. The federal waiver runs two years from the actual start-up date of the new capitation plan. Obviously, an inordinate delay in implementation might suggest that the contractor is unable to do the job, but nothing in the record suggests that 60 days marks the beginning of an inordinate delay. Respondent understandably wants to get the pilot project started quickly, presumably in anticipation of important cost savings. But these considerations do not rise to the importance of other provisions involving the actual delivery of mental health services to Medicaid clients. Non-CMHCs, especially offerors with as yet unidentified subcontractors, face a considerable task in plan implementation. For this procurement, only one offeror will have the assistance of the CMHCs, which gives that offeror a clear advantage in at least the community mental health and targeted case management categories. There is no good reason to increase this advantage by imposing an unrealistically short implementation timeframe on contractors. On the other hand, there are two reasons why the 60-day implementation timeframe is arbitrary and illegal: it conflicts with RFP provisions encouraging open competition and it conflicts with RFP provisions prohibiting more than a minimal disruption to clients. The new capitation plan represents a marked departure from past practice. The successful contractor is assuming considerable financial risks when it sets its fees and risk corridor, if any. This risk is spread over a wide geographic area containing some of Florida's most densely populated areas. Anticipated cost savings to the State may result in narrowed profit margins before the contractor can safely realize savings from reductions in the cost of mental health services provided to Medicaid clients. The success of the capitation plan is jeopardized if the contractor underestimates the revenue needed for the successful operation of the plan. The offeror without subcontractors at the time of submitting a proposal needs time to enlist the cooperation of CMHCs or other subcontractors. A witness of Respondent described a possible scenario in which CMHCs declined to cooperate with the contractor and were forced to terminate employees. Although these employees would be available to the contractor, they would not likely be available in a 60-day timeframe. A multitude of tasks confront the non-CMHC contractor, especially if the contractor does not have a subcontractor network in place when submitting the proposal. Not surprisingly, Respondent's witnesses did not offer a spirited defense of the 60-day implementation timeframe, as is partly illustrated by the following testimony of Respondent's chief witness: Q: Is there a reason that the language on Page 61 says "must have signed subcontract within 60 days?" A: No. What it is trying to get at there is that if you are going to start being operational within 60 days, you got to know that you got to get those subcontracts approved by us prior to being able to do that. Respondent's witness readily testified that the deadline would not be enforced, if the enforcement jeopardized the welfare of the Medicaid clients. Of course, given the vulnerability of the clients, Respondent would not require the implementation of an unfinished plan at the end of the contractual implementation timeframe, regardless of the duration of the implementation timeframe. But a rational deadline for implementation would not so readily invite discussions of waivers and extensions. The presence of an impractical deadline misleads offerors. Some offerors may obtain an unfair advantage by structuring their proposals without regard to the implementation timeframe, secure in the knowledge that it will not be enforced. Other offerors may limit Optional Services or avoid more creative delivery or administrative programs in order to ensure that their plans can be implemented within the arbitrarily short implementation timeframe. To eliminate arbitrary and illegal conflicts with other RFP provisions encouraging open competition and prohibiting more than minimal disruptions in service, the implementation timeframe of 60 days must be extended to at least 120 days.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a final order amending RFP 4.18 by inserting "120" days for "60" days in the second paragraph and making any necessary conforming changes elsewhere in the RFP, and, after making these changes, proceed with the subject procurement. ENTERED on January 31, 1995, in Tallahassee, Florida. ROBERT E. MEALE 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 on January 31, 1995. APPENDIX Rulings on Petitioner's Proposed Findings 1-4: (except that "poisonous" in paragraph 2 is rejected as melodramatic and unsupported by the appropriate weight of the evidence): adopted or adopted in substance. 5: rejected as unsupported by the appropriate weight of the evidence, except for 4.18. 6-7: adopted or adopted in substance, except that Petitioner did not challenge 5.1 E at the hearing or in the proposed recommended order. 8: rejected as irrelevant. 9-13: adopted or adopted in substance. 14: rejected as unsupported by the appropriate weight of the evidence. Petitioner did not prove that the actual information shared by the CMHCs was crucial--only that certain information could theoretically be crucial. 15: adopted or adopted in substance, although other CMHCs operate in Area 6, but do not possess much share of the community mental health services market. 16-17: rejected as irrelevant. 18: adopted or adopted in substance, except for the last sentence, which is rejected as unsupported by the appropriate weight of the evidence (except for 4.18). 19-20: adopted or adopted in substance. 21: rejected as repetitious. 22: adopted. 23-25: adopted or adopted in substance, except for last sentence of paragraph 25, which is rejected as unsupported by the appropriate weight of the evidence. 26-27: adopted or adopted in substance. 28: rejected as unsupported by the appropriate weight of the evidence. 29-33: adopted or adopted in substance, except for last sentence of paragraph 33, which is rejected as unsupported by the appropriate weight of the evidence. 34: adopted or adopted in substance. 35-36: rejected as unsupported by the appropriate weight of the evidence. 37-38: adopted or adopted in substance, although this was hypothetical testimony of one of Respondent's witness, not a formal statement of Respondent's "position." 39 (first sentence): rejected as unsupported by the appropriate weight of the evidence. 39 (second sentence): adopted. 40-44 (second sentence): adopted or adopted in substance. 44 (third sentence): rejected as recitation of evidence. 45: adopted. 46-47: adopted or adopted in substance. 48: rejected as unsupported by the appropriate weight of the evidence. 49: rejected as irrelevant and, except for 4.18, unsupported by the appropriate weight of the evidence. Rulings on Respondent's Proposed Findings 1-5: adopted or adopted in substance. 6: adopted or adopted in substance, except for 4.18. 7: adopted or adopted in substance. 8: adopted or adopted in substance, at least to the extent that Petitioner failed to prove the contrary. 9 (except last sentence): adopted or adopted in substance. 9 (last sentence): rejected as speculative. 10-16: adopted or adopted in substance, although the extent of Petitioner's ability to respond satisfactorily is questionable, as is the rationale for the use of FTEs for non-administrative positions. Additionally, all proposed findings that RFP provisions do not place non-CMHCs at a disadvantage, when such proposed findings conflict with findings in the recommended order, are rejected as unsupported by the appropriate weight of the evidence. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Seann M. Frazier Mark A. Emanuele Panza Maurer P.A. 3081 East Commercial Blvd. Suite 200 Ft. Lauderdale, FL 33308 Paul J. Martin William H. Roberts Assistant Attorneys General Office of the Attorney General PL-01, The Capitol Tallahassee, FL 32399-1050
Findings Of Fact NEED FOR LONG TERM ADOLESCENT PSYCHIATRIC BEDS Both the application of PIA and that of HMA are for long term adolescent psychiatric beds in DHRS District IX. All parties to this proceeding are in agreement that there is some need in District IX for long term adolescent psychiatric beds. The need for long term adolescent psychiatric beds was analyzed in two general ways. DHRS and the applicants analyzed by an "interview analysis." This method involves interviewing key persons engaged in the provision of mental health care as it is affected by the availability of that care in District IX. In performing its interview analysis DHRS contacted several agencies; including the District IX Local Health Council, the Mental Health Board the Alcohol, Drug Abuse and Mental Health Program Office in District IX and the Children Youth and Family Program Office (CYF) in Tallahassee. All the persons contacted indicated that there was a need for long term adolescent psychiatric services in District IX. The CYF in Tallahassee indicated that 40 adolescents from District IX were being provided long term psychiatric services through POS of Payment of Services. Under the POS program, the State pays to or contracts with providers of long term psychiatric services. At present these services are being provided outside of District IX. Additionally, CYF indicated that 25 adolescents from District IX were being provided similar services out-of-State and 32 adolescents were on a waiting list to be provided with long term services. Further, 6 adolescents were receiving long term services in state hospitals; 6 in group homes; and 17 in foster homes. Phillip C. Braeuning, Director of Development for HMA, also conducted an interview analysis of District IX. He interviewed essentially the same individuals as those interviewed by DHRS and received documentation from CYF and the District IX Mental Health Board regarding the availability of long term adolescent services in District IX. All of this documentation showed a need for long term adolescent psychiatric beds. HMA Exhibit 6, entitled District IX, Children and Adolescent Services, and prepared by the District IX Mental Health Board, indicates that 359 patients in District IX need residential psychiatric care. HMA Exhibit 7, which was received from CYF in Tallahassee, shows that 27 adolescents are receiving long term psychiatric services outside of District IX, both in-state and out-of-state. There are fourteen approved long term adolescent psychiatric beds in District IX, proposed to be located in the Vero Beach area in Indian River County, the northernmost county in District IX. These beds were granted in the batching cycle subsequent' to the cycle in which the HMA and PIA applications were considered. In determining the existing need for long term adolescent psychiatric beds in District IX, the DHRS's analysis, as presented at final hearing, considered these approved beds. The DHRS analysis is that there is sufficient need in District IX for the granting of both the HMA and PIA applications in addition to the approved 14 beds. Both HMA and PIA also analyzed need according to a numerical methodology. The experts of both HMA (Noel D. Falls) and PIA (Carol Moore) applied the Graduate Medical Education National Advisory Committee (GMENAC) methodology. While both these experts utilized the GMENAC methodology, their methods of application and projected bed need numbers were significantly different. Mr. Falls assumed a targeted age group of 10-19 using the methodology. He then identified a prevalence rate for psychoses and neuroses diagnoses. The District IX population ages 10-19 was 125,561. This was multiplied by the admission rate of .00103 (103 psychoses and neuroses per hundred thousand population) to determine the projected admissions for 1989. The projected admissions of 129 was then multiplied times four different lengths of stay (90, 120, 150 and 180 days) to determine the number of patient-days projected. The number of patient days projected was then divided by 365 days and then was again divided by 80 percent(the occupancy standard required by Rule 10-5.11(26) Florida Administrative Code) to arrive at the total need for long term adolescent psychiatric beds in District IX. After performing these calculations, Mr. Falls concluded that at an average length of stay of 90 days, 40 beds would be needed; and at an average length of stay of 120 days, 53 beds would be needed; at and average length of stay 150 days, 66 beds would be needed; at an average length of stay 180 days, 80 beds would be needed. Mr. Noel did not apply any adjustments to these figures because, in his opinion, the GMENAC methodology already has an adjustment factor built into the prevalency rate to account for any difference between need and utilization or demand. Additionally, Mr. Falls has never seen anyone advocate the application of a "demand adjustment" in addition to that already built into the methodology. PIA's expert, Carol Moore, also used the GMENAC methodology to determine the need for long term adolescent psychiatric beds in District IX. Ms. Moore used a target population of ages 10-17 and used a 90 percent occupancy rate as opposed to the 80 percent occupancy rate used from Mr. Falls. Ms. Moore performed GMENAC calculations in the same manner as Mr. Falls and concluded that using a 90 percent occupancy rate, 38 beds would be needed at an average length of stay of 120 days and 57 beds would be needed at an average length of stay of 180 days. If Ms. Moore had used an 80 percent occupancy rate, 43 beds would be needed at an average length of stay of 120 days and 64 beds would be needed at an average length of stay of 180 days. Ms. Moore then applied a "demand adjustment" to these projections. In her opinion, the bed need projection needs to be reduced by 50 percent because only 50 percent of those patients who actually need care will seek or demand it. Ms. Moore did not think that a demand adjustment was built into the GMENAC methodology. If the demand adjustment is applied, however, the above projected bed need, at both 90 percent and 80 percent occupancy; would be reduced by one-half. Ms. Moore also subtracted the approved beds in Vero Beach from the projected bed need and concluded that there was a net need of 14-21 long-term adolescent psychiatric beds at 90 percent occupancy and 16-23 beds at 80 percent occupancy. In analyzing need, the primary service area for both the HMA and PIA facilities is District IX. It is recognized by all the parties that there is a secondary service area which includes District X. If the secondary service area is taken into consideration, there is a greater need than that indicated by any method. THE HMA APPLICATION In the November, 1983, batching cycle, HMA filed an application for a Certificate of Need to construct a "60-bed residential adolescent center" in Palm Beach County, Florida. Total projected cost was to be $6,307,310. HMA is a corporation with main offices in Fort Myers, Florida. It is engaged in the operation of acute care and psychiatric hospitals. HMA originally proposed to locate its facility in Boca Raton, Florida. Based on subsequent demographic data supplied to it by Noel D. Falls, HMA made a decision to move the facility to the northern part of Palm Beach County, specifically north of PGA Boulevard. However, at the time of final hearing, HMA had not selected a site for the proposed facility and did not limit itself to a location north of PGA Boulevard. The proposed HMA facility is to be patterned after a 55-bed adolescent treatment program currently operated by HMA in Arlington, Texas. At the time of final hearing, the Arlington, Texas, facility had been operating for approximately one month. The proposed treatment program will be based on a holistic concept of health care. The facility will be a long term hospital for the treatment of adolescents between the ages of ID and 19. It is anticipated that the facility will treat the whole person, not just the psychiatric conditions. In doing so, the program will look at and treat family problems, social problems, and other factors which have a bearing on the adolescent's ability to fit into society. The form of treatment proposed is based on the "levels of care" medical model of psychiatric treatment. This form of treatment is a behavior modification program wherein privileges are granted and tokens are received by the patients for specified behaviors Good behaviors are re-enforced; bad behaviors are not rewarded. Movement to the next succeeding level of privileges is permitted only after achievement of a certain behavior pattern. The ultimate goal of this model is to allow the adolescents to take on more suitable functioning and responsibility and to look after themselves once they leave the facility. The levels of care approach will require approximately 4-6 months for the patient to move from the admission level to the level of discharge. The ongoing quality of programs at the HMA facility will be monitored from a corporate level. Additionally, HMA intends to seek accreditation of its hospital from the Joint Commission on Accreditation of Hospitals. The HMA proposal anticipates a unit size of 30 adolescents, however, HMA witness, Dr. Max Sugar, does not use the treatment program proposed by HMA and believes adolescents are best treated in units of 15-20. Staffing projections for the facility, based upon the staffing structure at the Arlington, Texas, facility, call for: One Administrator Two Assistant Administrators Fourteen Registered Nurses Forty-four Mental Health Technicians Four Social Workers Two Psychologists Six Counselors Medical Director Dietician (quarter-time) Kitchen Workers Purchasing personnel Financial Manager Four Business Office Personnel Six Secretarial/Administrative Positions Two Personnel Employees Twelve Miscellaneous Other Positions. Salaries for the proposed staff are based upon information from the National Association of Private Psychiatric Hospitals and from a study done by the Florida Hospital Association. Projected salaries should therefore be adequate to attract qualified personnel. Because the proposed facility is a 60-bed facility, it is of sufficient size to allow HMA to hire the necessary staff of physicians, paraprofessionals, psychologists and social workers on a full-time basis. HMA is apparently not intending to be involved in any research or teaching endeavors at its proposed facility. HMA has not made any productive contact with any members of the local medical community or mental health community. It has not made contact with health care providers such as physicians, psychiatrists, acute care hospitals, drug abuse programs, or mental health programs as it relates to any source of referrals. HMA has no plans for joint, cooperative or shared health care resources that would result in economies or improvements in the provision of health care. HMA has not selected a site for its proposed facility. Approximately one week prior to final hearing, HMA contacted Edward Riggins, a real estate broker and agent familiar with real estate values and availability in Palm Beach County, Florida. While HMA's application calls for a site to be a minimum of 10 to 15 acres in a semi-rural area to allow for a green belt and space for outdoor activities, the instructions given to Mr. Riggins called for a parcel of 5-15 acres and emphasized a location in close proximity to major highways and interstates with utilities within economic reach. Mr. Riggins located three potential parcels prior to hearing, but HMA had not even looked at these parcels. Additionally, any location in Palm Beach County will require a special exception to zoning in order for the site to be used for a psychiatric hospital. Factors which will impact upon achieving this special exception include traffic studies, engineering studies, and a site plan which conforms to the Palm Beach County building and zoning codes. Mr. Riggins believes that he will eventually be able to find a site which meets HMA's requirements as to price, location availability of utilities, and access, and that a special exception will be achieved. A significant factor which may impact on cost is the traffic impact analysis for a particular site. Palm Beach County imposes considerable costs and fees upon the development of properties which may impact upon traffic on the major arteries in the county. Many of the major arteries in the northern portion of Palm Beach County are at or over capacity. The cost associated with traffic impact at a particular site could be great. While it appears likely that HMA can eventually find a suitable site, it is unknown what the impact of the site location will be on cost. 23 The design plans for the proposed HMA facility were characterized by John R. Chambless, HMA expert in architecture and design, as being a "first look." Numerous changes will be bade prior to completion of the "second look" and "third look." Even at final hearing it was clear that HMA was altering the design plan which accompanied its application. That design plan called for approximately 45,000 square feet and included a gymnasium and swimming pool. At hearing the proposed design plan contemplated elimination of the gymnasium and redesigning of the physical Plant to provide for square footage of approximately 50,524. Final design planning cannot be done until HMA has selected a site for its facility. Additionally, the site preparation aspect of the architectured plans could not be considered or anticipated because of lack of the site. In its application, HMA projected the total cost of the project to be $6,307,310.00. Included within this figure are project development cost of $18,000.00; financing cost, $838,010.00; architecture and soil testing fees, $204,000; construction cost, $3,750,300.00 (including contingency and inflation); land acquisition, $450,000; interest during construction, $170,000; fixed and movable equipments, $800,000; and other costs, $57,000. Mr. Chambless believed that the construction cost and other construction related project costs as reasonable even though the proposed project contemplated approximately 5,000 additional square feet. He believed that 6 percent architecture and engineering fees are reasonable, that a 7 percent contingency factor was reasonable, and that the cost of preparing the site was reasonable, assuming that the site selected did not have dramatic water problems. Mr. Chambless based his opinion testimony on his experience in the construction of health care facilities in Florida and in other states, but he had very little recent experience with psychiatric hospitals and no experience in the Palm Beach County area. In contrast, according to Tom Ebejer, an expert in health care facility design and construction, including design cost and construction cost, the proposed construction costs of HMA are considerably understated. Mr. Ebejer has extensive experience in construction costs for health care facilities and has extensive current knowledge and experience in such construction costs in Florida and, in particular, in Palm Beach County. Specifically, the HMA proposed cost of construction for a 50,000 square foot building works out to a cost of $76.72 per square foot. Mr. Ebejer proposes that such construction in Palm Beach County would cost $95.00 per square. These estimates are consistent with costs of recently constructed free standing adolescent hospitals in Citrus County ($90.77 per square foot), Orlando ($95.00 per square foot), West Palm Beach, and Miami Beach. The construction cost of the current PIA facility in Delray Beach was $91.45 per square foot. Additionally, the site preparation cost proposed by HMA ($151,000.00) is approximately 5 percent of the anticipated construction cost. In Mr. Ebejer's experience, site preparation in the Palm Beach County area would be 10 percent of total construction costs on a normal site without a lot of problems. Problems that are typically encountered will include drainage problems, swampy areas, or bay heads. With these factors considered, Mr. Ebejer projects that construction of HMA facility would cost $4,750,000.00 as compared to the proposed cost of construction of $3,836,800.00, for a understatement of the cost of construction of $913,000.00. Mr. Ebejer's projected square footage cost of construction is based upon the least expensive construction design, material, and finishes. In evaluating the testimony of Mr. Chambless and Mr. Ebejer, it is found that Mr. Ebejer's opinions regarding construction cost are based upon his extensive experience in construction cost of similar facilities in Florida and Palm Beach County. Mr. Ebejer's testimony is given greater weight than that of Mr. Chambless and it is found that HMA's construction costs as proposed are understated and not reasonable. HMA anticipates obtaining financing for its facility either through a local bond issue or through financing by a Private lending institution. According to Howard H. Weston, Senior Vice-President of the Municipal Financing Department of Arch W. Robertson and Company, an investment banking firm head quartered in St. Petersburg, Florida, financing through a bond issue can be obtained for this project. HMA may also receive a letter of credit from a lending institution, but it is probably not possible to receive such a letter of credit without an equity contribution from HMA. If a bond issue is utilized, it would be backed by revenues of the project, a first mortgage on the property and a corporate guarantee. It could also be backed by a letter of credit, but that would require some equity contribution by HMA. The interest rate anticipated by HMA, as shown in their application of 11.5 percent is unrealistic. The lowest interest rate on these types of bonds in the last 12 months has ranged from 12 1/2 percent to 13 3/4 percent. While HMA's projected financing for the project is preliminary, it is found that financing can probably be achieved through some combination of revenue bonds, a letter of credit, and a corporate guarantee. The proposed financing arrangement is reasonable, based upon HMA projected cost. It is probably also reasonable in light of the earlier finding that those cost are understated, in that Mr. Weston has contemplated financing from the issuance of six and half to seven million dollars worth of bonds. THE PIA APPLICATION In the November, 1983, batching cycle, PIA submitted a Certificate of Need application to add 15 long term and 15 short term adolescent psychiatric beds to its facility located in Delray Beach, Florida. No question involving the short term beds was involved in this proceeding. PIA's existing facility in Delray Beach is named the Psychiatric Institute of Delray and is a seventy-two bed speciality psychiatric hospital scheduled to open in early 1985. When it opens, it will consist of short term psychiatric and substance abuse beds. Psychiatric Institute of Delray is part of the Medical Center at Delray, a medical campus owned and operated by National Medical Enterprises, the parent company of PIA. PIA's home office is Washington D.C., and PIA is the psychiatric division of National Medical Enterprises, a corporation engaged in the operation of numerous hospitals throughout the country. The Medical Center at Delray contains an existing acute care hospital, a nursing home, and medical office buildings. Additionally, a Certificate of Need has been issued for the construction of a Rehabilitation Hospital; a shopping center providing support services for the medical campus is also under construction. PIA's proposed treatment program was described as a "broad-based general systems approach." This program involves examining the entire individual and trying to understand those factors that influence the patient's clinical state. The treatment model is essentially a medical model. An important part of the treatment program will be evaluation in the neuro-psychiatric evaluation unit which is a part of the existing facility at the Psychiatric Institute of Delray. Patients in the neuro-psychiatric evaluation unit, including adolescents which may eventually become long term patients, will be given a detailed battery of psychiatric, psychological and biological tests to help determine the nature and extent of their illness. Based upon this evaluation, new patients would be placed in the appropriate treatment units. PIA has already hired a medical director and clinical director for the facility as well as three other psychiatrists in charge of various aspects of the program at Psychiatric Institute of Delray. This psychiatric staffing results in 2.5 full-time equivalent psychiatrists on its medical staff. The psychiatrists are currently preparing to operate the short term psychiatric unit at Psychiatric Institute of Delray and will provide the staff psychiatric services for the proposed 15 long termadolescent psychiatric beds. The psychiatrists were trained at Yale University, are eminently qualified to provide psychiatric services, and will bring active research and teaching backgrounds to the hospital. The staffing projection for the 15-bed addition will include the following: One Social Worker One Activity Therapist Two Unit Coordinators Ten Registered Nurses Sixteen Mental Health Workers Two Group Leaders One Unit Secretary One Medical Transcriber One Admissions Employee One Secretary One Maintenance Staff k. Three Housekeeping Staff m. Three Food Service Workers PIA intends to set up a medical residency program with the University of Miami, a psychological residency with Nova University, and a nursing residency with Florida Atlantic University. The staff at PIA will be active in the area of research and education. Every patient in the PIA facility will be seen by a psychiatrist seven days a week and all psychiatrists on staff will be board certified or board eligible. There will be supervision of the clinical staff by qualified personnel, a professional activity committee and a quality assurance committee. The hospital will seek accreditation from the Joint Commission on Accreditation of Hospitals and there will be continuing education programs for the staff at all levels. PIA has been successful in recruiting qualified staff for the other units in its facility and the methods used for the recruitment are adequate for the recruitment of staff in the proposed long term adolescent unit. Psychiatric Institute of Delray has established a referral network in Palm Beach County and PIA has established contact with other components of the health care community in Palm Beach County. The hospital will be affiliated with the 800 COCAINE Program which is a national hot-line for cocaine users This affiliation will provide a referral source for the hospital and the long term adolescent unit. PIA will obtain an 80 percent occupancy in the long term adolescent unit by its third year of operation. Projected cost of the project, for both the 15 long term and 15 short term beds, is $1,360,00.00. The projected development costs are $5,000 in feasibility studies, survey and permit; $80,000 in architecture and engineering fees; construction cost of $1,030,000; equipment cost of $115,000; and land acquisition and other related costs of $115,000. The design plan and projected costs are adequate and reasonable for the proposed addition to the Psychiatric Institute of Delray.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order granting the Certificate of Need application of Psychiatric Institute of Delray, Inc., d/b/a Psychiatric Institute of Delray, for 15 long term adolescent psychiatric beds. Further, that a Final Order be entered denying the Certificate of Need application of Hospital Management Associates, Inc., for a 60-bed long term adolescent psychiatric hospital. DONE and ENTERED this 17th day of May, 1985, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of May, 1985.
The Issue The issue is whether Windmoor has standing to challenge AHCA's award of Certificate of Need No. 10074 to Community to establish a Class III Specialty Psychiatric Hospital in New Port Richey, Florida.
Findings Of Fact AHCA is the state agency responsible for administering the CON program, and is authorized to evaluate and make final determinations on CON applications pursuant to the Health Facilities and Services Development Act, sections 408.031-.045, Florida Statutes. Community Community Hospital owns and operates a 389-bed Class I general acute care hospital, comprised of 343 acute care beds and 46 adult psychiatric beds, currently located at 5637 Marine Parkway, New Port Richey, Pasco County, Florida, AHCA Health Planning District 5. AHCA previously awarded CON No. 9539 to Community authorizing construction of a replacement facility in an area known as Trinity, approximately 5.5 miles southeast of Community's current location. The Trinity replacement hospital facility is currently under construction and scheduled for occupancy in November 2011. The route between the Trinity and Community campuses is a drive of approximately one mile on a two-lane road leading into State Road 54, a six-lane divided highway. Trinity Medical Center campus is located on State Road 54. Windmoor Windmoor is a licensed Class III Specialty Hospital with 78 adult psychiatric beds and 22 adult substance abuse beds, located in Clearwater, Pinellas County, Florida. Windmoor is an existing provider of adult psychiatric services located within the same Health Planning District 5 as Community. Windmoor's facility has remained in its current location since its inception in 1987. That year, Windmoor had 200 adult psychiatric beds, which were reduced in 1996 to 163. In 2001, the number of adult psychiatric beds was reduced to its current 100. Windmoor has the capability of adding 40 to 60 additional beds. Windmoor's parent corporation is Psychiatric Solutions, Inc. (PSI), a publicly traded company based in Franklin, Tennessee, that also owns psychiatric hospitals in other states. PSI also owns at least seven other psychiatric hospitals in Florida, as well as other treatment facilities. PSI acquired all of its Florida facilities within the past five years, including Windmoor in 2006. On November 15, 2010, PSI was acquired by Universal Health Systems, which owns and operates psychiatric hospitals and general acute care hospitals throughout the United States, including Florida. This is the first CON proceeding in which Windmoor has participated. District 5 Providers District 5 consists of Pasco and Pinellas Counties. At the time the CON application was filed, Pasco County had two adult inpatient psychiatric providers: Community and Florida Hospital Zephyrhills with 15 beds. The Pinellas County providers were Morton Plant Hospital (Clearwater), St. Anthony's Hospital, Sun Coast Hospital (now known as Largo Medical Center- Indian Rocks) (Largo), and Windmoor. Windmoor was the only Class III specialty psychiatric hospital in District 5. Additionally, new CON-approved adult psychiatric beds included 17 at Largo, and approval for Ten Broeck Tampa, Inc., to construct a new 35-bed Class III adult psychiatric hospital in Pasco County. Also, Morton Plant North Bay Recovery Center (NB Recovery Center) had received CON exemptions to establish 56 adult psychiatric beds at its new Class III facility in Pasco County which had already been approved for 10 child/adolescent psychiatric beds. NB Recovery Center is a new entrant into the market, having opened its Class III psychiatric hospital in August 2010. This Class III psychiatric hospital is on the same license as North Bay Hospitals' Class I general acute care hospital (North Bay). North Bay is located about one mile north of Community. The approximate distances of the District 5 providers from Community are: NB Recovery Center, 19 miles; Florida Hospital Zephyrhills, 40 miles; Morton Plant Hospital, 24 miles; and Windmoor, 26 miles. Also, Largo, like Community, is an HCA affiliated hospital located approximately nine miles north-northwest of Windmoor, and two to four miles south of Morton Plant. St. Anthony's Hospital is located in downtown St. Petersburg. CON approvals and exemptions are no longer reliable predictors of bed inventory since existing psychiatric facilities can add beds through CON exemptions at will. Service Areas No overlap exists between Community and Windmoor's service areas. Community's primary service area (PSA) is a nine zip code area located in western Pasco County. Community's secondary service area (SSA) consists of four zip codes in Hernando County to the north, a few zip codes in eastern Pasco County, and a single zip code in the far northwestern corner of Pinellas County - 34689. Community's PSA accounts for 79.4% of its psychiatric discharges. An additional 9.1% of its discharges are from its SSA, defined as any non-PSA zip code from which it receives at least 1% of its discharges. The remaining 11% of Community's discharges are scattered among other areas. All of Community's PSA zip codes are within Pasco County. The only SSA zip code in Pinellas County is in the northwestern corner of the county – 34689, from which Community received only 2% of its discharges. Community derives 84.4% of its discharges from Pasco County, while only 6.9% of discharges originate from Pinellas County residents. Another 5.6% of Community's discharges originate in Hernando County which is outside District 5. Community's psychiatric service area is not expected to change with the implementation of the CON. While Community received 1367 discharges from its PSA, Windmoor received only 97 of its discharges from that PSA. On a percentage basis this is 79.4% versus 4.7% of discharges, respectively. Windmoor did not derive even 1% of its discharges from any single zip code within Community's PSA. When a provider receives less than 1% of its discharges from a particular zip code, that zip code is not appropriately considered part of the provider's PSA or SSA. Further, Windmoor has no significant market share in Community's SSA. On a county basis, while Community derived 84.4% of its psychiatric discharges from Pasco County residents, Windmoor received only 5.9% of its discharges from Pasco County. Conversely, Community derived only 6.9% of its discharges from Pinellas County compared with 73.6% for Windmoor. During the year ending June 2009, among all providers of inpatient psychiatric services to Community's PSA, Community had a 70% market share compared with Windmoor's 4% market share. For Pasco County as a whole, Community had a 52% market share compared with Windmoor's 4% market share. Like Windmoor, Morton Plant had only a 4% market share for both Pasco County and Community's PSA. The conclusion from this analysis is that Community is predominantly a Pasco County provider while Windmoor is predominantly a Pinellas County provider. Windmoor is not a significant provider in either Community's PSA or in Pasco County. Further, there is no physician overlap between the psychiatrists on the respective medical staffs of Community and Windmoor. Community's CON Proposal In its State Agency Action Report concerning Community's CON application, AHCA summarized the proposal: "[t]his project is to keep 46 existing adult inpatient psychiatric beds at their present location following completion of the replacement facility authorized by CON #9539." The proposal is to allow Community's psychiatric facility to remain in the same location with the same bed complement, which will remain unchanged in terms of its historical operations. The psychiatric unit at Community has been located at its current site since at least 1981. A CON is required only because, upon occupancy of the Trinity replacement facility, the continued use of the existing site for its inpatient psychiatric activity would fall within the statutory criteria for projects subject to CON review as an "establishment of additional healthcare facilities." With respect to both hospital campuses, Community will own, operate, and be the licensee of both facilities. All components of patient care will be controlled by a single governing body, and will have a single medical staff, chief medical officer, and CEO. Florida is home to other similarly situated hospitals that own and operate a Class I general acute care hospital and an affiliated Class III licensed specialty hospital on separate campuses. In each case, the Class I and Class III facilities share the same license and license number, owner, and CEO. These facilities include Westchester General Hospital and its affiliated Class III Southern Winds Hospital; Halifax Health Medical Center and its affiliated Halifax Psychiatric Center North; Shands Hospital at the University of Florida and Shands at Vista; and Morton Plant North Bay Hospital and NB Recovery Center. AHCA issues an actual license certificate for each facility for general display at each campus. The approximate distances between the two campuses of these Class I and Class III single license facilities are: Westchester General Hospital and Southern Winds Hospital – nine miles; Halifax Health Medical Center and Halifax Psychiatric Center – 1.5 miles; Shands at the University of Florida and Shands at Vista – 10 miles; and Morton Plant North Bay and NB Recovery Center – 20 miles. The scenario of a Class I hospital with an affiliated Class III hospital with a single license number is considered one licensee with two premises. Psychiatric Services at Community Will Remain Unchanged Implementation of the CON will result in no changes in the current level of health care services provided to patients for both psychiatric and non-psychiatric medical conditions. Those patients who might currently be transported internally to the psychiatric unit behavioral health unit or (BHU) upon discharge from non-psychiatric medical units of the hospital will now be transported by vehicle to the BHU campus if the patient requires transport assistance. The transport of psychiatric patients is not material to the discussion of whether the two campuses are, in fact, one hospital. Patients cannot be admitted to the BHU until they have been medically cleared of any non-psychiatric medical conditions that would require inpatient medical care. "Medically cleared" means the patient no longer requires medical/surgical inpatient care. Those processes and requirements will not change as a result of implementation of the CON. Community currently provides transport services for all types of patients. Those services will continue for patients between the two campuses, including any psychiatric patients who may need transport assistance. AHCA has never had a regulatory issue involving the movement of patients among different facilities that are operated by one licensee. AHCA has no concern about the ability of hospitals to transport patients among their various facilities, including any hospital provider-based services. Under federal regulations such services may be provided at locations up to 35 miles from the main hospital campus. A psychiatric patient presenting to a hospital's emergency department (ED) is handled the same initially as any patient. The patient undergoes triage and is seen by an ED physician. If the patient exhibits both psychiatric and non- psychiatric medical conditions, the ED physician calls a psychiatrist and together they will determine the primary diagnosis. If an ED patient has achieved medical stability, and is ready to be medically discharged from the ED, yet still suffers from a psychiatric condition, the ED physician will call in a psychiatrist to participate in the disposition of the patient. If the primary diagnosis for a patient is medical or emergent, but with a secondary or co-morbid psychiatric condition, the patient receives medical/surgical care with a psychiatrist serving as a consulting physician. If deemed appropriate, the patient would be admitted to the medical/surgical unit for care until reaching medical stability. While on the medical/surgical unit, the patient needing psychiatric care would receive it from a psychiatrist while on the medical/surgical unit. Once medically cleared for discharge, the patient requiring further inpatient psychiatric care would be transferred to the BHU. Once in the BHU, the patient would still receive any necessary care for any non- psychiatric conditions from the appropriate physicians. This system will not change with the implementation of the CON. Coverage of the BHU by hospitalists and other members of the medical staff who do rounds will not change as a result of implementation of the CON. Some patients will achieve medical stability for both the psychiatric and non-psychiatric conditions from which they suffer, and will therefore not be admitted to the BHU upon discharge from the ED or medical/surgical unit. As reflected in Community's policies and procedures, all BHU patients must be admitted under the care of a psychiatrist, and can only be discharged by a psychiatrist. Every BHU patient also receives a general medical history and physical examination performed by a consulting medical physician. Non-psychiatrist medical staff physicians are always available for consultation to the psychiatrist and other clinical staff while the patient stays in the BHU. Community's current practices with respect to psychiatric patient services and physician coverage will not change due to implementation of the CON. AHCA's Review of Community's CON Application AHCA gave notice of its intent to approve CON No. 10074 in the June 25, 2010, Florida Administrative Weekly. In AHCA's view, the status quo will be maintained by the issuance of the CON. Nothing will be different in the way Community delivers its health care services in District 5. This is a case where the applicant has to go through the CON process to arrive at the same place it already was. AHCA expects no change at all. AHCA concluded that "this project is not likely to change the current competitive structure of the existing market." By that conclusion, AHCA intended to convey a lack of adverse impact on existing providers based upon CON approval. Particularly due to deregulation, AHCA believes there have already been significant changes to the competitive structure of the District 5 market, such as psychiatric bed additions through CON exemption, CON approval of a new Ten Broeck psychiatric hospital, and upcoming shifts toward greater Medicaid HMO reimbursement and associated federal health care reform legislation. Conversely, the Agency projects no impact from Community's CON. Lack of Adverse Impact Adverse impact analyses typically arise from a new entrant to the market. Community's proposal does not present a new entrant to the market for inpatient psychiatric services. Adverse impact will occur when a new provider enters a service area or an existing provider increases its capacity to offer services. Neither of those will occur as a result of Community's CON. None of the conditions that could lead to an adverse impact is present. Implementation of the Community CON will have no adverse impact or effect on existing providers because Community will continue to have the same historic PSA and its market shares will remain the same, except for potential market changes unrelated to the CON, such as entrance of new providers. This case is unique. For example, Ms. Patricia Greenberg, Windmoor's highly qualified and experienced expert in health care planning, has never been involved in a case such as this where the applicant sought approval to remain at its current location. The typical CON application seeks permission for a new provider, facility, for beds, or services to enter a particular market for the first time. In the typical case, health care planners will agree that some shift in market share will occur among existing providers as the result of the new entrant to the market. Ms. Greenberg's adverse impact analysis did not take into account the new market entrants such as Ten Broeck and NB Recovery Center, even though she expects them to have a greater impact on Community, due in part to geography. Health care planners develop adverse impact analyses that attempt to estimate the future shift in market shares. From there, the planner will attempt to project a number of lost patients per provider, and then apply a financial impact. Regarding Community's proposal, since there will be no new entrant into the market, the typical adverse analysis cannot be performed. Windmoor, through Ms. Greenberg, creatively developed four theories of adverse impact that could result from the status quo. Each of Windmoor's theories is premised on assumptions that Community will cease providing certain clinical services that will result in Community losing the capability to serve some of its psychiatric patients. However, Windmoor provided no clinical evidence to support its alleged changes to Community's clinical services. Indeed, all clinical evidence in the record confirms that Community can and will continue its current clinical services to all patients, including its BHU patients. The four impact theories offered by Windmoor are each based upon the unproven assumption that CON implementation will transform Community into two separate unaffiliated hospitals as opposed to a single hospital with two campuses. From that assumption, Ms. Greenberg contended there are two, and only two, categories of psychiatric facilities, which she labeled as either a "hospital based unit" or a "freestanding" facility. Ms. Greenberg defined "hospital based unit" (HBU) as either located inside a hospital or on the campus of a general hospital. She defined "freestanding" as any facility that is not co-located with a general hospital on the same campus. Ms. Greenberg did not consider or address a category of commonly owned and operated Class I general acute care hospitals affiliated with Class III psychiatric hospitals. Ms. Greenberg did not recognize the existence in Florida of several general hospital affiliated Class III psychiatric hospitals. The fact that two hospital campuses of Class I and Class III facilities exist is irrelevant, so long as in reasonable proximity to one another. The relevant factors are whether the two campuses share the same: 1) license number, 2) ownership, 3) hospital administration, and 4) medical staff. If these factors are present, it is incorrect to characterize one of the two facilities or campuses as "freestanding" because that implies no connection to a general acute care hospital. Community is a general acute care hospital with an affiliated psychiatric facility which is in no sense "freestanding." Ms. Greenberg's attempt to compare statewide data for various patient characteristics between facilities that she defines as "freestanding" versus HBUs is not persuasive, primarily because it is built upon the incorrect assumption that Community and other Florida hospitals cannot operate a Class I general acute care hospital and a Class III specialty psychiatric hospital under the same license. Characteristics such as payor source or patient mix are influenced by a number of factors other than simply whether an inpatient program is "freestanding" or "hospital based," as defined by Ms. Greenberg, including influences such as age composition of the service area, income distribution, and whether the hospital is located in an urban or rural area, to cite but a few. Attempts to draw generalizations from such data and then conclude that Community will be more like a HBU than a freestanding or vice versa, is without merit. Ms. Greenberg's data indicates that Community falls into her defined HBU categories in some respects while, in other respects, falls into her freestanding categories. This type of analysis is not sound. Community will not transform into a "freestanding" facility as defined by Ms. Greenberg, as a result of this CON. Moreover, many people with a primary diagnosis of psychosis are treated in hospitals that do not have inpatient psychiatric beds. In 2008, psychosis was the number one discharge diagnosis for all males in Florida hospitals, and was the number three diagnosis for all females behind conditions associated with pregnancy. Simply looking at discharge data by diagnosis between freestanding and HBUs as defined by Ms. Greenberg is not a meaningful analysis. Every adverse impact scenario presented by Windmoor is based upon the incorrect premise that implementation of Community's CON will result in Community becoming a "freestanding" facility as defined by Ms. Greenberg. For this reason alone, none of Ms. Greenberg's adverse impact theories is valid and each must be rejected. Another common thread running through Windmoor's impact theories is the assertion that, based again upon the false "freestanding" presumption, Community's patient mix will change due to changes in clinical services available to patients, such as ED services, no medical environment for comprehensive treatment, and certain patients allegedly no longer clinically appropriate for Community's HBU. There is no evidence in the record to support such claims, either operationally or clinically. All of Ms. Greenberg's impact theories lead to the contention that CON implementation will result in Community being adversely affected by its own CON through the loss of psychiatric patients. Ms. Greenberg further speculates that because of her asserted loss of patients, Community would need to replace those patients ("backfill") with patients who might otherwise be admitted to a competing hospital. As explained previously, however, there is virtually no overlap of service area or competition between Windmoor and Community as reflected by their respective service areas. Community does not contact health care providers in Windmoor's service area regarding the availability of Community's psychiatric services. In fact, Largo, a sister facility of Community, is an inpatient provider located between Community and Windmoor. Community would not actively seek patients in those areas of Pinellas County. It is neither reasonable to expect, nor was any credible evidence presented, that to make up for lost patients, Community would go outside its current PSA into the Windmoor area to seek patients when it has its sister Largo facility near Windmoor. As stated above, Windmoor, through Ms. Greenberg, offered four adverse impact scenarios. All four scenarios are premised upon the assumption that CON implementation will transform Community's BHU into a "freestanding" facility. The premise is not correct for the reasons stated above, primarily that AHCA recognizes the ability of hospitals in Florida to have Class I general acute care facilities along with Class III specialty psychiatric hospitals under the same license, ownership, management, etc. Further, all four scenarios are based upon Ms. Greenberg's theory of "backfill" under which Community will have to make up lost patients by intruding into Windmoor's service area. The evidence supports the assertion that Community expects no lost admissions because its PSA and SSA will not change, nor will the type and extent of services it provides, including ED, medical/surgical, and a unified medical staff, change upon implementation of the CON. Medicaid Windmoor asserted that Community would lose its eligibility to receive reimbursement for services under the Medicaid program if the CON were implemented. This assertion was not supported by the evidence presented by Windmoor. Moreover, the evidence presented by Community and AHCA negated Windmoor's assertion. Prior to the filing of the CON application omissions response, Community representatives met with AHCA personnel and confirmed its continued Medicaid reimbursement eligibility, which to Community was never an issue. Community's CON application proposed a Medicaid CON condition, and contained numerous statements of expected continued ability to serve Medicaid fee-for-service patients. AHCA accepted the proposed CON condition when recommending approval of the application. Community expects to satisfy the Medicaid CON conditions. AHCA's Deputy Secretary for Medicaid, Roberta Bradford, subsequently confirmed by letter to Community that, based upon Community's representations of satisfaction of certain applicable criteria, Community's proposed 46-bed inpatient psychiatric hospital would continue to be eligible for Medicaid participation. The determination of a facility's Medicaid reimbursement is a state determination, rather than a federal CMS decision. In Florida, that determination is ultimately made by AHCA's Deputy Secretary for Medicaid, Ms. Bradford. Windmoor elicited testimony from Community to show that each of the following services would not be physically present on the campus of the Class III psychiatric hospital portion of Community following CON implementation: ED, emergency cardiac catheterization and angioplasty services, surgical and operating suites, stroke center designation, CT equipment, and the full range of medical services currently available on site at Community. Community will, however, continue to operate all of these services in the Class I acute care hospital campus, which will be under the unified license with the psychiatric campus. Satisfaction of the Medicaid letter criteria from AHCA was confirmed at hearing. The criteria include: Community will own and operate both locations and be the licensee of both facilities; all components of patient care at the facilities will be controlled by a single governing body; one Chief Medical Officer will be responsible for all medical staff activities at both facilities; one Chief Executive Officer will control both facilities' administrative activities; and the two facilities are situated closely enough geographically that it is feasible to operate them as a single entity. Mr. Jeffrey N. Gregg, AHCA's head of CON review, is satisfied that the Class III licensed Community facility will maintain its Medicaid eligibility. Southern Winds, Halifax Psychiatric Center, and Shands at Vista receive Medicaid fee-for-service reimbursement, and are similarly situated to Community. Mr. Gregg also expects NB Recovery Center to receive this type of Medicaid reimbursement when it initiates its service. Ms. Greenberg has been aware for at least 10 years that Class III psychiatric facilities affiliated with general hospitals in Florida receive fee-for-service reimbursement. She testified that if AHCA determines that Community is Medicaid eligible, her scenario related to Community losing its Medicaid eligibility "would go away." Moreover, due to recent legislative changes that will expand the use of Medicaid HMOs, the majority of Medicaid reimbursement is soon going to be under Medicaid HMOs. Class III psychiatric hospitals that are not affiliated with or on the same campus as a general acute care hospital, such as Windmoor, are eligible for Medicaid HMO reimbursement versus Medicaid fee- for-service reimbursement. Summary of Impact Analysis Conclusions All of Windmoor's adverse impact claims are based on a series of false and erroneous assumptions, none of which is supported by the evidence of record. In fact, most of the claims in the form of four scenarios are based upon ignoring the fact that what Community proposes here is not so unique in Florida. Many Florida health care facilities currently operate both Class I general acute care hospitals and Class III specialty psychiatric hospitals under the same license, management, and receive Medicaid fee-for-service reimbursement, while maintaining two physically separate campuses. This should have been common knowledge for an existing provider such as Windmoor, which based its entire case, adverse impact scenario, and decision to go forward with the hearing in this case on a series of erroneous assumptions. Windmoor offered several theories about how it would suffer a substantial and adverse impact in the event Community's CON application is approved, yet offered no competent evidence to support its claims. Windmoor failed to demonstrate that Community would lose any psychiatric patient admissions and be forced to seek admissions from Windmoor's PSA or SSA to keep its beds full. Windmoor failed to provide competent evidence that it will be adversely affected by the approval of Community's CON. Community's CON will have no impact on Windmoor.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a final order dismissing Windmoor's Petition for Formal Administrative Hearing due to lack of standing to challenge the award of CON No. 10074. DONE AND ENTERED this 6th day of July, 2011, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 2011. COPIES FURNISHED: Timothy Bruce Elliott, Esquire Smith & Associates 2873 Remington Green Circle Tallahassee, Florida 32308 Richard Joseph Saliba, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3, Mail Station 3 Tallahassee, Florida 32308 Stephen A. Ecenia, Esquire Rutledge, Ecenia & Purnell, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 Richard J. Shoop, Agency Clerk Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Justin Senior, General Counsel Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Elizabeth Dudek, Secretary Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308-5403
