Findings Of Fact A not for profit 520-bed acute care hospital in Pensacola, Baptist primarily serves not only residents of Escambia and Santa Rosa Counties, within Florida's HRS Service District I, but also patients from Escambia and Baldwin Counties in Alabama. The other two counties in District I, Okaloosa and Walton, lie outside Baptist's primary service area, but within a secondary service area, as does Covington County, Alabama. Baptist proposes to convert twelve medical/ surgical beds to a children's psychiatric service, to complement an existing 38-bed psychiatric service housed in the Behavioral Medical Center across the street from Baptist's main campus. On average, eighty percent of Baptist's existing psychiatric beds are occupied at any one time. Of four separate, psychiatric treatment programs Baptist now offers, all accredited by the Joint Commission on Accreditation for Health Care Organizations, none is designed for children below the age of 13. Seldom, and only in an emergency, has a child below this age been accepted into Baptist's program for adolescents, which is operated separately from any adult treatment program. Baptist has treated indigent and medicaid patients in its psychiatric programs, as well as patients for whose treatment it has received greater remuneration. Hospital-wide, Baptist has had "medicaid utilization" of between six and nine percent. "Baptist was willing to do Baker Act patients." Farr deposition, p. 17. Rollins deposition, p. 30. Other Resources Pensacola and Escambia County have extensive outpatient psychiatric services for children, offering a broad range of options, short of inpatient care in a treatment facility. Rollins deposition, pp. 15-16. Lakeview Community Health Center offers outpatients treatment, as do a number of private providers. The Children's Intervention Project System conducts home visits. Day care and therapeutic foster homes are also available. Professionals distinguish between "crisis stabilization" which does not "focus on treatment" and even short-term psychiatric care. Lakeview Community Health Center has a 31-bed crisis stabilization unit, which was full as of the week before the hearing. Ten of the 31 beds are reserved for children, aged 9- 17, but children's beds are not segregated from beds for adolescents. Treating children and adolescents together (if not stabilizing their crises in the same facility) is inappropriate. They have different needs and require different structures. Adolescents require more autonomy; children need more supervision. See deposition of Cruz. Farr deposition, p. 21. Rollins deposition, p. 22. Only Harbor Oaks, a free-standing facility more than 45 minutes from Pensacola and Gulf Breeze, accepts children as psychiatric patients. Harbor Oaks has 19 children's beds but does not accept medicaid patients. The children's unit at Harbor Oaks experienced an occupancy rate of approximately 74 percent in 1988. Occasionally, girls were put on waiting lists. University hospital does not accept children as psychiatric patients. It rarely accepts adolescents. West Florida Hospital, which has a program for adolescents, refuses child psychiatric patients admission. West Florida Community Center accepts no children. Nor does Humana Hospital in Ft. Walton. Play Therapy Rather than convert a part of an existing medical or surgical ward to a children's psychiatric ward, Baptist proposes to spend $565,660 to construct a facility abutting but distinct from its Behavioral Medical Center. Lakeview Medical Health Center is nearby. Farr deposition, p. 32. The parties have stipulated that "the costs and method of proposed construction, including ... energy provision and the availability of alternative, less costly or more effective methods of construction" are not in dispute, and that "the facility design schematic is reasonable and appropriate." Baptist would hire a child psychiatrist to head up to the children's psychiatric unit. Treatment teams for existing programs also include psychologists, psychiatric social workers, occupational therapists, certified recreational therapists, and nursing staff. Dr. DeMaria recommends that "somebody in the creative arts therapy," (T.99) be hired for the children's unit, as well. The parties agree that "the availability of resources, including health manpower, management personnel, and funds ... are not at issue." The plan is to create a homelike environment where children will sleep two to a room and eat together family style in a dining room. A living room, at least one classroom, a playroom and a playground out of doors are to be the situs of art, dance, music and play therapy, individual, group, and family, all in a "therapeutic milieu." Baptist intends that the children's psychiatric unit be the least restrictive inpatient facility for children possible and has given assurances that the same rigorous review now taking place in its existing psychiatric programs would see to it that children are discharged to a still less restrictive environment as soon as their conditions permitted. In large part, Baptist is counting on medical staff at the Lakeview Community Health Center, all of whom have admitting privileges at Baptist, to identify children who will need inpatient care but cannot afford to pay. Baptist has committed to reserve two beds in the proposed unit for patients who are indigent, or eligible for medicaid benefits. Baptist has also undertaken "not [to] turn away patients," Farr deposition, p. 49, needing psychiatric care. Baptist has agreed to accept a requirement that it honor this commitment, as a condition to any certificate of need it obtains. Less than 20 percent of the children seen by 19 of the 55 child psychologists practicing within Baptist's service area who responded to a survey seemed to require inpatient care, but only 60 percent of this group actually received such care. Baptist's Exhibit No. 30. A survey of referral agencies indicated some 80 children in Baptist's service area needing inpatient psychiatric care in 1988 did not receive it. Projected daily charges of $390 in Baptist's second year of operating the children's psychiatric unit are less than the $450 a day now charged by Harbor Oaks. The parties stipulated that "the pro forma income and expense statement relating to the children's short-term psychiatric beds is reasonable and requires no further proof except for validation of the number of patients days." Assuming admission rates comparable to elsewhere in the South, children in Baptist's service area would keep ten children's psychiatric beds at 70 percent average occupancy. Baptist's Exhibit No. 26. Twelve beds would make it economically feasible to serve the medically indigent as well as other children needing inpatient care. The first seven days following a child's admission staff would devote to evaluating the child. Children not discharged to a less restrictive situation by the end of the evaluation period, Baptist projects, would have an average stay totalling 28 days, as compared to the 35- to 40-day average length of stay harbor Oaks has reported. Not Normal District I has a total of 240 short-term psychiatric beds. According to the state agency action report, short-term psychiatric bed utilization was 88.9 percent at Harbor Oaks for 1987, 73.5 percent at Ft. Walton's Humana Hospital, 59.4 percent at University Hospital and 58.1 percent at West Florida. Baptist's recent experience of psychiatric bed utilization in excess of 80 percent dates to January of 1988, and is a substantial increase over the 55.8 percent reported for the period July 1986 to June 1987. Baptist's Exhibit No. 9. Projected 1993 population for District I is 601,559. Baptist's Exhibit No. 23. The parties agree that the formula set out in Rule 10- 5.011(1)(o), Florida Administrative Code, for determining "numeric need" for acute care, short-term, general psychiatric beds does not indicate a need for additional acute care short-term general psychiatric beds in District I. But 53 percent of the District's population resides in Escambia County where no treatment facility has any children's psychiatric beds. A significant number (compare Baptist's Exhibit No. 23 with T. 133) of Baptist's psychiatric admissions are patients who reside in Alabama. Although Escambia County has 52 percent of the District I population, between ages 1-12, it has none of the children's psychiatric beds. More than half the District's population lives more than 45 minutes travel time from Harbor Oaks, complicating arrangements for family therapy, often essential in these cases, Rollins deposition, pp. 28-29, and for other conferences, including discharge conferences, where parents and community-based professionals work out details necessary to effect a smooth transition from inpatient to something less restrictive. The District I Health Plan, approved on June 1, 1988, provides: The following policies and priorities are to be used in CON review in tandem with the bed need numbers on the preceding pages. POLICIES AND PRIORITIES FOR PSYCHIATRIC AND SUBSTANCE ABUSE BEDS Psychiatric or substance abuse beds which are not used by residents of the District shall not be included in the resource inventory count of the District. [NOTE: There have in the past, been facilities in another district treating patients originating solely from outside of that district. The facility's intake policies precluded the treatment of "local" district residents. In addition, the facility's marketing effort was directed entirely out- of-state. A local marketing effort plus treatment of patients originating within the district can easily be demonstrated.] Priority will be given to applicants who can demonstrate that all existing short term inpatient psychiatric beds in the subdistrict have had an average annual occupancy rate equal to or greater than 70% for the preceding year. Priority will be given to applicants who can demonstrate that all existing short term inpatient substance abuse beds in the subdistrict have had an average annual occupancy rate equal to or greater than 80% for the preceding year. Proposals for new facilities, expansions, conversions and additional services will be given priority for applicants who agree to continue or enter into Baker Act, Medicaid, Medicare and other medically indigent contracts for the provision of services to qualifying patients. Among the goals, objectives, and recommended actions set out in the 1985-1987 State Health Plan, now expired but not replaced, is a goal that short-term inpatient hospital psychiatric beds not exceed .35 per thousand population. HRS Exhibit No. 1. In requiring that .15 (of a total of .35) short-term psychiatric beds per 1,000 population be located in general hospitals eligible for medicaid reimbursement, HRS's rules do not distinguish between children and adults. But no children's psychiatric beds in Distract I are located in a facility that accepts medicaid patients. If the ratio prescribed for psychiatric beds generally applied specifically to children's psychiatric beds, District I would already have at least eight such beds: Multiplying the 19 existing beds by .15/.35 yields 8.14. Applying the rule's .15 beds per 1,000 population methodology to the 111,211 children projected to be in District I by 1993, see Baptist's Exhibit No. 23, yields a need for 16.68 children's psychiatric beds in facilities that accept medicaid patients.
Recommendation It is, accordingly, RECOMMENDED: That HRS grant Baptist's application for certificate of need No. 5669, on condition that Baptist honor its commitments to care for medically indigent and medicaid-eligible children in need of inpatient psychiatric care. DONE and ENTERED this 2nd day of November, 1989, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of November, 1989. APPENDIX Petitioner's proposed findings of fact Nos. 1 through 6, 8 through 21, 28 through 35, 40, 44, 45, 47 through 50, 60, 61, 64, 69, 72, 73, 75, 76, 78, 79, 81 and 82 have been adopted in substance as fare as material. With respect to petitioner's proposed finding of fact No. 7, either a music therapist or an art therapist is contemplated. With respect to petitioner's proposed finding of fact No. 22, children in Escambia and Santa Rosa counties can go to Harbor Oaks. Petitioner's proposed findings of fact Nos. 23 through 26 here not established by the evidence. With respect to petitioner's proposed finding of fact No. 27 at least one eleven-year-old was also admitted. Petitioner's proposed findings of fact Nos. 36 and 37 are immaterial. Petitioner's proposed findings of fact Nos. 37, 39, 42, 43, 46, 51 through 59, 62, 63, 65, 67, 70, 71, 74, 77 and 80 relate to subordinate matters. With respect to petitioner's proposed finding of fact No. 41, the evidence did not show that everybody living in Escambia and Santa Rosa counties was more than 45 minutes from Harbor Oaks. Petitioner's proposed finding of fact No. 66 is properly a proposed conclusion of law. Respondent's proposed findings oil fact Nos. 1, 2, 5 through 8, 11, 14 and 15 have been adopted in substance insofar as material. With respect to respondent's proposed finding of fact No. 3, the petitioner's stipulation further narrowed the issues. Respondent's proposed findings of fact Nos. 4 and 17 are properly proposed conclusions of law. Respondent's proposed findings of fact Nos. 9, 10, 21, and 23 have been reject in whole or in part as unsupported by the evidence. Respondent's proposed findings of fact Nos. 12, 13, 16, 18, 20 and 22 pertain to subordinate matters. With respect to respondent's proposed finding of fact No. 19, whether institutionalizing of children is ever a good idea is not at issue in this proceeding. The question is whether services available to others should also be available to indigent patients. COPIES FURNISHED: Sam Power Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Stephen A. Ecenia Roberts, Baggett, LaFace, and Richard 101 East College Avenue Post Office Drawer 1838 Tallahassee, FL 32302 Richard A. Patterson Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive, Suite 103 Tallahassee, FL 32308 =================================================================
The Issue The parties have stipulated that these cases are properly before the Division of Administrative Hearings for de novo review of the Petitioners' applications for a certificate of need and that this action is controlled by the provisions of Chapters 120 and 381, Florida Statutes, and Chapters 10-5 and 28- 5, F.A.C. The parties have further stipulated that portions of Section 481.494(6)(c), Florida Statutes (1984 Suppl.), and its counterparts under Section 10-5.11, F.A.C., have either been met or are not applicable. The portions of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), which the parties have stipulated have been met or do not apply and the parties' summary of the content of those subsections are as follows: (3) both applicants have the ability to manage and operate facilities such as those applied for; (6) need in the services district for special equipment and services not reasonably and economically accessible in adjoining areas; (7) need for research and training programs; (8) health and management manpower and personnel only. The remaining parts of (8) remain in issue; (10) special needs and circumstances of health maintenance organizations; (11) needs and circumstances of those entities which provide a special portion of their services or resources, or both, to individuals not residing in the service district. The parties stipulated that the remaining portions of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), remain in issue. Based upon the stipulations of the parties, the following issues require resolution: Is there a need for a 100-bed acute care hospital in Orange County, Florida? Do the Petitioners' proposals meet the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), which have not been stipulated to as having been met or as not being applicable? If a need exists for only one proposal and both Petitioners meet the appropriate criteria, which of the Petitioners should be granted a certificate of need? Should a certificate of need for a computerized axial tomography scanner (hereinafter referred to as a "CAT Scanner") be issued to AMI? Does Florida Hospital and/or OGH have the requisite standing to take part as parties in these proceedings?
Findings Of Fact AMI is a publicly traded for-profit Delaware corporation which owned, managed or operated 103 hospitals in the United States and 29 hospitals outside the United States as of January, 1985. AMI also owns, manages or operates a number of other health care facilities, i.e., psychiatric care facilities and freestanding outpatient surgery centers. AMI also owns a number of subsidiary corporations which provide a variety of technologies and services in support of its hospitals. In Florida, AMI owns 100 percent or a majority interest of 9 hospitals. In its proposed findings of fact AMI has indicated that it "operates" these 9 hospitals. The record supports this finding, although the record also supports a finding that the 9 hospitals are separate legal entities. AMI initially filed a letter of intent to file a certificate of need application with the Department for a 175-bed hospital in Orange County, Florida, for review in the August 15, 1983, batching cycle. The letter of intent was rejected because it had not been timely submitted to the local health council. On October 12, 1983, AMI filed a second letter of intent with the Department in which it informed the Department that AMI "or a to-be-formed wholly-owned subsidiary of AMI intends to file a Certificate of Need application for a 175-bed hospital to be located along Highway 50 in the vicinity of the University of Central Florida in Orange County, Florida." On October 19, 1983, seven days after the letter of intent was filed, Articles of Incorporation were filed for University Community Hospital of Orlando, Inc. (hereinafter referred to as "UCH, Inc."). UCH, Inc., is a for-profit Florida corporation. It currently owns no assets. AMI's application, which was reviewed in the November 15, 1983, batching cycle, was denied by the Department. AMI subsequently reduced the number of beds it had requested in its application from 175 to 100 beds. No change in the application with regard to the services to be provided has been made by AMI. Based upon its amended application AMI has proposed to construct and operate a 100-bed "full-service" acute care hospital to be located in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposed hospital will include a separate outpatient unit, an on-site stationary CAT Scanner, a 24-hour a day emergency room and birthing rooms and will provide therapeutic and diagnostic inpatient services, and community outreach and wellness programs. Tertiary care services will not be provided at the proposed hospital but AMI intends to contract with existing providers of tertiary care services to provide those services to its patients. AMI has projected that the total cost of its proposal will be $19,698,831.00. This figure includes $566,700.00 for architectural and engineering fees, $6,268,747.00 for equipment, $1,025,000.00 for the acquisition of land, $10,095,000.00 for construction, $250,000.00 for start-up costs and $1,285,385.00 for capitalized interest. The proposed AMI facility will include separate entrances for outpatient surgery and the emergency room. The facility has been designed to take into account the trend in health care to provide outpatient and ambulatory services. Two of the four proposed operating rooms in the facility will be used primarily for outpatient surgery. The 8 birthing rooms to be included in the facility are designed in recognition of the trend in health care to provide a room in which the family can participate in the birthing process. A delivery room will also be provided. Finally, classroom space will be provided in the facility for allied health services training and continuing education. Winter Park. Winter Park Memorial Hospital Association, Inc., is a not for-profit Florida corporation. It operates Winter Park, a 301 bed hospital in Winter Park, Orange County, Florida. The hospital provides a full range of medical services including a full-body CAT Scanner. Winter Park Memorial Hospital Association, Inc., qualifies for exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1954, as amended (hereinafter referred to as the "Code"), because it is an organization designated in Section 501(c)(3) of the Code. On October 31, 1983, Winter Park filed its letter of intent to file an application for a certificate of need with the Department in the same batching cycle as AMI. In its application Winter Park proposed to build a 100-bed acute care hospital in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposal does not include a CAT Scanner. Winter Park has projected that the total cost of its proposed facility will be $16,015,000.00. This amount includes $75,000.00 for project development, $50,000.00 for financing, $685,000.00 for professional services, $10,395,900.00 for construction, $4,457,700.00 for equipment and $351,400.00 for other related cost. Florida Hospital Florida Hospital is a not-for-project hospital owned by Adventist Health Systems Sunbelt, a division of the Adventist Church. Florida Hospital presently consists of 3 campuses: the main campus in Orlando and satellite campuses in Altamonte Springs, Seminole County, Florida and Apopka, Orange County, Florida. In the 75 years since the hospital was begun it has grown from a 20 bed hospital to its present size of 959 beds. Florida Hospital is a tertiary acute care hospital providing a full range of services including ambulatory surgery, a stationary full-body CAT Scanner, general inpatient medical and surgical services, obstetrics, pediatrics, psychiatric services, substance abuse treatment, open heart surgery, oncology and other services. Florida Hospital is involved in a number of teaching programs and internship programs. It is a teaching hospital with a number of positions dedicated to teaching, including a director of education. Florida Hospital would be substantially affected if a certificate of need is granted to either Petitioner. Florida Hospital has standing to intervene. OGH OGH is a not-for-profit 171-bed hospital located in Orlando, Orange County, Florida. It was founded in 1941 and has operated as a not-for-profit facility since 1945. OGH is licensed by the State of Florida as an acute care general hospital. The services provided by OGH include obstetrics, outpatient services, general inpatient medical and surgical services, pediatrics, a mobile CAT Scanner and other services. OGH would be substantially affected if a certificate of need is issued to either Petitioner. OGH has standing to intervene. THE NEED FOR ACUTE CARE HOSPITAL BEDS. Section 10-5.11(23), F.A.C. Pursuant to Section 381.494(6)(c), Florida Statutes (1984 Suppl.), the Department is responsible for determining whether health care facilities and services are needed in the State of Florida. To fulfill its responsibility with regard to acute care hospital beds, the Department has promulgated Section 10 5.11(23), F.A.C. Section 10-5.11(23)(b), F.A.C., provides the following Department goal: The Department will consider applications for acute care hospital beds in context with all applicable statutory and rule criteria. The Department will not normally approve applications for new or additional acute care hospital beds in any departmental service district if approval of an application would cause the number of beds in that district to exceed the number of beds calculated to be needed according to the methodology included in paragraphs (f),(g) and (h) below. A favorable Certificate of Need determination may be made when the criteria, other than bed need, as provided for in Section 381.494(6)(c), Florida Statutes, demonstrate need. An unfavorable Certificate of Need determination may be made when a calculated bed need exists but other criteria specified in Section 381.494(6)(c), Florida Statutes, are not met. Based upon this Department goal, the need for acute care hospital beds is first determined by service district based upon the methodology included in Section 10-5.11(23)(f)-(h), F.A.C. (Hereinafter referred to as the "Formula"). For purposes of the Formula, acute care beds include general medical and surgical, intensive care, pediatric and obstetrical beds. Section 10 5.11(23)(c), F.A.C. The Petitioners are proposing to build a hospital with general medical and surgical, intensive care and obstetrical beds. Therefore, the Formula must be applied to determine if there is a need for their proposed hospitals. Under the Formula, acute care bed need is to be determined five years in the future: 1990 in these cases. Generally, acute care bed need is determined under the Formula based upon two age cohort population projections, statewide service-specific discharge rates, statewide service-specific lengths of stay, statewide service-specific occupancy standards and patient flow adjustments. See Section 10-5.11(23)(f), F.A.C. The bed need for the service district determined in accordance with Section 10-5.11(23)(f), F.A.C., is adjusted based upon the service district's historical use rate and projected occupancy rate. Section 10-5.11(23)(g), F.A.C. The historical use rate to be used under the Formula is for the three most recent years and is based upon utilization of hospitals located in the service district. After applying the adjustment of Section 10-5.11(23)(g), F.A.C., one final adjustment is required to complete the determination of acute care bed need under the Formula. Section 10-5.11(23)(h), F.A.C. provides for an adjustment to reflect peak demand in the service district. Based upon the evidence presented at the final hearing of these cases, application of the Formula results in a net acute care bed need of 89 beds or 146 beds, or an excess of 464 beds. These projections are all for the Department's District 7, which consists of Orange, Seminole, Osceola and Brevard Counties, The Petitioners are proposing to build new hospitals in Orange County. The Formula projection of a net acute care bed need in District 7 of 89 beds is an outdated Department application of the Formula. The 146 net acute care bed need projection for District 7 is the Department's most current application of the Formula, dated March 12, 1985. The Department's most recent application of the Formula is not based upon a proper application of the adjustment for the District 7 projected occupancy rate and historical use rate under Section 10-5.11(23)(g), F.A.C. In making this adjustment, the Department relied upon utilization data in determining the District 7 historical use rate from 1981, 1982 and 1983. Section 10-5.11(23)(g), F.A.C., requires that the historical use rate be based upon the most recent three years available. In these cases 1982, 1983 and 1984 utilization data was available to the Department. The fact that incorrect utilization data was used in determining the District 7 historical use rate was confirmed by Mr. Eugene Nelson, the Director of the Office of Community Medical Facilities of the Department, Mr. Steve Windham, the Executive Director of the Local Health Council of East Central Florida, Inc., and Mr. Lawrence W. Margolis, an expert health planner. Mr. Nelson also indicated that if 1982, 1983 and 1984 utilization data had been used by the Department in applying the Formula a more "contemporary picture of what's actually happening" would have be given. Mr. Margolis did apply the Formula using the most current utilization data to calculate the historical use rate of District 7. Based upon the data used by the Department in its most recent projection of acute care bed need for District 7, but substituting the current utilization data of 1982, 1983 and 1984, an application of the Formula results in a projected total acute care bed need in 1989 for District 7 of 4,416 beds. There are currently 4,880 licensed and approved beds in District 7. Therefore, a proper application of the Formula based upon the most current data indicates that District 7 will have an excess of 464 acute care beds in 1989. A finding that District 7 will have an excess of acute care beds in 1989 is supported by the trend toward reduced utilization of hospitals in District 7. This reduction in hospital utilization, which began in 1982, has been evidenced by reductions in occupancy rates, average lengths of stay and admissions. This trend is likely to continue for an additional two to four years. The trend is sufficient to cause an excess in acute care beds despite increases in population. To add another 100 acute care hospital beds to Orange County would further reduce utilization. The reduced utilization of hospitals could become worse when new hospital beds are opened by Florida Hospital (210 beds) and Holmes Regional Medical Center in Brevard County (81 beds). The opening of these beds could create a further excess of beds in District 7. There are a number of factors which have contributed to the decline in the use of hospitals: (1) there has been an increase in the use of health maintenance organizations and preferred provider organizations; (2) the introduction of Diagnostic Related Groups, a method of reimbursement now being used by Medicare; and (3) there has been an increase in the use of outpatient medical services. Health maintenance organizations in Orange County alone could decrease patient days in hospitals from 800 days per 1,000 population to 350 days per 1,000 population. Because of the introduction of Diagnostic Related Groups by Medicare, hospitals are trying to discharge patients as quickly as possible. Finally, there are 8 to 10 freestanding ambulatory surgery centers approved for Orange County which are, or will be, providing outpatient medical services. All of these factors have reduced hospital utilization in District 7. The current trend of reduced utilization of hospitals was recognized by Mr. Mark Richardson, AMI's expert in health planning. Mr. Richardson therefore recommended that AMI reduce its application for a certificate of need to construct and operate a hospital in Orange County from 175 acute care beds to 100 beds, which AMI did. Based upon the foregoing, it is concluded that District 7 will have an excess of at least 464 acute care beds in 1989 according to a proper application of the Formula of Section 10 5.11(23), F.A.C. Although insufficient evidence was presented at the final hearing to forecast the exact acute care bed need for District 7 under the Formula for 1990, it does not appear that there will be any need for acute care beds in District 7 in 1990 in light of the fact that the trend toward decreased utilization of hospitals will probably continue for 2 to 4 more years. In fact, the evidence supports the conclusion that District 7 will continue to have an excess of beds in 1990. AMI has proposed findings of fact to the effect that there has been too much concern with "over-bedding" based upon computations such as those provided in the Formula. AMI further proposed findings of fact to the effect that a more rational approach to health planning "should be assuming adequate supply as opposed to considering a negative approach." These proposed findings of fact are rejected. The Department's rules and in particular, the Formula, are the law and will be followed in these cases. Whether "over-bedding" is over emphasized, the Formula clearly indicates that District 7 will be greatly overbedding in 1990. In addition to requiring an application of the Formula to determine acute care bed need for each Department service district, Section 10-5.11(23), F.A.C., requires that local health councils adopt acute care service subdistricts as an element of their local health plans. Section 10-5.11(23)(d), F.A.C. District 7 has been divided along county lines into four subdistricts: Orange, Seminole, Osceola and Brevard Counties. Section 10-17.008, F.A.C. Prior to this proceeding AMI challenged the validity of Section 10- 17.008, F.A.C., the rule establishing subdistricts along county lines in District 7. The rule was upheld as valid in American Medical International, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83- 3092R, September 28, 1984. Therefore, Orange, Seminole, Brevard and Osceola Counties constitute the only recognized subdistricts in District 7 for purposes of allocating acute care bed need in District 7. Section 10-5.11(23)(e), F.A.C., further provides that the district acute care bed need as determined by application of the Formula is to be allocated to each subdistrict established pursuant to Section 10-5.11(23)(d), F.A.C. This allocation of acute care bed need to the subdistricts is to be made consistent with Section 381.494(7)(b), Florida Statutes (1984 Suppl.), which provides that the local health council is to develop a district health plan and submit it to the Department. Elements of the district health plan necessary in the Department's review of certificate of need applications are required to be adopted by the Department as a part of its rules. Section 381.494(7)(b), Florida Statutes (1984 Suppl.). The Local Health Council of East Central Florida, Incorporated (hereinafter referred to as the "Council"), has developed a district health plan which includes the methodology it employs to allocate the District 7 acute care bed need to the subdistricts of District 7. That plan has also been submitted to the Department. The Department, however, has not adopted the district health plan for District 7 in its rules. This does not mean, however, that evidence pertaining to the Council's method of allocation is not relevant to, or should be ignored for purposes of, this proceeding. Based upon the evidence presented at the final hearing, Orange County has an excess of acute care beds. This is true even if it is assumed that the Department's determination under the Formula that there is a need for 89 or 146 acute care beds in District 7 is correct. According to Mr. Windham, application of the Council's subdistrict allocation methodology to the Department's determination under the Formula that there is a need in District 7 for 89 acute care beds indicates that Orange County ",4 will have an excess of 81 acute care beds and that Seminole County will have an excess of 36 acute care beds. Mr. Windham's application of the Council's methodology for allocating bed need to the subdistricts of District 7 was based upon the Department's application of the Formula without the benefit of the more current utilization data. Therefore, if the most current data had been used, the projected excess beds for Orange County would be even greater. In light of the foregoing, it is clear that the Petitioners have failed to prove that there is any need under Section 10-5.11(23), F.A.C., for additional acute care beds in District 7 or in Orange or Seminole Counties. In fact, under Section 10- 5.11(23), F.A.C., there is a significant excess of acute care beds projected for Orange and Seminole Counties and District 7 as a whole. Winter Park has conceded this conclusion. AMI has in essence argued that any evidence as to the application of the Formula based upon the most current utilization data should be ignored because the Department has not yet officially applied the Formula based upon such data. Mr. Margolis, an expert in health planning, was clearly capable of applying the Formula based upon the most current information. His conclusions were also supported by Mr. Nelson's and Mr. Windham's testimony. AMI has in essence also argued that any evidence as to how acute care bed need in District 7 under the Formula should be allocated to the properly designated subdistricts should be ignored because the Council's methods of allocation have not been adopted as part of the Department's rules. Mr. Windham's unrebutted testimony, however, supports a finding that the Council's method of allocating the District 7 acute care bed need to the subdistricts is a reasonable method for health planning purposes. The determination that there is no need for additional acute care beds in Orange County does not necessarily preclude the issuance of a certificate of need for a new hospital to either or both of the Petitioners. Section 10- 5.11(23)(b), F.A.C., provides that the Department will "not normally" approve an application if such an approval would result in acute care beds in excess of those needed as determined under the Formula. The rule goes on to provide that an application may be approved "when the criteria, other than bed need, as provided in Section 381.494(6)(c), Florida Statutes, demonstrate need." Bed Need Based upon the Petitioner's Alternative to the Formula. AMI has suggested in its proposed recommended order that there is a need for 146 acute care beds in District 7 based upon an application of the Formula. That finding of fact has been rejected, supra, because it was based upon the use of outdated utilization data. The Petitioner also failed to prove that there is a need for beds in Orange County based upon an application of the Formula. Winter Park's position throughout this proceeding and AMI's alternative position has been essentially that the population of east Orange County where the Petitioners propose to locate their facilities and parts of Seminole County do not have adequate accessibility to acute care hospital beds. In determining whether an application for a certificate of need should be issued for acute care hospital beds, Section 381.484(6)(c)2, Florida Statutes (1984 Suppl.), provides that the accessibility . . of like and existing health care services and hospitals in the service district of the applicant" should be considered. The Petitioners have attempted to prove that like and existing health care services are not accessible in portions of Orange and Seminole Counties and therefore there is a need for their proposed hospitals. The Petitioners' Medical Service Areas. AMI has identified and proposed to serve portions of Orange and Seminole Counties which purportedly have an access problem which it has designated as a "medical service area." AMI projects that the majority of its patients will be attracted from its medical service area (hereinafter referred to as an MSA) AMI's MSA consists of most of east Orange County and southeastern Seminole County. Generally, the MSA boundary runs south along most of the western shore of Lake Jessup in Seminole County, to and along Tuscawilla Road (Seminole and Orange County), to and along Highway 436 in Orange County, south to the Bee Line Expressway, east along the Bee Line Expressway to Highway 15, south along Highway 15 to the Orange-Osceola County line, east and then north along the Orange County line to the Seminole County line and along the Seminole County line north and then west to Lake Jessup. Winter Park has also identified and proposed to serve a MSA very similar to, although a little smaller than, AMI's MSA. The difference in size amounts to only a difference of 1000 less population in Winter Park's MSA. The portion of east Orange County included in the MSAs represents a distinct geopolitical and economic base. Each of the Petitioners and Florida Hospital presented testimony by experts in the field of demographics. Frederick A. Raffa, Ph.D., for AMI, William J. Serow, Ph.D, for Winter Park and Stanley Smith, Ph.D., for Florida Hospital. Based upon their testimony, it is clear that the MSAs have experienced a great deal of population and economic growth since 1970 and that this growth will probably continue through 1990. During the period 1980 to 1985, the rate of population growth for Orange and Seminole Counties was 16 percent (23 percent for Seminole County alone). The rate of growth in Winter Park's MSA during this same period was 32 percent. For the period 1985 through 1990 the projected rate of growth for Orange County is 12 percent. The projected rate of growth from 1985 through 1990 for Winter Park's MSA is 23.3 percent. These figures indicate that the rate of growth for Orange County and the MSAs is slowing down. The figures also show that the MSA rate of growth is twice that of Orange and Seminole Counties. Looking at only the rate of growth of an area can be misleading. For example, a 50 percent rate of growth may not be as significant when applied to a population base of 10 as when applied to a larger population base. In terms of actual growth, the evidence proves that Orange County's population growth in terms of additional people is greater than the population growth of the MSAs. The evidence also establishes that population growth in the MSAs is projected to be greater for young adults and women of child bearing age (15 to 44 years of age), that there will be larger families and a greater number of children under 18 years of age in the MSAs than in Orange County as a whole and that the projected population of the MSAs will be newer to the area and generally more mobile than Orange County as a whole. Florida Hospital has suggested that "logic" leads to the conclusion that some of these projected trends will cause a decrease in utilization. No evidence was presented at the hearing to support such a finding of fact. The evidence clearly establishes that population growth in the MSAs will be concentrated between the western boundary of the MSAs at Highway 436 and Alafaya Trail (Highway 419), which is located in the western portion of the MSAs, during the next five years. In fact, more than half of the projected growth of east Orange County will occur in a one and a half mile corridor between Highway 436 and Goldenrod. It will be 5 to 10 years before population growth will begin to expand into any area east of Highway 419. Accessibility under Section 10-5.11(23)(i), F.A.C. The Department has promulgated Section 10-5.11(23)(i)1 and 2, F.A.C., for purposes of determining accessibility: Acute care hospital beds should be available and accessible within an automobile travel time of 30 minutes under average travel conditions to at least 90 percent of the population in an urban area subdistrict. Acute care hospital beds should be available and accessible within a maximum automobile travel time of 45 minutes under average travel conditions to at least 90 percent of the population residing in a rural area subdistrict. The terms "urban area" and "rural area" are defined in Section 10- 5.11(23)(a)4 and 5, F.A.C., as follows: Urban Area. Urban area means a county designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, and having 50,000 or more persons residing in one or more incorporated areas. Rural Area. Rural area means a county not designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, or a county so designated but having fewer than 50,000 persons residing in one or more incorporated areas. Orange County meets the definition of an "urban area." It has been designated as part of a Standard Metropolitan Statistical Area and has 50,000 or more persons residing in one or more incorporated areas. Orange County is not also a "rural area" as defined above as suggested by OGH although it does have some incorporated areas with less than 50,000 persons. AMI has suggested in its proposed recommended order that Section 10- 5.11(23)(i), F.A.C., is to be used only by local health councils in determining subdistrict allocations of acute care bed need and where a subdistrict allocation reveals a surplus of beds in a subdistrict. Although Section 10 5.11(23)(i), F.A.C., is to be used in the manner suggested by AMI, Section 10- 5.11(23)(i), F.A.C., is not clearly limited to such use. This section of the rule is titled "Geographic Accessibility Considerations." Its provisions are applicable in determining whether a geographic accessibility problem exists in District 7 or in the subdistricts of District 7. AMI, Winter Park and Florida Hospital presented testimony of expert traffic engineers: Mr. William A. Tipton for AMI, Mr. R. Sans Lassiter, P.E., for Winter Park and Mr. Sven Kansman for Florida Hospital. All three of these gentlemen based their travel studies on travel times to and from certain control points. The travel times were then averaged. Florida Hospital has suggested in its proposed recommended order that this method of determining travel times to and from control points and Mr. Tipton's testimony that "you probably wouldn't get as far in a given time going outbound [east" is significant because travel times from the MSAs west into Orlando, where the majority of the existing hospitals are presently located, would be shorter. This conclusion is reasonable. Therefore, travel times for the population of the MSAs to existing Orange County hospitals would be less than indicated by the traffic engineers. Also, the 30 minute contour lines on the traffic engineers' exhibits would extend farther into the MSAs. The studies performed by all three traffic engineers were performed in the same general manner as to the speed of the test vehicles. Test vehicle drivers were instructed to drive at average speed employing the "average car method," the "floating car technique" or the "moving car method." All three methods are essentially the same. The test runs were conducted in November and February by AMI'S expert, in the fall by Winter Park's expert and during the last two weeks of January by Florida Hospital's expert. January to March is the most congested time of the year in Orange County. Only two of the traffic engineers testified that their tests were conducted under "average travel conditions" as required by Section 10- 5.11(23)(i), F.A.C.: Winter Park's and Florida Hospital's traffic engineers. These traffic engineers properly conducted their tests during off-peak and peak hours. Mr. Tipton, AMI's traffic engineer, conducted his tests only during the peak hours of 4:00 p.m. to 6:00 p.m. and only on week days (Monday to Thursday). According to Mr. Tipton, average travel conditions "doesn't mean anything" to a traffic engineer. Average travel conditions does mean something under the rule and to the other two traffic engineers. Mr. Tipton also indicated that the peak hours he conducted his tests during would not show "average travel conditions." Mr. Tipton also admitted that he averaged what amounted to the "worst case scenario" because it represented "real world conditions." Mr. Tipton's "real world conditions," however, is not the test of Section 10-5.11(23)(i)1, F.A.C. Mr. Tipton's tests have been given little weight because of his failure to take into account average travel conditions. None of the exhibits prepared by the three traffic engineers and accepted in evidence (AMI'S composite exhibit 8, Winter Park's exhibit 11 and Florida Hospital's exhibit 10) are totally consistent with the requirements of Section 10-5.11(23)(i), F.A.C. AMI's composite exhibit 8 includes 30 minute contour lines representing Mr. Tipton's 30 minute drive times from only three hospitals in Orange County and one hospital in Seminole County and only shows the travel times to the east of those hospitals. Winter Park's exhibit 11 shows the 30 minute contour lines for seven hospitals in Orange County and two hospitals in Seminole County and generally only showns the travel times to the east. Florida Hospital's exhibit 10 shows the location of eight hospitals in Orange County, three in Seminole County and three in Brevard County but only shows the total 30 minute contour line for Florida Hospital's Orlando campus. The test under Section 10-5.11(23)(i)1, F.A.C., is whether existing acute care hospital beds are available and accessible within 30 minutes by automobile by 90 percent of the subdistrict's population. In order for AMI and Winter Park to prove that acute care hospital beds are not available and accessible within 30 minutes in Orange County, they needed to prove that more than 10 percent of the population of Orange County cannot access on existing acute care hospital bed within 30 minutes by automobile. In order to prove this crucial fact it is necessary to show the travel time based upon average travel conditions of the entire population of Orange County to all existing acute care hospitals. AMI and Winter Park have failed to do so. The evidence fails to show that more than 10 percent of Orange County's population is more than 30 minutes by automobile from existing Orange County hospitals. The evidence does not support a conclusion that there is an accessibility problem under Section 10-5.11(23)(i), F.A.C. Only 1 percent of the population of Orange County residing in the MSAs is located more than 30 minutes by automobile from existing hospitals in Orange and Seminole Counties. This is based upon the 1985 population and the projected 1990 population. In 1985 there are 4,232 people residing in the MSAs more than 30 minutes from existing Orange and Seminole County hospitals. By 1990, there will only be 5,276 people projected to live more than 30 minutes from existing hospitals. These figures are maximum numbers. As indicated, supra, the evidence with regard to population growth in the MSAs proves that the projected population growth will be concentrated in the western portion of the MSAs--the portion of the MSAs closest to where existing hospitals are located. Most of the projected population growth through 1990 in the MSAs will clearly be within 30 minutes of existing hospitals. The projected 1990 population of 5,276 people who will reside more than 30 minutes from an existing Orange County or Seminole County hospital is well below 10 percent of Orange County's total projected population of 596,713. Additionally, the people in the MSAs who reside more than 30 minutes from existing Orange and Seminole County hospitals are probably within 30 minutes of Jess Parrish Hospital in Titusville, Brevard County, Florida. There are no natural obstacles in Orange County which impede or prevent access to existing health care facilities. Well over 90 percent of Orange County's population can access a hospital within 30 minutes driving time. OGH has proposed findings of fact pertaining to the availability of motor vehicle and air ambulance services in Orange County. The accessibility test of Section 10-5.11 (23)(i), F.A.C., requires a consideration of automobile travel times under "average travel conditions," not emergency services. Therefore, these proposed findings of fact and OGH's proposed findings of fact as to the requirements of obtaining a trauma level designation are unnecessary. The evidence also clearly establishes that there are acute care hospital beds available in Orange County. The average occupancy rates in District 7, Orange County and Seminole County for 1982, 1983 and 1984 were as follows: 1982 1983 1984 District 7 71.8% 70.34% 61.71% Orange County 69.5% 68.68% 60.80% Seminole County 76.0% 74.20% 59.39% Florida Hospital and OGH have experienced similar declines in utilization similar to those evidenced by these figures. Florida Hospital's utilization rate dropped from 86.3 percent in 1982 to 78.6 percent in 1984 and OGH's rate dropped from 88.5 percent in 1982 to 44.4 percent in 1984. There are currently 4,880 licensed and approved acute care hospital beds in District 7. Based upon the 1984 utilization rate for District 7, over 1,800 acute care beds were empty on an average day in District 7 during 1984; In Orange County, approximately 1,000 acute care beds were empty on average during 1984. As indicated, supra, the decreasing acute care bed utilization rate is expected to continue for 2 to 4 years. Therefore, there are acute care hospital beds available in Orange County at existing hospitals and there will be in 1990. Additionally, new acute care hospital beds have been approved for Orange County and Seminole County which are not yet open: 134 acute care beds to be opened by Florida Hospital at its Orlando campus and 76 acute care beds to be opened by Florida Hospital at its Altamonte Springs campus. Also 81 new beds will be opened in Brevard County. These additional beds will further increase the number of available acute care hospital beds in Orange and Seminole Counties and in District 7. Based upon the foregoing and the fact that there is a large number of unoccupied acute care beds available on average in Orange County, there is no geographic accessibility problem in Orange County or Seminole County under Section 10-5.11(23)(i), F.A.C. Other Accessibility Considerations. Despite the evidence with regard to geographic accessibility under Section 10-5.11(23)(i), F.A.C., the Petitioners have argued that accessibility to acute care beds is a problem in the MSAs. Mr. Willard Wisler, Winter Park's administrator, although agreeing that "planning studies" indicated no need for additional acute care beds in Orange County, stated: But our posture has been that they have been misallocated, and that the east Orange County [sic) is a greatly underserved area on the basis of the number of hospital beds that are available to the people that live there. The evidence does establish that the majority of the hospitals in Orange County are located in the center of the County, in the City of Orlando, where the majority of the population is located and that there is only one hospital currently located in the MSAs. Currently, 6 percent of Orange County's acute care hospital beds are located in the MSAs at OGH while 19 percent of Orange County's population is located in the MSAs. The Petitioners have characterized this geographic distribution of acute care beds and population as a "maldistribution" of acute care beds. The disparity between the precentage of population and acute care beds in the MSAs will increase in the future because the projected rate of growth in the MSAs is greater than that of Orange County. It is projected that by 1990 22 percent of the Orange County population will be located in the MSAs. The centralization of acute care beds in Orange County, according to Mr. Van Talbert, Winter Park's expert health planner, constitutes irresponsible health planning: "It tends to perpetuate the old patterns of centralization, and I think that is inconsistent with contemporary thought in American society." Mr. Talbert also testified that the MSAs and particularly east Orange County, are greatly underserved based upon the number of hospital beds conveniently available to the people who live there. Even if Mr. Talbert's conclusions are correct and even if there is a "maldistribution" of acute care beds as defined by the Petitioners, this does not mean there is an accessibility problem in the MSAs sufficient to conclude that additional acute care beds are needed in District 7, Orange County or the MSAs. The fact that 22 percent of the population of Orange County may reside in the MSAs by 1990 with only 6 percent of the County's acute care beds is not the test. Even if it is true that "contemporary planning may indicate that centralization of acute care beds is poor planning," the pertinent statutes and rules only require a determination of whether acute care beds are available and accessible. The evidence in these cases clearly indicates that the population of the MSAs can access available acute care hospital beds in District 7. All the Petitioners have shown is that some residents of the MSAs "will be forced to make inconvenient drives to downtown hospitals," as stated in Winter Park's proposed recommended order. Likewise, AMI's proposed finding of fact that ",the realities of the situation reveal that the residents of the MSA and their physicians perceive serious access problems due to excessive travel distance, traffic congestion, the lack of convenience for patients who have to go to hospitals for tests, and the lack of convenience for families and friends having to make several trips a day to see a person in a hospital" does not prove there is an access problem. The perception of patients and physicians as to the inconvenience in accessing acute care beds does not prove there is an access problem sufficient to warrant a new hospital. In conjunction with the Petitioners' position with regard to "maldistribution" of acute care beds, the Petitioners have proposed findings of fact to the effect that previous Department responses to shifts in population growth away from where hospitals are located have been to authorize new hospitals. New hospitals in Altamonte Springs and Longwood in Seminole County, and in southwest Orange County (Sand Lake) have been cited as examples. Although Mr. Talbert's testimony supports these proposed findings of fact to some extent, there is insufficient evidence to conclude why those hospitals were authorized by the Department. If the evidence showed that additional acute care beds were needed in Seminole and Orange Counties when those hospitals were approved it would be consistent with the Department's rules to locate the additional acute care beds where population growth had occurred. In these cases, if there was an established need for an additional acute care hospital in Orange County, the evidence would probably justify placing it in east Orange County. The facts, however, do not indicate any need for additional acute care beds in Orange County. Other MSA Considerations. It is not essential to identify a MSA for purposes of considering an application for a new acute care hospital as suggested by AMI. As discussed, infra, the designation of a MSA by an applicant may be helpful for some purposes, but not to determine whether there is a need for a new hospital. AMI has proposed a finding of fact that Orlando Regional Medical Center and Florida Hospital's Orlando campus, both of which are located in Orlando, are tertiary care facilities providing services of higher complexity for patients; they therefore attract a substantial number of referral patients in need of more extensive, complex services which are not available from primary care hospitals. The existence of these tertiary facilities has justified the allocation of more acute care beds to Orange and Seminole Counties in the past. Although these facts were proved at the hearing, the overriding fact remains clear that there is no need for additional acute care beds in Orange County. AMI attempted to prove through Mr. Mark Richardson an expert in health planning, that there is a need for acute care beds in AMI's MSA based upon the characteristics of the MSA. Mr. Richardson testified that his projections were not based or contingent on the Formula of Section 10-5.11(23), F.A.C., and acknowledged the decline in utilization of acute care hospital beds in Orange County. Mr. Richardson did state that the Department's projection of a net acute care bed need of 89 beds under the Formula supported his projections. The projection of a need for 89 beds was clearly based upon outdated data. Use of current utilization data indicates an excess of 464 acute care beds. Therefore, if application of the Formula resulting in a bed need of 89 beds supports Mr. Richardson's projections, an application of the Formula which results in an excess of 464 acute care beds must indicate that Mr. Richardson's projections are suspect. Mr. Richardson's projections were clearly based primarily on the characteristics of AMI's MSA. Because of the narrow scope of Mr. Richardson's analysis, the trend in Orange County and District 7 as to reduced occupancy rates did not affect his projections. In particular, Mr. Richardson used an 80 percent occupancy rate for all beds except obstetric beds, for which he used a 75 percent rate. These occupancy rates are excessive when compared to the occupancy rates for District 7, and Orange and Seminole Counties. Additionally, Mr. Richardson failed to consider the effect of unopened acute care beds in Orange County on occupancy rates. On average, there are over 1,800 unoccupied acute care beds in District 7 and 1,000 unoccupied beds in Orange County. This does not include 134 acute care beds to be opened at Florida Hospital's Orlando campus, 76 acute care beds to be opened at Florida Hospital's Altamonte Springs campus or 81 acute care beds to be opened at Holmes Regional Medical Center in Brevard County. When opened, these additional acute care beds will further decrease occupancy rates in Orange County and District 7. Even if Mr. Richardson's projections were totally accurate, such a finding would not be relevant to the question of whether there is a need for additional acute care beds in Orange County. That is the crucial question in these cases. Mr. Richardson and AMI have attempted to justify Mr. Richardson's projections by suggesting that the Department does not consider itself precluded from assessing the need for acute case beds on an area within a subdistrict based upon Mr. Nelson's testimony. Mr. Nelson's testimony clearly does not support the use of a MSA to determine if there is a need for additional acute care beds in Orange County. Mr. Nelson, when asked whether an applicant could determine bed need based upon the character of a part of Orange County replied: There's nothing to preclude an Applicant from doing that, from carving out what I would call an Applicant's service area, running their own calculations of bed need, and doing whatever they feel they want to do in that regard. And we're not ,precluded from looking at it, either. But our position is that that has no official basis in determinations of bed need. We do look at those subdistricts but not to determine bed need. We look at them to get a better understanding of an application, because we get a sense, from looking at the unique service areas, what they' re trying to accomplish. That would be number one. Number two, and from having worked on the private side, I know one of the reasons why this is done, this is an attempt to define a market share or market area and a percent of all the considerations of what the existing hospitals that are already in the area have in the way of markets and market shares, and so on. So on the second hand, looking at the subdistricts is very important, from the standpoint of helping us to assess the financial feasibility of these proposals, which is another criterion, of course, altogether, specifically in the longer term. Because, you know, you have to know who is getting patients from where in order to be able to fully understand that. And I think the third way in which these subdistricts, these Applicants -- pardon the expression, subdistricts, that's not what these things are -- the Applicant's medical services areas are useful is in those cases where we may have a need helping us to decide where, within, let's say a subdistrict that need should be met. For example, let's suppose in this case, we were showning a need of sufficient magnitude to approve a hospital. But instead of having two applications within a few miles of each other, we had one for east Orange County, and one in west Orange County, and portions of other counties, each of which had carved out their own service area, then it would be very important for us, in that case, to look at these things very carefully, to consider them to help us determine which location was preferable. But in terms of calculating bed need from the Department's perspective, we don't put any stock in those whatsoever from that perspective. ,Emphasis added. Based upon the above testimony, it is clear that MSAs may be looked at if an applicant uses one in order to provide a better understanding of the applicant's proposal, to assess financial feasibility and, where there is an established need for acute care beds, to decide where in the subdistrict the need is the greatest. MSAs are clearly not relied upon to determine the initial question of whether there is a need for acute care beds. To determine acute care bed need based upon a MSA without considering `the' entire subdistrict of Orange County is not appropriate. The Department, as the statute and rules require, determines need at the district level and allocates the district bed need to the subdistricts. In fact, the Department has ruled that it is improper to divide a district into subdistricts smaller than those designated by a local health council for purposes of determining need as pointed out by Winter Park in its proposed recommended order. Southeastern Palm Beach County Hospital District v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1091A (1983). For purposes of determining whether there is a need for additional acute care hospital beds in Orange County, Mr. Richardson's testimony is of very little value. STATUTORY CRITERIA. Section 10-5.11(23)(b), F.A.C., provides that a certificate of need may be issued when the criteria, other than bed need, as provided in Section 38l.494(6)(c), Florida Statutes (1984 Suppl.), demonstrate need. The Petitioners have attempted to prove that there is an accessibility problem in Orange County which demonstrates acute care bed need under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). The facts do not support such a conclusion as discussed, supra. This section of the Recommended Order contains findings of fact with regard to the other criteria contained in Section 381.494(6)(c) and (d) Florida Statutes (1984 Suppl.). Consistency with the State and Local Health Plan: Section 381.494(6(c)1, Florida Statutes. The applications of the Petitioners are only partly consistent with the State Health Plan and the Council's Local Health Plan. The Council's Local Health Plan establishes the following occupancy levels for acute care beds which should be met before new acute care beds are approved: TYPE OF BEDS OCCUPANCY LEVEL Medical - Surgical 80% Obstetrical 75% As already discussed, occupancy levels for acute care beds in District 7, and in Orange and Seminole Counties were below 70 percent in 1984. The declining utilization of acute care beds will continue for the next 2 to 4 years and therefore it does not appear that the occupancy level goals in the Local Health Plan will be met by either applicant. These occupancy level goals are intended to be used as checks on the bed need methodologies. The importance of existing occupancy levels in determining whether to add additional acute care beds to a district is recognized in Section 10-5.11(23)(g), F.A.C. The Petitioners have projected that they will achieve an occupancy rate of 45-50 percent after one year of operation. South Seminole Community Hospital, which was opened in May of 1984 in Longwood, Seminole County, Florida, achieved only a 27 percent occupancy rate after 8 months of operation. In light of the fact that South Seminole Community Hospital is located in Longwood, it is doubtful the Petitioners will achieve their projected occupancy rate. The Petitioners have projected that their proposed hospitals will achieve an 80 percent occupancy rate, which is an optimal occupancy rate. Their projections, based upon the findings of fact as to acute care bed need in Orange County and current occupancy levels, are highly unlikely to be reached. Especially in light of the fact that the average occupancy rate in Orange County was only 60.80 percent in 1984. The proposals are also inconsistent with the Local Health Plan goal that a proposal be consistent with the state's acute care bed need methodology. Based upon an application of the Formula, using current data, District 7 and Orange County will have an excess of acute care beds in 1990. Winter Park's proposal is consistent with several other portions of the Local Health Plan. Winter Park's facility will have an active outpatient program, its beds can be available within 24 hours and it will meet several priorities under the Local Health Plan such as being accredited and licensed, and being willing to serve indigents and other patients without regard to payment source. AMI's proposal also meets some of these goals. The Local Health Plan also contains a provision to the effect that "needed" beds should be approved at existing hospitals unless the addition of a new hospital would substantially improve access by at least 15 minutes for 25,000 or more residents. Winter Park has suggested a finding of fact that this provision has been met. If there was a need for additional acute care beds in Orange County such a finding would be appropriate. There is, however, clearly no need for additional acute care beds in Orange County. This portion of the Local Health Plan therefore does not apply. Finally, the Local Health Plan provides that applicants should be able to document community and provider support for their proposals. Community support for the proposals has been demonstrated. Provider support, however, has not been demonstrated. In fact, there is opposition from some providers to the proposed new hospitals, i.e., Florida Hospital and OGH. The proposals are also partially consistent with the State's health plan. The evidence does not clearly establish, however, that the proposals are totally consistent with the goals of the State health plan. Mr. Talbert did testify that Winter Park's proposal is consistent with the goals of the State health plan. It was not clear, however, whether all of the goals were met. Also, Mr. Talbert's testimony was inconsistent with other evidence in this proceeding in some respects. For example, Mr. Talbert testified that one goal of the State health plan is to provide adequate access to acute care resources. The evidence clearly shows that adequate access is already available in Orange County. To the extent it can be inferred that Mr. Talbert's testimony also applies to AMI's proposal, the same problems exist. The evidence does not support a finding that AMI's proposal is totally consistent with the State health plan. Based upon the foregoing, it does not appear that either proposal is totally consistent with the Local Health Plan or the State health plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services in the Service District; Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires that the availability, quality of care, efficiency, appropriateness, extent of utilization and adequacy of like and existing health care services in the service district be considered. The service district for this purpose is District 7. The designation of subdistricts in District 7 is specifically for purposes of allocating district bed need to the subdistricts. The parties, to the extent they addressed this criterion, presented evidence primarily for Orange County only, however. The availability, accessibility and extent of utilization of like and existing acute care hospitals in Orange County has been discussed and findings of fact with regard thereto have been made, supra. To summarize, like and existing services in Orange County are available and accessible and are underutilized. The Petitioners have not shown that like an existing services in District 7 do not provide quality of care or that they are not efficient, appropriate or adequate. Winter Park has argued that like and existing services are not accessible. The evidence does not support such a finding of fact. AMI has argued that there are no like and existing services accessible in the MSAs. That is not the test. The determination to made under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), is whether there are like and existing services in the service district. The service district in these cases is all of District 7, not the MSAs. There are currently seven acute care hospitals in Orange County: Florida Hospital, OGH, Orlando Regional Medical Center, Brookwood Hospital, Humana Lucerne, Winter Park Hospital and West Orange Memorial Hospital. Additionally, Orlando Regional Medical Center - Sand Lake is expected to be opened before 1990. These district. The evidence does not support a finding that some or all of these facilities or others in District 7 are not available, providing quality of care, efficient, appropriate, accessible, over utilized or adequate. AMI and OGH spent an inordinate amount of time and effort presenting evidence on the issue of whether OGH is a like and existing service. The evidence supports a finding that OGH is a like and existing service. Even if OGH was not a like and existing service, such a conclusion would only be relevant if it were concluded that like and existing services must exist within the boundaries of the MSAs or that OGH was the only accessible acute care hospital to the residents of the MSAs. As stated, supra, the pertinent area is not the MSA but District 7 and there are clearly other acute care hospitals in District 7 and some of those hospitals are accessible. If Orange County alone is the appropriate service area for purposes of applying this criterion, the evidence clearly proves that the Petitioners do not meet the criterion. The evidence proves that there are available, quality, appropriate, efficient and adequate like and existing health care services in Orange County and District 7. The Ability of the Applicants to Provide Quality of Care; Section 381.494(6)(c)3. Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion has been meet. 113.. The Availability and Adequacy of Other Health Care Facilities and Services in the Service District which may Serve as Alternatives: Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.). There are clearly other health care facilities in Orange County providing like and existing services. The evidence does not, however, establish that there are other health care facilities and services in Orange County which are alternatives to a 100 bed acute care hospital. Transferring beds from existing facilities has been suggested as an alternative to the proposed new hospitals. This suggested "alternative" could be achieved as easily by approving a new hospital and closing some existing beds. The cost would be essentially the some. Transferring beds is not an alternative. Use of existing beds which are not being occupied is not a viable alternative either, as suggested by OGH in its proposed findings of fact. Probable Economies and Improvements in Service that may be Derived from Operation of Joint, Cooperative or Shared Health Care Resources; Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.). AMI's proposed facility may eventually share some services with Brookwood Community Hospital in the area of administrative management. Brookwood Community Hospital (hereinafter referred to as "Brookwood") is a 157 bed general acute care hospital owned and operated by a limited partnership. The general partner and owner of 82.5 percent of the partnership is Brookwood Medical Center of Orlando, Inc., which in turn is owned by AMI. AMI presented its proposal assuming that there would not be any shared services with Brookwood. Through AMI, UCH, Inc., can receive price discounts for its purchases, typically 15 percent to 20 percent lower than the lowest price available in the market generally. UCH, Inc., will also be able to participate in Brookwood's preferred provider organization agreement. This could result in enhanced utilization of UCH, Inc., which could result in decreased health care costs. Winter Park will share some resources with its new hospital. The resources to be shared include Winter Park's incinerator, CAT Scanner, cardiac catheterization ion laboratory, and certain personnel. Centralized accounting, centralized purchasing and some centralized management would also be employed. Both proposals will have joint, cooperative or shared health care resources which would result in probable economics and improvements in service. The Need in the Service District of the Applicant for Special Equipment and Services not Reasonably and Economically Accessible in Adjoining Areas; Section 381.494(6)(c)6, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Need for Research and Educational Facilities: Section 81.494(6)(c) 7, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Availability of Resources; the Effects on Clinical Needs of Health Professional Training Programs in the Service District: Accessibility to Schools for Health Professionals: the Availability of Alternative Uses of Resources: Extent Accessible to All Residents; Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.). The parties have stipulated that Section 81.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met to the extent it deals with "health and management manpower and personnel only." The other factors to be considered under this criterion were not stipulated to. The first factor to be considered is the availability of resources, including physicians and funds for capital and operating expenditures. The availability of funds will be discussed, infra. As to the availability of physicians, the weight of the evidence supports a finding that physicians are available to staff either of the proposed facilities. AMI proposed a finding of fact that ", unlike WPMH, AMI demonstrated that the major medical specialty areas will be represented by various physicians who will joint the UCH medical staff." AMI did demonstrate that various medical specialty physicians would be willing to work at UCH, Inc. It is also true that Winter Park did not demonstrate that all of the medical specialty physicians would be willing to work at its proposed facility. Despite these facts, several physicians testified that they would use Winter Park's proposed facility if it were approved instead of UCH, Inc., and Mr. Willard Wisler's unrebutted testimony establishes that Winter Park would have no difficulty staffing its proposed hospital. Both Petitioners have established that physician resources are available for project accomplishment and operation. The second and third factors to be considered are the effect the projects will have on clinical needs of health professional training programs in Orange County and, if available in a limited number of facilities, the extent to which services will be available to schools for health professionals in Orange County. The weight of the evidence does not establish that professional training programs are available in a limited number of facilities. In fact the evidence establishes that the University of Central Florida (hereinafter referred to as "UCF"), which is located in east Orange County, has fifty-two affiliation agreements with hospitals and other medical facilities. These affiliation agreements include agreements involving clinical training of radiology technicians at Florida Hospital and, in Brevard County, at Halifax Hospital. Approximately 32 radiology students are currently involved in hospital training programs. AMI presented evidence proving the existence of a proposed "affiliation agreement" between its proposed hospital and UCF. AMI and UCF have in fact entered into an Agreement of Intent. The Agreement of intent essentially provides, in relevant part, that AMI's proposed hospital, if approved, would provide clinical training to UCF radiology technician students. Approximately three to six UCF students per semester would receive training at the new hospital. The program with UCF will clearly have a positive effect on "clinical needs of health professional training programs" in Orange County. The agreement also provides for certain other benefits to UCF in the form of certain gifts. Those benefits, however, are not relevant in considering whether a certificate of need should be issued to AMI. The portion of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), at issue in this proceeding requires only that the effect on "clinical needs of health professional training programs" be considered. AMI's gifts will not meet the "clinical needs" of health professional training programs. AMI's proposed findings of fact with regard to its gifts to UCF are unnecessary. Florida Hospital and Winter Park have proposed several findings of fact concerning AMI's motive in entering into the agreement with UCF. Those proposed findings are not supported by the evidence and are not relevant. Florida Hospital also has proposed findings of fact concerning whether a tertiary hospital would be a better facility for training, the effect of patient mix on training, the lack of any study by UCF to assess the benefits of the agreement and the fact that AMI's proposed facility will not be a teaching hospital or have full-time teachers. Those proposed findings are unnecessary. The fact is, the clinical training to be provided by AMI's facility will be a benefit to the clinical needs of health professional training programs in District 7. Because of the substantial amount of gifts to be made to UCF, which will be paid for by patients of AMI's facility, the costs of AMI's clinical program will be substantial. Winter Park is currently involved in meeting clinical needs of health professional training programs at a number of educational institutions, including UCF. Winter Park's involvement includes radiology and several other programs. Although no agreements have been entered into, programs to meet such clinical needs will be provided at Winter Park's new facility. Because Winter Park has not committed to make any gifts to educational institutions, the costs of its programs will probably be less than AMI's program. The fourth factor to be considered is the availability of alternative uses of resources for the' provision of other health services. The evidence presented at the hearing does not establish that there are not alternative uses of resources. The petitioners failed to present evidence sufficient to conclude that there are not alternative uses for available resources. Finally, the extent to which the proposed services will be accessible to all residents of the service district is to be considered. Both Petitioners are willing to accept all patients regardless of age, sex, race, color or national origin, and medically underserved groups. The Petitioners have met most, but not all, of the requirements of this criterion. Immediate and Long-Term Financial Feasibility; Section 1.494(6)(c)9. Florida Statutes (1984 Suppl.). Immediate Financial Feasibility. AMI's proposed facility will be financed by a 50 percent equity contribution from AMI to UCF, Inc., and 50 percent debt financing from AMI at a maximum interest rate of 12 percent amortized over 30 years. AMI has sufficient lines of credit to cover the amount needed for debt financing. AMI also has sufficient cash and unrestricted liquid assets (almost $300,000,000.00 by the end of its 1984 fiscal year) and generates enough capital ($300,000,000.00 to $400,000,000.00 a year) to fund its equity contribution and the debt. AMI also has sufficient funds to provide working capital needs of UCF, Inc. Exactly how Winter Park's proposed facility will be financed is less clear. Both of the Petitioners have suggested that the other has not proved that it has "committed" itself to funding their respective proposals. Although the evidence does raise questions as to whether AMI or Winter Park has finally committed the total funds necessary to complete their proposals, the weight of the evidence supports a finding that both Petitioners are committed to funding their proposals. More importantly, the test is whether the Petitioners have available financing sources. University Community Hospital, et ala v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1346-A, 1360-A (1983). AMI clearly proved that its Executive Committee had approved its proposal. One of its witnesses, however, testified that the approval of capital expenditures of over $1,000,000.00 took approval of the full AMI Board of Directors. Winter Park clearly proved that its Board of Trustees had approved only $4,000,000.00 of the costs of its facility. Despite these facts, the evidence establishes that, although final approval of all the funds necessary to fund the proposals may not have been given, the funds necessary to insure the immediate, financial feasibility of both proposals are available. Where the funds will come from in Winter Park's case and the total amount of funds needed by Winter Park is far from being crystal clear. Winter Park failed to take into account several expenses it will incur, including sewer capacity reserve fees (approximately $160,500.00), telephone lease costs ($20,000.00) and possibly some interest expenses. There may also be an underestimate of the cost of debt financing, depending upon whether tax-exempt loans are available to Winter Park. The costs of sewer capacity reserve and the telephone lease can probably be covered by the contingency funds projected by Winter Park. AMI's proposed findings of fact with regard to equipment costs underestimates are rejected as unsupported by the weight of all of the evidence. Even with the understatement of project costs, the evidence supports a conclusion that Winter Park's proposal is immediately financial feasible. Winter Park currently has set aside "over $7,000,000.00" which can be applied to fund its proposal. (Although Winter Park has certain planned or ongoing capital improvements, the evidence does not prove that these improvements will be funded out of the funds set aside for the proposed new hospital, as suggested by AMI)'. Winter Park also has lines of credit with Barnett Bank and Sun Bank of $5,000,000.00 each. Neither line of credit has been used in the past. The Sun Bank line of credit was recently renewed and is available for one year. The Barnett Bank line of credit is also good for only one year. Both lines of credit have been renewed in the past. These lines of credit will have to be renewed before construction of Winter Park's facility begins. Winter Park presented no evidence as to whether the lines of credit would be renewed by either bank, however. Therefore, the record does not contain evidence as to whether the lines of credit will be available. Winter Park is also the sole beneficiary of the Winter Park Memorial Hospital Association Foundation, a not-for-profit foundation set upon to receive donations for the support of Winter Park. The Foundation "would make funds available to it [Winter Parka when needed." (Although testimony concerning Winter Park's alleged ability to "request" funds from the Foundation was struck, the quoted testimony was not objected to). The Foundation currently has $2,000,000.00 which could be provided to Winter Park. Finally, Winter Park has a commitment from Barnett Bank for a loan of $9,181,648.00. The loan has been committed whether interest on the loan is tax- free or taxable to Barnett Banks. Whether the loan is tax-free will affect the immediate and long- term financial feasibility of the proposal. If the loan is not tax-free, additional interest expense will be incurred; instead of being financed at a 7.696 interest rate, Winter Park will be charged approximately 11.5 percent interest if the loan is not tax- free. If the loan is tax-free, Winter Park may have failed to take into account costs associated with obtaining tax-free financing, i.e., underwriter's fees. AMI has proposed a number of findings of fact concerning additional costs associated with whether the Barnett Bank loan is tax-free. Those findings of fact are not relevant, however, in determining immediate financial `feasibility of Winter Park's proposal. The evidence establishes that the funds available to Winter Park are sufficient to cover Winter Park's projected costs and the costs it failed to include in its proposal (including the $1,20 0,000.00 of working capital which will be needed by the and of 1988). Both proposals are financially feasible in the short-term. Long Term Financial Feasibility. The Petitioners have failed to prove that their proposals are financially feasible in the long run. The projections of the Petitioners with regard to expected gross revenue depends upon whether their utilization projections are correct. Based upon the conclusion that there is no need for the proprosed facilities it is unrealistic to expect the facilities to be financially feasible. AMI's projections as to gross revenue depend on Mr. Richardson's need analysis for AMI's MSA. As discussed, supra, Mr. Richardson's projections were based upon unrealistic occupancy rates. Winter Park's projected utilization is based upon Winter Park's historical experience with its MSA for 1983. Mr. Talbert's and Mr. John Winfrey's reliance on this data in light of the trend toward reduced utilization of hospitals in Orange County is misplaced. Determining utilization of Winter Park's proposed hospital in future years based on utilization of an existing hospital in light of the trend toward reduced utilization of hospitals is very suspect. The fact that east Orange County is expected to grow in terms of population does not eliminate the concern with regard to utilization. Orange County has been growing since 1980 and before. Despite that growth, hospital utilization has declined. As to the projected expenses of the proposed hospitals which effect the financial feasibility of the proposals, it appears that AMI's projections are reasonable. A number of questions concerning Winter Park's expenses were raised, however, by the evidence. The evidence supports a finding that Winter Park has failed to take into account some expenses which will affect the long term financial feasibility of its proposal. Expenses not taken into account include phone lease expenses ($15,000.00 to $20,000.00), indigent care assessments ($58,000.00 in the second year of operation) and start-up costs ($22,680.00 a year). The evidence, however, also supports a finding that Winter Park's estimate of medicare contractual allowances was $318,900.00 too high and that depreciation expense was $130,000.00 too high. These overstatements of expenses are more than sufficient to cover the understatements of expenses discussed in this paragraph. The primary problem with Winter Park's estimate of expenses is that Winter Park has projected interest expense at a tax- exempt rate of 7.6 percent. The evidence does not prove that Winter Park can, however, obtain tax-exempt financing. Winter Park only presented evidence that Barnett Bank is willing to loan funds on a tax-exempt or taxable basis. Winter Park must, however, obtain approval of its proposed tax-exempt financing from the Orange County Health Facilities Authority. See Chapter 154, Florida Statutes (1983). No evidence that such approval could be obtained was presented at the hearing. Winter has therefore failed to prove that its estimated interest expenses can be achieved. The evidence also shows that if Winter Park cannot obtain tax-exempt financing, it will have to borrow funds at an 11.5 percent interest rate. This rate of interest can be obtained, but the additional interest expense would result in a net loss for the second year of operation. Based upon the foregoing, Winter Park has failed to prove that its proposal is financially feasible in the long-term. Winter Park has proposed findings of fact to the effect that it could charge a higher rate for its services to cover understated expenses. No evidence was presented, however, that proves that Winter Park would be willing or committed to a higher charge for its services. AMI's proposed findings of fact with regard to expenses for utilities, food and drugs, other operating expenses, incinerator costs and equipment costs are rejected. AMI's proposed findings of fact with regard to the goal of Winter Park to achieve an optimum profit margin of 5 percent to 7 percent are rejected because that goal does not apply to the proposed facility. The projected profit margin of the proposed facility is only seven-tenths of one percent. AMI's proposed findings of fact as to the years projections were made for (two years instead of five), the manner of making those projections (no balance sheet, no cash flow statements and no quarterly breakdowns) and the lack of a feasibility study are not necessary. AMI's remaining proposed findings of facts concerning "soft spots" in Winter Park's projections are also rejected. Special Needs and Circumstances of Health Maintenance Organizations; Section 381.494(6)(c)10, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Needs and Circumstances of Entities which Provide Services or Resources to Individuals not Residing in the Service District or Adjacent Service Districts; Section 381.494(6)(c)11, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Probable Impact of the Proposal on the Costs of Providing Health Services; Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.). The weight of the evidence clearly supports a conclusion that if either of the proposed hospitals is approved, the probable impact on the costs of providing health services would be negative. The only real question raised by the evidence is the degree of the negative impact. It has already been found that there will be an excess of beds in Orange County in 1990 and that utilization rates are decreasing and will continue to do so. To add 100 acute care beds to an already over-bedded subdistrict can only further add to the number of excessive beds. Patients who would occupy 100 new acute care beds would have access to other hospitals in Orange County if a new hospital is not approved. If it is assumed that patients could be attracted to a new hospital in the MSA's it necessarily follows that those patients will not use an existing, already underutilized, hospital in Orange County, Seminole County or the rest of District 7. Additionally, the evidence clearly shows that some patients who currently use existing Orange and Seminole County hospitals would be attracted to a new hospital in the MSAs. AMI has suggested that such a loss of patients would be "minimal." Minimal or not, the loss of any number of patients would result in a loss of patient days and revenue to existing hospitals which are on average already underutilized. If patients are lost by existing hospitals, the ability to serve indigents could be adversely affected. The projected population growth for the MSA's does not solve the problem either. Orange County has been experiencing population growth during the 1980's, as well as prior to 1980. Despite this population growth, utilization rates have been decreasing. Even Mr. Richardson, AMI's expert health planner, admitted there would be an impact on existing hospitals. Mr. Richardson indicated that there would a "1.5 percent occupancy impact on the system" by 1990 based upon Mr. Margolis' analysis. Mr. Richardson indicated that such an impact would be "minimal." Whether a 1.5 percent impact is minimal is not the issue. The issue is what effect such an impact would have. The weight of the evidence clearly supports the finding that the impact would be negative and the citizens of Orange County would suffer the consequences of that "minimal" impact. Florida Hospital's expert health planner, Mr. Margolis, was the most credible witness with regard to this criterion. His testimony proves that Florida Hospital and OGH could lose 5,400 to 6,000 patient days if a new 100 acute care hospital is approved. How much the dollar loss would be as a result of such a decrease in patient days is not clear. There was testimony that OGH could lose $1,000,000.00 to $3,500,000.00 in gross revenue. AMI has again suggested that the loss in patient days and revenue to OGH would be minimal and that OGH's testimony as to the amount of loss was misleading. Mr. Patrick Deegan, who testified as an expert in finance for OGH, did fail to take into account any reduction in expenses which might be associated with a loss in revenue and also failed to take into account increases in revenue as a result of growth. Although these factors could influence the amount of projected losses in revenue, the fact remains that a new acute care hospital could and probably would have a negative impact on OGH. AMI has also suggested that OGH could and should reduce its staff. This suggestion is based upon a comparison of OGH's staffing patterns and UCH Inc's proposed staffing. The record does not support AMI's proposed findings of fact. The record does not prove that UCH, Inc's, proposed staff will be at a more appropriate staffing level. Nor does the record establish that a reduction in staff at OGH would be detrimental, as suggested by OGH. As to Florida Hospital, AMI also suggests that any impact to its campuses would be minimal, if any. It is true that there probably would be no impact on Florida Hospital's Apopka campus. Florida Hospital's Orlando campus, however, gets 20 percent of its admission from the MSAs and its Altamonte Springs campus gets 3 percent of its admissions from the MSAs, as AMI points out in its proposed findings of fact. If any of those patients utilize a new hospital in the MSAs, Florida Hospital will lose patients and will be adversely affected. AMI suggested several findings of fact with regard to the financial well-being of Florida Hospital, the addition of beds at its Altamonte Springs and Orlando campuses and its motives in intervening in these cases. These proposed facts do not support a finding that Florida Hospital would not be negatively affected by the opening of a new 100 acute care bed hospital in Orange County. Finally, Winter Park has proposed findings of fact to the effect that a new Winter Park hospital in the MSAs will foster competition and thereby lower costs in Orange County for hospital services. The record does not support these proposed findings of fact in light of the excess of beds in District 7 and the underutilization of existing beds. Based upon the foregoing, Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), has not been met by the Petitioners' proposals. Costs and Methods of Construction; Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.). The Petitioners only partially proved that Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), will be met. This section requires proof as to the costs and methods of construction, including methods of energy provision and the availability of alternative, less costly or more effective methods of construction. The Petitioners only proved that the costs of construction would be reasonable. AMI's proposed facility will have 99,000 square feet. The total cost of construction will be $10,095,000.00 including $650,000.00 for site preparation, $8,161,000.00 for labor, materials, overhead and profit, $406,000.00 for contingencies and $878,000.00 for inflation. Architectural and engineering fees will cost an additional $566,700.00. AMI's costs of construction do not include the $236,800.00 cost of reserving sewage capacity or the costs of obtaining appropriate rezoning of its property. These costs will add to the total cost of construction and the total cost of the proposal. AMI's contingency funds are sufficient to cover these amounts. AMI's additional findings of fact concerning construction costs are cumulative or unnecessary for purposes of determining if this criterion has been met. Winter Parks's proposed facility will have 98,763 square feet. Total cost of construction projected by Winter Park is $10,415,000.00, consisting of $375,000.00 for site preparation, $9,000,000.00 for labor, materials, overhead and profit, $468,700.00 for contingencies and $552,200.00 for inflation. Winter Park's projections do not include the costs of reserving sewage capacity which will add approximately $150,000.00 in costs. This additional amount can be covered by the contingency amount. Although the evidence was contradictory, Winter Park did not inadvertently leave out the cost of an incinerator--there will be no incinerator at the new hospital. Although the Petitioners presented testimony to the effect that their projected costs of construction are reasonable, no consideration was given to whether the proposed facilities would be developments of regional impact (hereinafter referred to as "DRI") under Chapter 380, Florida Statutes (1983), and the costs associated with such a determination. The evidence supports conclusion that there will be some costs associated with the determination of whether the proposals are DRIs. The additional cost, however, does not appear to be significant. The Petitioners have failed to prove that the methods of construction are reasonable. They have also failed to prove that the provision of energy will be reasonable or that there are not alternative, less costly, or more efficient methods of construction available. Section 381.494(6)(d). Florida Statutes (1984 Suppl.). In addition to considering the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), Section 381.494(6)(d), Florida Statutes (1984 Suppl.), requires findings of fact in cases of capital expenditure proposals for new health services to inpatients as follows: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. The existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, that the addition will be consistent with the plans of other agencies of the state responsible for the provision and financing of long-term care, including home health services. The facts concerning the first three items quoted are favorable to the Petitioners. The last one does not apply. The fourth item has not been proved to be true in this case. Summary. In summary, the evidence proves that an application of the criteria of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate the need for either of the proposed facilities. The Petitioners have only proved that they can provide quality of care, that there are not alternatives to their proposals, that they will have shared resources, that personnel are available, that they have the capital to create the facilities, that they will improve the clinical needs of health professional training programs, and that their proposals are `financially feasible in the short-run. The Petitioners, however, have failed to prove any need for the facilities. Their proposals are not consistent with the local health plan or the State health plan. There are sufficient, underutilized existing hospitals to meet any need for hospital care and they will be adversely affected by the proposed facilities. The proposed facilities are not financially feasible in the long run. THE NEED FOR A CAT SCANNER AMI is also seeking a certificate of need for a CAT Scanner in this proceeding. The determination of whether such a certificate of need should be issued is governed by Section 10-5.11(13), F.A.C. In order to qualify for CAT Scanner, AMI must first obtain approval of its proposed hospital. Because it has been concluded that a certificate of need for a new hospital should not be granted, AMI should not be granted a certificate of need for a CAT Scanner; it will not qualify under Section 10- 5.11(13), F.A.C. In an abundance of caution, the following findings of fact are made as to whether a certificate of need for a CAT Scanner should be issued if AMI's application for a certificate of need for an acute care hospital is approved by the Department. Section 10-5.11(13)(b), F.A.C., provides that a favorable determination will not be given to applicants failing to meet the standards and criteria of Section 10-5.11(13)(b)1-10, F.A.C. The evidence clearly establishes that AMI's CAT Scanner application meets the standards of Sections 10- 5.11(13)(b) 1-3 and 7-9, F.A.C. Section 10-5.11(13)(b)4, F.A.C., does not apply. Section 10-5.11(13)(b)5, F.A.C., requires that an applicant document that there is a need for at least 1,800 scans to be accomplished in the first year of operation and at least 2,400 scans per year thereafter. Mr. Richardson testified that this standard is intended to apply to existing providers and that for a new hospital the need should apply to a five year horizon (1990 in this case). Mr. Richardson indicated that in 1990, this standard can be met. The language of Section 10-5.11(13(b)5, is clear; there must be a need documented for the first year of operation and each year thereafter. In this case, the first year of operation will be 1987. AMI has not documented that there is a need for 1800 scans in 1987 or 2,400 scans per year thereafter. Section 10-5.11(13)(b)6, F.A.C., requires that the applicant document that the number of scans per existing scanner exceeded 2,400 during the "preceding 12 months." The evidence establishes that during the 12 months preceding the hearing all of the fixed CAT Scanners located at hospitals except two were being used for more than 2,400 scans. Again, Mr. Richardson indicated that this standard should be applied to the 12 months preceding 1990. That is not what the rule specifies. The standard applies to the 12 months preceding the hearing. The two units that have not been used for 2,400 scans just started operation, however. Because the rule requires that in the first year of operation only 1,800 scans need to be performed, those units should not be considered in determining if AMI meets this standard. Therefore, AMI meets the requirements of Section 10-5.11(13)(b)6, F.A.C. The last standard, Section 10-5.11(13)(b)10, F.A.C., provides that extenuating circumstances pertaining to health care quality or access problems, improved cost benefit consideration or research needs may be considered. The facts do not support a finding that there are extenuating circumstances in this case. The facts do prove that any hospital such as the AMI proposed hospital should have access to a CAT Scanner. This need, however, can be met by a mobile CAT Scanner or by transferring patients to a facility with a CAT Scanner, although the latter alternative is less desirable. The evidence clearly proves that there is not access problem with regard to obtaining the services of a CAT Scanner. AMI has not met the requirements of Section 10-5.11(13)(b), F.A.C. Taking into account the factors to be considered under Section 10-5.11(13)(a)1- 8, F.A.C., also supports a finding that a certificate of need for a CAT Scanner should not be issued to AMI even if there is a need for its proposed hospital.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need applications for a 100-bed acute care hospital and CAT Scanner filed by AMI, case number 84-1819, be denied. It is further DONE and ENTERED this 26th day of July, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 26th day of July, 1985. COPIES FURNISHED: Fred Baggett, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302 Michael Von Eckhardt, Esquire American Medical International, Inc. 414 Camden Drive Beverly Hills, California 90210 Kenneth F. Hoffman, Esquire OERTEL & HOFFMAN, P.A. Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A. P.O. Box 880 Winter Park, Florida 32790-0880 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 E. G. "Dan" Boone, Esquire Stephen K. Boone, Esquire E.G. BOONE, P.A. P.O. Box 1596 Venice, Florida 34284 Steven R. Bechtel, Esquire Brain D. Stokes, Esquire MATEER & HARBERT, P.A. 100 East Robinson Street P.O. Box 2854 Orlando, Florida 32802 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 LIST OF WITNESSES AMI NAME EXPERTISE Jim Palmer Phillip L. Coppage Hospital administration including staffing. Thomas C. Wohlford Patient group and insurance programs in the health care industry. J.D. Garland Health care facilities, including hospital construction management and budgeting and cost estimating. Manuel Viamonte, M.D. Radiology. Dick Chadbourne Manpower staffing requirements for health care facilities. Jan Stirrat Health care facility equipment planning and equipment cost budgeting. Preston Thompson Physician relations and recruiting. Joseph Akerman, M.D. Peter Hiribarnc, M.D. Louis Trefonas, Ph.D. Need, development and operation of sponsored research projects at UCF. Thomas S. Mendenhall, Ph.D. Need, development and operation of health education and affiliation programs. Alan Denner, M.D. Louis C. Murray, M.D. Joseph Sandberg, M.D. Myles Douglas, M.D. Robert D. Fennell Corporate health facilities planning, processing, implementation and development. Manuel J. Coto, M.D. Jerold J. Faden, M.D. Zivko Z. Gajk, M.D. Don Steigman Hospital operations and administration. William A. Tipton Traffic and transportation. Neal B. Hiler Civil engineering and property site analysis. Trevor Colbourn Ben E. Whisenant Frederick A. Raffa, Ph.D. Demographics and socioeconomic forecasting. Nilo Regis, M.D. Richard Pajot Mark Richardson Health planning. Richard Altman Hospital management engineering. Walter Wozniak Armond Balsano Health care facility financial feasibility and analysis and third- party reimbursements. Rick Knapp Health care facility financial feasibility and analysis, third- party reimbursement and rate-setting for health care facilities. Richard Anderson Edward E. Weller Real estate appraisal. John Winfrey Health care accounting and financial feasibility analysis. Van Talbert Health care planning. Margo Kelly Financial management, analysis and feasibility. WINTER PARK NAME EXPERTISE Katherine J. Brown Florida Hospital Cost Containment Board procedures; hospital costs and charges, data gathering and review; and hospital costs and charges comparisons. Karl Schramm, Ph.D. Hospital cost and charges and comparisons thereof and health care financing, including the impact upon the health care consumer. Willard Wisler Hospital administration including staffing and operating hospitals. John H. Roger Construction design and costs, including site preparation, and analysis thereof, in central Florida; including health care facilities construction. R. Sans Lassiter Traffic engineering, travel times and access in central Florida. Richard Anderson Sarah Mobley Equipment and cost of equipment. William J. Serow, Ph.D. Demographics. Van Talbert Health care planning. John Winfrey Health care accounting and financial feasibility analysis. Robert C. Liden Investment banking, including tax-exempt financing of health care facilities. Lewis A. Siefert Hospital accounting and Medicare Reimbursement. FLORIDA HOSPITAL NAME EXPERTISE Steven Windham Health planning. W. Eugene Nelson Health planning, CON administration and transportation planning. Ronald J. Skantz Radiology training and management. Sven Kansman Traffic engineering and travel time studies. John Crissey Stan Smith, Ph.D. Demographics. Gabriel Mayer, M.D. Physician. Larry Margolis Health care planning, hospital administration, facility planning, HMO's and PPO's. Scott Allen Miller Health care accounting and financial feasibility. OGH NAME EXPERTISE Patrick J. Carson, D.O. Medical emergencies and operation of an emergency room. Tracey Watson Michael Sherry B. Jean Martell Walter J. Wozniak Lawrence Kramer, O.D. Family practice. Patrick Deegan Accounting, hospital finance and budgeting. Andrea Walsh DEPARTMENT NAME EXPERTISE W. Eugene Nelson Health planning, CON administration and transportation planning. PUBLIC WITNESSES Mike Baumann Bob Mandell Luddy Goetz Martin Goodman Yvonne Opfell Martin Lebnick
The Issue Which, if any, of the four certificate of need applications for short-term psychiatric beds in Department of Health and Rehabilitative Services District 9 should be approved.
Findings Of Fact Description of the Parties The Department of Health and Rehabilitative Services ("HRS") is the agency charged under Chapter 381, Florida Statutes (1991), to make decisions regarding certificate of need ("CON") applications. HRS issued its intent to approve the CON applications of Glenbeigh Hospital of Palm Beach, Inc. ("Glenbeigh"), for 45 beds, and Boca Raton Community Hospital, Inc. ("Boca"), for 15 beds, pursuant to a published fixed need for 67 beds for HRS District IX. HRS also issued its intent to deny the CON applications of Wellington Regional Medical Center, Incorporation ("Wellington") to convert 15 acute care beds to 15 short term adult psychiatric beds, and Savannas Hospital Limited Partnership ("Savannas") to convert 20 substance abuse beds to 20 short term adult psychiatric beds and to add 10 new short term adult beds. District IX includes Palm Beach, Martin, St. Lucie, Okeechobee and Indian River Counties. As a result of Glenbeigh's Notice of Withdrawal filed on April 6, 1993, CON No. 6438 is no longer under consideration in this case. Boca is an existing 394-bed acute care hospital, located one mile north of the Broward County line, and is the applicant for CON No. 6442, to convert 15 medical/surgical beds to 15 adult psychiatric beds, and to delicense an additional 6 medical/surgical beds. Wellington is an existing acute care hospital in Palm Beach County, with 104 acute care medical/surgical beds and 16 substance abuse beds, and is the applicant for CON No. 6441 to convert 15 acute care beds to 15 short term adult psychiatric beds. Savannas is an existing 70 bed child/adolescent and adult psychiatric and substance abuse hospital in St. Lucie County, about 40 miles north of Palm Beach, and is the applicant for CON No. 6444, to convert its 20 substance abuse beds to 20 adult short-term psychiatric beds, and to add 10 new adult short-term psychiatric beds. Lake Hospital and Clinic, Inc., d/b/a Lake Hospital of the Palm Beaches ("Lake"), at the time of hearing, was a 98-bed psychiatric and substance abuse hospital, with 46 adult psychiatric beds, 36 child/adolescent psychiatric beds and 16 substance abuse beds, located in Lake Worth, Palm Beach County, between Boca Raton and West Palm Beach. The parties stipulated that Lake had standing to challenge the Boca application. Community Hospital of the Palm Beaches, Inc., d/b/a Humana Hospital Palm Beaches ("Humana") is an existing 250-bed acute care hospital, with 61 adult and 27 child/adolescent psychiatric beds, and is a Baker Act receiving facility, located directly across the street from Glenbeigh in Palm Beach. Florida Residential Treatment Centers, Inc., d/b/a Charter Hospital of West Palm Beach ("Charter") is an existing 60-bed psychiatric hospital with 20 beds for children and 40 beds for adolescents, located approximately 15 minutes travel time from Glenbeigh. Martin H.M.A., Inc., d/b/a SandyPines Hospital ("SandyPines") is an existing 60 bed child and adolescent psychiatric hospital, and a Baker Act receiving facility, located in Martin County, less than one mile north of the Palm Beach County line. By prehearing stipulation, the parties agreed that the statutory review criteria applicable to the CON application of Boca are those listed in Subsections 381.705(1)(a), (b), (d), (f), (i) - (l) and (n). If Rule 10- 5.011(1)(o) is applicable, the parties stipulated that the disputed criteria are those in Subsections 4.g. and 5.g. Background and Applicability of HRS Rules and Florida Statutes Rule 10-5.011(o) and (p), Florida Administrative Code, was in effect at the time HRS published the fixed need pool and received the applications at issue in this proceeding, the September 1990 batching cycle. The rule distinguished between inpatient psychiatric services based on whether the services were provided on a short-term or long-term basis. Similarly, Rule 10- 5.011(q), Florida Administrative Code, distinguished between short-term and long-term hospital inpatient substance abuse services. On August 10, 1990, HRS published a fixed need pool for 19 short-term psychiatric beds in HRS District IX, with notice of the right to seek an administrative hearing to challenge the correctness of the fixed need pool number. See, Vol. 16, No. 32, Florida Administrative Weekly. On August 17, 1990, HRS published a revised fixed need pool for a net need of 67 additional short-term hospital inpatient psychiatric beds in HRS District IX, based on the denial of a certificate of need application, subsequent to the deadline for submission of the August 10th publication. The local health plan formula, which has not been adopted by rule, allocates 62 of the additional 67 beds needed to the Palm Beach County subdistrict. The revised pool publication did not include notice of the right to an administrative hearing to challenge the revised pool number. See, Vol. 16, No. 33, Florida Administrative Weekly. There were no challenges filed to either the original or revised fixed need pool numbers. On December 23, 1990, HRS published new psychiatric and substance abuse rules, subsequently renumbered as Rule 10-5.040 and 10-5.041, Florida Administrative Code. These new rules abolished the distinction between short- term and long-term services, and instead distinguished psychiatric and substance abuse services by the age of the patient. Pursuant to Section 14 of the new psychiatric rule, that rule does not apply to applications pending final agency action on the effective date of the new rule. HRS will, however, license any applicant approved from the September 1990 batching cycle to provide services to adults or children and adolescents, using the categories in the new rule, not based on the distinction between short and long term services which existed at the time the application was filed. Approved providers will receive separate CONs for adult and child/adolescent services. Rule 10-5.008(2)(a), Florida Administrative Code, provides that the fixed need pool shall be published in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline and . . . shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. Humana, Lake, Charter and SandyPines allege that HRS incorrectly determined need under the old rule, by failing to examine occupancy rates pursuant to that rule. The rule provided, in relevant part, 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 percent 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 percent 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 percent or greater for the preceding year. (Emphasis added.) Rule 10-5.011(o)4(e), Florida Administrative Code. HRS' expert witness, Elizabeth Dudek, testified that the fixed need pool for 67 additional short term inpatient psychiatric beds was calculated pursuant to the formula in Rule 10-5.011(l)(o), Florida Administrative Code. Ms. Dudek also testified that since calculation resulted in a positive number, according to HRS policy, the publication of the fixed need pool indicates that the occupancy prerequisites must have also been met. To the contrary, the State Agency Action Report and the deposition of Lloyd Tribley, the HRS Health Facilities consultant who collected the data to support the publication of the fixed need pool, indicate that he did not determine existing occupancy separately for adults and for children/adolescents, as required by subsection (e) of the old rule. Rather, he determined, pursuant to subsection (f), that overall occupancy rates for licensed short-term psychiatric beds exceeded 75 percent. With the August 10, 1990 publication of the need for 19 additional short-term inpatient psychiatric beds, HRS provided a point of entry to challenge the published need, including the agency's apparent failure to make a determination of existing occupancy rates for separate age categories. No challenge was filed. In the August 17, 1990 publication, HRS failed to provide a point of entry, when it added 48 more beds to the pool as a result of the issuance of a final order denying a prior CON application. The August 10th publication of numeric need, according to HRS' representative should have been based on an analysis of separate and combined occupancy rates. There was no challenge to that publication, therefore the number of beds in the fixed need pool is not at issue in this proceeding. Like and Existing Facilities Humana, Lake and Charter assert that, as a result of the new rule abolishing separate licensure categories for short-term and long-term beds, all psychiatric providers within an applicant's service district are like and existing facilities. These parties also assert that there was not, even under the old rule, any practical difference between these categories of providers, particularly for children/adolescents. In support of this position, the evidence demonstrated that the average lengths of stay in short-term and long- term adolescent psychiatric beds in 1989 were 48.1 days and 53.02 days, respectively. In 1990, the average lengths of stay in short and long-term beds were 41.8 days and 41.9 days, respectively. The parties asserting that the effect of the new rule is to create an additional group of like and existing providers point to HRS' response to the application of Indian River Memorial Hospital in Vero Beach, Florida ("Indian River"). According to the testimony of HRS expert witness Elizabeth Dudek, Indian River was another District 9 applicant in this same batching cycle. Indian River applied for a CON to convert long-term psychiatric beds to short- term psychiatric beds. HRS denied the CON application of Indian River because, under the new rule, which had taken effect before the decisions on the batch were made, Indian River would receive a new license permitting it to treat psychiatric patients regardless of their projected lengths of stay. Glenbeigh asserted that the numeric need for 67 additional short term psychiatric beds cannot be challenged in this proceeding based on the failure of any party timely to challenge the August 10, 1990, publication of need. Similarly, Glenbeigh asserted that the comparison of "like and existing" facilities must be limited to those used in the inventory to compute need. Glenbeigh relied generally on Florida Administrative Code Rule 10-5.011(o), the old rule governing short term hospital inpatient psychiatric services, for the proposition that "like and existing" in Subsection 381.705(1)(b), Florida Statutes, is equivalent to the inventory of licensed and approved beds for short term psychiatric services, which was used in the computation of need. However, the rule also provides, in a list of "other standards and criteria to be considered in determining approval of a certificate of need application for short term hospital inpatient psychiatric beds," the following, Applicants shall indicate the availability of other inpatient psychiatric services in the proposed service area, including the number of beds available in crisis stabilization units, short term residential treatment programs, and other inpatient beds whether licensed as a hospital facility or not. In light of the rule directive that the consideration of like and existing services is not limited to licensed provider hospitals, Glenbeigh's assertion that the statutory review criteria is more restrictive and limited to the licensed and approved beds that were used to compute numeric need is rejected. The like and existing facilities are the hospitals or freestanding facilities which are authorized to provide the same psychiatric services, as the applicants seek to provide as a result of this proceeding. It was established at hearing that the following list of District 9 facilities provide psychiatric services comparable to those which the three remaining applicants seek to provide in these consolidated cases: DISTRICT 9 Hospital PSYCHIATRIC BEDS SUBSTANCE ABUSE BEDS Adult Child and Adult Child and Adolescent Adolescent Lic. App. Lic. App. Lic. App. Lic. App. Bethesda Hospital 20 0 0 0 0 0 0 0 Charter Palm (IRTF) 0 0 60 0 0 0 0 0 Fair Oaks 36 0 49 0 14 0 3 0 Forty Fifth Street 44 0 0 0 0 0 0 0 Glenbeigh Palm Beach 0 0 0 0 30 0 30 0 Humana Palm Beach 61 0 27 15 0 0 0 0 Humana Sebastian 0 0 0 0 16 0 0 0 Indian River Mem. 16 0 38 0 0 0 0 0 J.F. Kennedy Mem. 14 0 0 0 22 0 0 0 Lake Hospital 46 0 36 0 16 0 0 0 Lawnwood Regional 36 Res. Treat. Palm 0 24 0 0 0 0 0 (IRTF) 0 0 40 0 0 0 0 0 Sandy Pines 0 0 60 0 0 0 0 0 Savannas 35 0 15 0 20 0 0 0 St. Mary Hospital 0 40 0 0 0 0 0 0 Wellington Regional 0 0 0 0 16 0 0 0 Vol. 16, No. 52, Florida Administrative Weekly, (December 28, 1990) (Humana Exhibit 26). Need For Additional Beds An analysis of need beyond that of the numeric need, requires an analysis of the availability and accessibility of the like and existing facilties. One reliable indicator of need is the occupancy levels in the like and existing facilities. In addition to providing guidelines for the publication of need, Rule 10-5.011(o)(4)(e) also mandates a consideration of occupancy levels to determine if applicants are or are not required to demonstrate "not normal circumstances" necessitating the issuance of a CON. For all child/adolescent psychiatric programs in District 9, the expert for Lake and Humana calculated total average occupancy rates at 57.6 percent in 1988, 64.2 percent in 1989, and 53.2 percent in 1990. In support of the accuracy of the expert's calculations, the District 9 Annual Report for 1990 (Lake Exhibit 4) shows occupancy at 46.80 percent in general hospitals, 88.22 percent in specialty hospitals then categorized as short term and 38.22 percent in specialty hospitals then categorized as long term. In addition, during this same period of time, average lengths of stay in District 9 child/adolescent beds also declined by approximately 10 percent. Using the guidelines of the old rule, new short term psychiatric beds should not normally be approved when the child/adolescent rate is below 70 percent. In the new rule, child/adolescent beds should not normally be approved if occupancy is below 75 percent. Therefore, under either rule, applicants who will be licensed for child/adolescent beds, must demonstrate not normal circumstances for their CON applications to be approved. The expert for Lake and Humana, also computed the adult occupancy rates for 1988-1990 in District 9 as follows: 1988- 66.5 percent; 1989 - 73.1 percent; 1990 - 68.5 percent. The occupancy rates for adult beds for the 12- month period ending March, 1990 was 70.6 percent and 69.2 percent for the twelve months ending June, 1990. In evaluating the accuracy of the expert's calculations of occupancy rates for adult beds, a comparison can be made to the District 9 Annual Report for 1990 (Lake Exhibit 4). Occupancy rates were 57.75 percent in general hospitals and 79.45 percent in specialty hospitals. This data does not include Indian River Memorial or Lawnwood Regional which were also listed on the December 1990 inventory of licensed adult beds, nor St. Mary's Hospital which was listed as having 40 approved adult beds. The comparison indicates the accuracy of concluding that the highest occupancy level for District 9 adult psychiatric beds during the period 1988 to 1990 was approximately 70 percent. Using the guidelines of the old rule, 75 percent occupancy is required before new adult beds can be approved unless there is a not normal circumstance. Boca's Proposal Boca Raton Community Hospital ("Boca") is a 394-bed not-for-profit acute care hospital, accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations, which proposes to convert 21 of its medical/surgical to 15 adult psychiatric beds and to delicense an additional 6 acute care beds. Boca's CON would be conditioned on the provision of 10.8 percent total annual patient days to Medicaid patients and a minimum of 5 percent gross revenues generated, or 2 percent total annual patient days to medically indigent patients. Boca has proposed this alternative so that, if it fails to provide direct care to indigents, it may donate the revenues to further the objectives of the state and district mental health councils. Boca Raton Community Hospital Corporation has control and manages the Boca's property, policies and funds. The Boca Raton Community Hospital Foundation raises funds for Boca and has the funds necessary to accomplish the proposed project at a cost of $932,531. Boca's application asserts that a not normal circumstance exists in the need to serve Medicaid patients in the district, and that a need exists to serve geriatric psychiatric patients in an acute care hospital, due to their general medical condition. Medicaid reimbursement for psychiatric care is only available in acute care hospitals. Boca Historically serves in excess of 70 percent Medicare (geriatric) patients. In 1990, 72 percent of Medicaid psychiatric patients residing in Boca's service area sought psychiatric services outside District 9, as compared to the outmigration of 14.7 percent Medicare patients, and 11 percent commercial insurance patients. Boca supported its proposed 10.8 percent Medicaid CON condition, with evidence that 10.8 percent of all psychiatric discharges in its market area were for Medicaid patients. Boca's opponents dispute the claim that a disproportionate outmigration of District 9 Medicaid patients is, in and of itself, a not normal circumstance. Using the travel time standard for inpatient psychiatric services of 45 minutes under average driving conditions, the opponents argue that District 10 facilities should be considered as available alternatives to additional psychiatric beds in District 9. In fact, the parties stipulated that there are no geographic access problems in District 9. In contrast to the opponents position, Subsections 381.705(a), (b)(, (d), (f) and (h), Florida Statutes (1991), indicate that need, available alternatives and accessibility are evaluated within a district, as defined by Subsection 381.702(5). Therefore, using the statutory criteria as indicative of the situation which is normal, the disproportionate outmigration of medicaid patients can be considered a not normal circumstance with a showing of access hardships for this payor group. Boca's opponents also assert general acute care adult beds are adequate. In August 1991, the occupancy rate was 56.9 percent in the 171 licensed adult psychiatric beds in District 9 general acute care hospitals which are eligible for Medicaid reimbursement. Finally, Boca's opponents argue that Boca historically has not, and will not serve Medicaid patients in sufficient number to alter the outmigration. In 1990, Boca reported 671 Medicaid inpatient days from a total of 99,955. That is equivalent to 92 of the 16,170 admissions. Because Boca has a closed medical staff, only the psychiatrists on staff would be able to admit patients to a psychiatric unit. From the testimony and depositions received in evidence, Boca's psychiatrists who discussed their service to Medicaid patients treated less than 12 Medicaid patients a year. One psychiatrist, who had previously treated Medicaid patients at a mental health center, has been in private practice since 1983-84, but was not sure he had treated a Medicaid patient in his private practice and has received a new Medicaid provider number a few weeks prior to hearing. One Boca psychiatrist does not treat Medicaid patients on an inpatient basis. Two other Boca psychiatrists reported seeing 10 and "a couple" of Medicaid patients a year, respectively. The latter of these described the Medicaid billing procedure as cumbersome. Given the unavailability of Medicaid eligible beds in the District and the nature of the practices of its closed staff of psychiatrists, Boca has failed to establish that its CON application will alleviate the outmigration for psychiatric services of District 9 Medicaid patients. This conclusion is not altered by the subsequent closure of Lake's 46 adult psychiatric beds, because Medicaid reimbursement would not have been available at Lake which was not an acute care hospital. In fact, HRS takes the position that there are no not normal circumstances in this case. Wellington's Proposal Wellington, a 120 bed hospital in West Palm Beach, Florida, proposed to convert 15 acute care beds to 15 short term adult psychiatric beds which, if approved, will be licensed as adult psychiatric beds. Wellington's acute care beds are only 28 percent occupied. Wellington is located in the western portion of Palm Beach County, where no other inpatient psychiatric facilities are located. Wellington is a wholly owned subsidiary of Universal Health Services, Inc. ("UHS"), accredited by the Joint Commission for the Accreditation of Hospitals and Health Organizations (JCAHO) and the American Osteopathic Association (AOA), and offers clinical experience for students of the Southeastern College of Osteopathic Medicine (SECOM). Internships and externships for osteopathic students are also provided at Humana's psychiatric pavilion. Wellington proposes to fund the total project cost of $920,000 from funds available to UHS and intends to become a Baker Act receiving facility. Wellington is not a disproportionate share hospital, and projects 1 percent Medicaid service in its payor mix. Wellington proposes to serve adult psychiatric patients in 15 beds, and projects 53.3 percent and 70 percent occupancy in those beds in years one and two, but does not make a third year projection of at least 80 percent occupancy as required by Paragraph 4(d) of Rule 10-5.011(o). Because the average annual adult occupancy rate in the district is less than 75 percent, any applicant proposing to serve adults must demonstrate that a not normal circumstance exists for approval of its CON application. In addition, there appears to be no shortage of psychiatric beds in acute care hospitals in District 9. See Finding of Fact 39, supra. Not Normal Circumstance Wellington has not alleged nor demonstrated that any of the factors related to its current operations, location or proposed services are not normal circumstances in support of its CON application. Absent the showing of a not normal circumstance, Wellington's proposal cannot be approved, pursuant to Paragraph 4(e) and Rule 10-5.011(o), Florida Administrative Code. Savannas Proposal Savannas Hospital Limited partnership d/b/a Savannas Hospital ("Savannas") is a JCAHO accredited 70 bed psychiatric and substance abuse hospital located in Port St. Lucie, St. Lucie County, Florida, approximately 40 miles north of Palm Beach. Savannas, a Baker Act facility, proposes to convert all 20 of its licensed substance abuse beds to psychiatric beds and to add 10 new psychiatric beds, at a total project cost of $1,444,818. Savannas also proposes to commit to providing 7 percent indigent care. While not specifically describing its circumstances as not normal, Savannas does indicate that it is (1) the only applicant in the northern sub- district of District 9, and (2) could readmit to a segregated unit low functioning neurogeriatric patients of the type it previously served. Savannas also indicated that Medicare reimbursement is not available for patients who have substance abuse, rather than psychiatric primary diagnoses. As a freestanding provider, Savannas is not eligible for Medicaid reimbursement. Savannas demonstrates what services it would provide, if its CON is approved, but fails to identify a need for the services by District 9 psychiatric patients. Within the northern sub-district, the only other facility in St. Lucie County, Lawnwood, reported an occupancy rate of 65 percent in 1989. AHCA also argued that the substance abuse beds at Savannas are needed and should not be converted to psychiatric beds. That position is supported by the fact that Savannas substance abuse beds had a higher occupancy level than its psychiatric beds in 1989. Savannas' application and the evidence presented do not support the need for the services proposed by Savannas, nor does Savannas assert that any not normal circumstances exist.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Certificate of Need Number 6438 to Glenbeigh Hospital of Palm Beach, Inc.; Certificate of Need Number 6442 to Boca Raton Community Hospital, Inc.; Certificate of Need Number 6441 to Wellington Regional Medical Center, Inc.; and Certificate of Need Number 6444 to Savannas Hospital Limited Partnership. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of June 1993. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of June 1993. APPENDIX The following rulings are made on the parties' proposed findings of fact: Humana Adopted in Finding of Fact 1. Subordinate to Finding of Fact 2. 3-6. Issues not addressed. 7-8. Adopted in Findings of Fact 3 and 4. Subordinate to Findings of Fact 44 and 46. Subordinate to Finding of Fact 10. 11-12. Adopted in Findings of Fact 6 and 7. 13-15. Subordinate to Finding of Fact 7. Adopted in Finding of Fact 7. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 27 & 29. Issue not addressed. 20-21. Subordinate to Finding of Fact 25. 22. Issue not addressed. 23-24. Adopted in Findings of Fact 8 and 9. Accepted in relevant part in Finding of Fact 11. Accepted in relevant part in Finding of Fact 10. Subordinate to Finding of Fact 12 and Conclusions of Law 4. Subordinate to Finding of Fact 1. Adopted in Finding of Fact 22. Rejected in Finding of Fact 20. Rejected in Findings of Fact 12 and 18. Adopted in Findings of Fact 15 and 17. Rejected in Finding of Fact 38. Adopted in Findings of Fact 16 and 17. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 47. 38-47. Issues not addressed. Adopted in Findings of Fact 44 and 47. Issue not addressed. Rejected in Finding of Fact 46. Issue not addressed. 52-54. Adopted in Findings of Fact 46 and 47. 55-57. Issues not addressed. Adopted in Finding of Fact Issue not addressed. Adopted in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Finding of Fact 21. Accepted in relevant part in Finding of Fact 22. Accepted in relevant part in Finding of Fact 21. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Finding of Fact 54 Accepted in relevant part in Findings of Fact 26, 38, 39, 42, 43, 47, 48, 54, 55 and 57. Accepted in relevant part in Finding of Fact 26. Rejected in Findings of Fact 21 and 22. Accepted in relevant part in Finding of Fact 26. 74-75. Accepted in relevant part in Finding of Fact 27. 76-77. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 28. Subordinate to Finding of Fact 31. Accepted in relevant part in Finding of Fact 82. Subordinate to Finding of Fact 82. Accepted in relevant part in Finding of Fact 37. Accepted in relevant part in Finding of Fact 39. Issue not addressed. Subordinate to Finding of Fact 27 and 30. Accepted in relevant part in Findings of Fact 27, 29 and 30. Subordinate to Findings of Fact 27 and 30. Accepted in relevant part in Finding of Fact 31. Accepted in relevant part in Finding of Fact 42. Issue not addressed. Addressed in Preliminary Statement. Accepted in relevant part in Finding of Fact 1. 95-99. Issues not addressed Accepted in relevant part in Finding of Fact 10. Accepted in relevant part in Finding of Fact 25. 102-114. Issues not addressed Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. Subordinate to Finding of Fact 25. Accepted in relevant part in Finding of Fact 37. Issue not addressed. Accepted in relevant part in Finding of Fact 10. 121-122. Issues not addressed. Accepted in relevant part in Findings of Fact 4 and 47. Issue not addressed. Irrlevant. Issue not addressed. Accepted in relevant part in Finding of Fact 10 Accepted in relevant part in Findings of Fact 10, 25, 47 and 48. Subordinate to Finding of Fact 11. Issue not addressed. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 45. Accepted in relevant part in Finding of Fact 46. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Issue not addressed. Accepted in relevant part in Findings of Fact 47 and 48. Accepted in relevant part in Finding of Fact 15. Accepted in relevant part in Findings of Fact 47, 48 and 49. Accepted in relevant part in Finding of Fact 11. Lake Adopted in Finding of Fact 1. Subordinate to Finding of Fact 1. 3-4. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 6 and 43. 11-12. Issues not addressed. 13-19. Subordinate to Findings of Fact 27-43. 20-21. Issues not addressed. 22. Adopted in Finding of Fact 10. 23. Adopted in Finding of Fact 11. 24. Adopted in Finding of Fact 12. 25-26. Adopted in Finding of Fact 13. 27-28. Adopted in Finding of Fact 1. 29-31. Adopted in Finding of Fact 22. 32. Rejected in relevant part in Finding of Fact 13. 33. Issue not addressed. 34. Accepted in relevant part in Finding of Fact 25. 35. Subordinate to Finding of Fact 25. 36-37. Accepted in relevant part in Finding of Fact 25. 38-39. Subordinate to Finding of Fact 27. 40. Accepted in relevant part in Finding of Fact 25. 41. Accepted in relevant part in Finding of Fact 30. 42-43. Subordinate to Finding of Fact 30. 44. Accepted in relevant part in Finding of Fact 25. 45. Subordinate to Findings of Fact 27 and 30. 46-47. Issues not addressed. 48. Accepted in relevant part in Findings of Fact 27 and 30. 49-52. Issues not addressed. 53. Subordinate to Finding of Fact 42. 54-56. Issues not addressed. 57. Accepted in relevant part in Conclusions of Law 4. 58-59. Accepted in relevant part in Finding of Fact 26 and in Conclusions of Law 4. Accepted in relevant part in Finding of Fact 20. Adopted in Finding of Fact 20. Adopted in Finding of Fact 15. Subordinate to Finding of Fact 1. Subordinate to Finding of Fact 17. 65-66. Adopted in Finding of Fact 17. Adopted in Findings of Fact 18, 27 and 30. Adopted in Finding of Fact 17. Adopted in Findings of Fact 27 and 29. Adopted in Finding of Fact 30. Adopted in Finding of Fact 29. Adopted in Finding of Fact 31. Adopted in Findings of Fact 28 and 31. Adopted in Finding of Fact 38. Adopted in Findings of Fact 27, 39 and 42. Adopted in Finding of Fact 43. Adopted in Finding of Fact 38. Adopted in Finding of Fact 35. Adopted in Findings of Fact 37, 39 and 42. Adopted in Finding of Fact 42. Adopted in Findings of Fact 47, 48, 49, 53 and 57. Adopted in Finding of Fact 47. Adopted in Finding of Fact 1. 84-89. Issues not addressed. Adopted in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 92-97. Issues not addressed. Subordinate to Finding of Fact 41. Subordinate to Finding of Fact 37. 100-102. Issues not addressed. Adopted in Findings of Fact 47 and 48. Adopted in Finding of Fact 26. Adopted in Finding of Fact 25. Subordinate to Finding of Fact 25. Adopted in Finding of Fact 30. Adopted in Finding of Fact 27. Subordinate to Finding of Fact 27. Adopted in Finding of Fact 27. 111-113. Subordinate to Finding of Fact 27. Subordinate to Finding of Fact 30. Adopted in Finding of Fact 29. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Adopted. Adopted. Accepted in relevant part. Issue not addressed. Accepted in relevant part in Findings of Fact 3 and 32. Subordinate to Finding of Fact 3. Accepted in relevant part in Finding of Fact 41. Adopted in Finding of Fact 42. Subordinate to Finding of Fact 41. Issue not addressed. 128-132. Subordinate to Finding of Fact 32. 133-135. Issues not addressed. Adopted in Findings of Fact 32 and 41. Adopted in Finding of Fact 32. Subordinate to Finding of Fact 32. Issue not addressed. Adopted in Finding of Fact 10. Adopted in Finding of Fact 6. Adopted in Finding of Fact 10. Adopted in Finding of Fact 30. Adopted in Finding of Fact 44. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 46. Subordinate to Finding of Fact 47. Adopted in Finding of Fact 44. 150-151. Adopted in Finding of Fact 46. 152-156. Issues not addressed. 157-158. Adopted in Finding of Fact 10. 159. Adopted in Findings of Fact 48 and 49. 160. Adopted in Finding of Fact 5. 161. Adopted in Finding of Fact 5. 162. Adopted in Finding of Fact 56. 163. Adopted in Finding of Fact 57. 164. Adopted in Finding of Fact 10. 165. Adopted in Finding of Fact 10. 166. Charter Adopted in Finding of Fact 57. 1. Accepted in relevant part in Finding of Fact 1. 2-3. Adopted. 4-10. Accepted in Preliminary Statement. 11. Adopted in Finding of Fact 1. 12-15. Issues not addressed. 16. Adopted in Finding of Fact 12. 17. Adopted in Finding of Fact 7. 18-19. Issues not addressed. 20. Adopted in Finding of Fact 8. 21-25. Subordinate to Finding of Fact 8. 26-38. Issues not addressed 39-40. Adopted in Finding of Fact 10. Subordinate to Finding of Fact 13. Adopted in Finding of Fact 13. 43-44. Adopted in Finding of Fact 22. Adopted in Finding of Fact 13. Adoped in Conclusion of Law 3. Adopted in Finding of Fact 13. Subordinate to Finding of Fact 25. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 23. Issue not addressed. 52-53. Adopted in Finding of Fact 25. 54-55. Issues not addressed. Adopted in Finding of Fact 26. Adopted in Finding of Fact 24. 58-73. Issues not addressed. Adopted in Finding of Fact 23. Adopted in Finding of Fact 38. Adopted in Finding of Fact 27. Adopted in Findings of Fact 27 and 30. 78-79. Subordinate to Findings of Fact 27 and 30. Subordinate to Finding of Fact 27. Issue not addressed. Adopted in Findings of Fact 27 and 30. Adopted in Finding of Fact 37. Adopted in Finding of Fact 39. Adopted in Finding of Fact 25. 86-94. Issues not addressed. Adopted in Finding of Fact 26. Issue not addressed. Adopted in Finding of Fact 15. Adopted in Findings of Fact 37, 39 and 42. 99-101. Issues not addressed. 102. Adopted in Finding of Fact 1. 103-134. Issues not addressed. 135. Adopted in Finding of Fact 4. 136-140. Issues not addressed. Boca Adopted in Finding of Fact 12. Adopted in Finding of Fact 11. Subordinate to Finding of Fact 11. Adopted in Finding of Fact 1. Adopted in Preliminary Statement. Adopted in Findings of Fact 3 and 32. Adopted in Finding of Fact 33. Subordinate to Finding of Fact 3. Adopted in Finding of Fact 32. 10. Subordinate to Finding of Fact 32. 11. Adopted in Finding of Fact 41. 12. Subordinate to Finding of Fact 32. 13. Adopted in Finding of Fact 32. 14. Adopted. 15-16. Subordinate to Finding of Fact 32. 17. Adopted in Finding of Fact 34. 18. Subordinate to Finding of Fact 32. 19. Issue not addressed. 20-21. Adopted in Finding of Fact 32. 22. Rejected in Finding of Fact 39. 23. Subordinate to Finding of Fact 32. 24. Adopted in Finding of Fact 32. 25. Subordinate to Finding of Fact 32. 26-27. Adopted in Finding of Fact 41. 28-30. Subordinate to Finding of Fact 41. 31. Adopted in Finding of Fact 34. 32. Adopted in Finding of Fact 39. 33. Subordinate to Finding of Fact 34. 34. Adopted in Finding of Fact 39. 35. Adopted in Finding of Fact 34. 36. Rejected in Finding of Fact 39. 37-42. Adopted in Finding of Fact 41. 43-47. Issues not addressed. 48. Subordinate to Finding of Fact 30. 49-50. Issues not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Issue not addressed. 53-54. Rejected in Finding of Fact 30. 55-56. Issues not addressed. 57. Adopted in Finding of Fact 12. 58-59. Issues not addressed. Rejected in Findings of Fact 39 and 42. Adopted in Finding of Fact 12. Issue not addressed. Adopted in Finding of Fact 32. 64-65. Issues not addressed. Adopted in Findings of Fact 32, 35 and 38. Adopted in Finding of Fact 36. Adopted. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 12. Subordinate to Finding of Fact 32. Issue not addressed. Accepted in relevant part in Finding of Fact 34. Issue not addressed. Issue not addressed. Adopted in Finding of Fact 15. Issue not addressed. Adopted. Adopted in Finding of Fact 32. 81-82. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Finding of Fact 32. Adopted in Finding of Fact 37. Rejected in Findings of Fact 25 and 42. Issue not addressed. Adopted in Finding of Fact 6. 89-97. Issues not addressed. Subordinate to Finding of Fact 25. Rejected in Finding of Fact 42. Issue not addressed. Adopted in Findings of Fact 25 and 26. Adopted in Finding of Fact 6. Sandy Pines 1. Issue not addressed. 2-3. Subordinate to Finding of Fact 1. 4. Issue not addressed. 5. Subordinate to Finding of Fact 9. 6-8. Adopted in Finding of Fact 9. 9-13. Subordinate to Finding of Fact 25. 14. Adopted in Finding of Fact 9. 15. Subordinate to Finding of Fact 9. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. Adopted in Finding of Fact 25. Adopted in Finding of Fact 27. 20-24. Subordinate to Finding of Fact 27. 25. Subordinate to Finding of Fact 9. 26-29. Issues not addressed. 30. Adopted. 31-33. Issues not addressed. Adopted in Findings of Fact 42, 43, 48, 49 and 54. Issue not addressed. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 28 and 31. Issue not addressed. 39-40. Subordinate to Findings of Fact 27 and 30. 41-42. Issues not addressed. Accepted in relevant part in Finding of Fact 12. Accepted in relevant part in Findings of Fact 12 and 17. Accepted in relevant part in Finding of Fact 17. 46-47. Accepted in relevant part in Finding of Fact 26. 48. Subordinate to Findings of Fact 25 and 26. 49-50. Issues not addressed. Adopted. Adopted. Accepted in relevant part in Finding of Fact 7. Accepted in relevant part in Finding of Fact 42. 55-56. Issues not addressed. 57. Adopted. 58-59. Issues not addressed. Accepted in relevant part in Conclusion of Law 3. Accepted in relevant part in Finding of Fact 26. 62-64. Accepted in relevant part in Finding of Fact 25. Accepted in relevant part in Findings of Fact 27 and 30. Subordinate to Findings of Fact 27 and 30. 67. Accepted in relevant part in Finding of Fact 22. 68-69. Accepted in relevant part in Finding of Fact 21. 70. Accepted in relevant part in Finding of Fact 26. 71. Accepted in relevant part in Finding of Fact 26 and in 72. Conclusion of Law 3. Accepted in relevant part in Findings of Fact 26 and 73. 38. Accepted in relevant part in Findings of Fact 25, 27 and 30. 74-75. Not legible. 76. Subordinate to Finding of Fact 25. 77-80. Subordinate to Finding of Fact 27. 81. Subordinate to Finding of Fact 25. 82-83. Subordinate to Finding of Fact 27. 84-95. Issues not addressed. Wellington 1-2. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Adopted in Finding of Fact 44. Subordinate to Findings of Fact 4 and 44. Adopted in Finding of Fact 44. Adopted in Finding of Fact 45. 8-10. Subordinate to Finding of Fact 45. 11-12. Adopted in Finding of Fact 45. 13-19. Subordinate to Findings of Fact 4 and 44. 20. Adopted in Findings of Fact 4 and 46. 21-22. Adopted in Findings of Fact 4 and 44. Adopted in Finding of Fact 45. Subordinate to Findings of Fact 44 and 46. Subordinate to Findings of Fact 4 and 44. Subordinate to Finding of Fact 46. 27-28. Adopted in Finding of Fact 46. Adopted in Finding of Fact 30. Adopted in Finding of Fact 46. 31-32. Issues not addressed. Subordinate to Finding of Fact 25. Adopted. Issue not addressed. 36-37. Adopted in Finding of Fact 45. 38-42. Issues not addressed. 43. Adopted in Findings of Fact 34, 42 and 47. 44-63. Issues not addressed. 64-65. Subordinate to Finding of Fact 46. 66-67. Issues not addressed. 68. Adopted in Finding of Fact 10. 69-91. Issues not addressed. Accepted in relevant part in Finding of Fact 47. Accepted in relevant part in Finding of Fact 12. 94-103. Issues not addressed. Accepted in relevant part in Findings of Fact 1 and 44. Accepted in relevant part in Finding of Fact 45. 106-111. Issues not addressed 112. Rejected in Findings of Fact 25, 27 and 30. 113-115. Accepted in relevant part in Finding of Fact 45. Savannas Adopted in Finding of Fact 1. Adopted in Findings of Fact 2 and 7. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6. Adopted in Finding of Fact 7. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. Adopted in Findings of Fact 5 and 50. Subordinate to Finding of Fact 5. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 53. Subordinate to Finding of Fact 56. Subordinate to Findings of Fact 5 and 50. Adopted. Issue not addressed. Adopted in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 53. Rejected in Finding of Fact 56. Issue not addressed. Adopted in Finding of Fact 51. Adopted in Finding of Fact 50. Issue not addressed. Adopted in Findings of Fact 5 and 51. Subordinate to Finding of Fact 51. Adopted in Finding of Fact 53. Subordinate to Finding of Fact 1. 30-33. Subordinate to Finding of Fact 12. 34. Adopted in Finding of Fact 12. 35-37. Issues not addressed. Adopted in Finding of Fact 53. Issue not addressed. 40-42. Rejected in Finding of Fact 54. 43. Adopted in Finding of Fact 50. 44-48. Subordinate to Finding of Fact 50. 49-51. Rejected in Findings of Fact 53 and 57. Adopted in Finding of Fact 53. Rejected in Findings of Fact 53 and 57. Adopted. Adopted. 56-57. Subordinate to Finding of Fact 50 Rejected in Findings of Fact 53 and 57. Issue not addressed. 60-61. Rejected in Findings of Fact 53 and 57. 62-63. Issues not addressed. 64. Adopted in Finding of Fact 56. 65-66. Issues not addressed. 67. Rejected in Findings of Fact 53 and 57. 68-70. Issues not addressed. 71. Adopted in Finding of Fact 52. 72-77. Issues not addressed 78. Adopted in Finding of Fact 1. 79-100. Issues not addressed. HRS Adopted in Finding of Fact 1. Adopted in Finding of Fact 11. Adopted in Finding of Fact 13. Adopted in Finding of Fact 12. Accepted in relevant part in Finding of Fact 16 and rejected in part in Finding of Fact 17. Adopted in Finding of Fact 16. Subordinate to Finding of Fact 16. Adopted in Finding of Fact 8. Adopted in Finding of Fact 9. 10-11. Subordinate to Finding of Fact 12. Accepted in relevant part in Finding of Fact 12. Issue not addressed. Accepted in relevant part in Finding of Fact 12. Subordinate to Finding of Fact 12. 16-17. Issues not addressed. Adopted in Finding of Fact 1. Subordinate to Findings of Fact 32, 46 and 52. Adopted in Finding of Fact 20. 21. Subordinate to Finding of Fact 1. 22. Subordinate to Finding of Fact 2. 23-33. Issues not addressed. 34. Adopted in Finding of Fact 3. 35-36. Subordinate to Finding of Fact 3. 37. Accepted in relevant part in Finding of Fact 32. 38. Subordinate to Finding of Fact 32. 39. Rejected in Findings of Fact 40, 41 and 42. 40. Adopted in Finding of Fact 32. 41. Issue not addressed. 42. Adopted in Finding of Fact 42. 43. Adopted in Finding of Fact 32. 44. Issue not addressed. 45-46. Adopted in Finding of Fact 32. 47. Adopted in Finding of Fact 47. 48. Accepted in relevant part in Finding of Fact 44. 49. Issue not addressed. 50. Accepted in relevant part in Finding of Fact 46. 51. Subordinate to Finding of Fact 47. 52. Accepted in relevant part in Finding of Fact 46. 53-54. Accepted in relevant part in Finding of Fact 45. 55. Issue not addressed. 56-57. Subordinate to Finding of Fact 46. 58. Subordinate to Finding of Fact 47. 59-61. Issues not addressed. 62-64. Adopted in Findings of Fact 50 and 51. 65. Subordinate to Finding of Fact 65. 66-68. Issues not addressed. 69. Accepted in relevant part in Finding of Fact 52. 70-71. Issues not addressed. 72. Accepted in relevant part in Finding of Fact 53. 73. Accepted in relevant part in Finding of Fact 53. 74. Adopted in Finding of Fact 56. 75-77. Subordinate to Finding of Fact 56. 78-80. Issues not addressed. 81-82. Subordinate to Finding of Fact 56. 83-89. Issues not addressed. COPIES FURNISHED: Thomas Cooper, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 William B. Wiley, Esquire McFARLAIN, STERNSTEIN, WILEY & CASSEDY, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 James C. Hauser, Esquire Foley & Lardner Post Office Box 508 Tallahassee, Florida 32302 Michael J. Cherniga, Esquire David C. Ashburn, Esquire Roberts, Baggett, LaFace & Richard Post Office Drawer 1838 Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire Newell & Stahl, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Michael J. Glazer, Esquire C. Gary Williams, Esquire Ausley, McMullen, McGehee, Carothers & Proctor Post Office Box 391 Tallahassee, Florida 32302 Robert S. Cohen, Esquire John F. Gilroy, III, Esquire Haben, Culpepper, Dunbar & French, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Charles H. Hood, Jr., Esquire MONACO, SMITH, HOOD, PERKINS, ORFINGER & STOUT 444 Seabreeze Boulevard, #900 Post Office Box 15200 Daytona Beach, Florida 32115 R. S. Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact Harbour Shores Hospital is a 60-bed short-term psychiatric facility, with 36 adult beds and 24 adolescent beds. The facility opened in October 1985, and had an occupancy of 62 percent at the time of the final hearing in March 1986. T. 14, 20. The hospital is an integral part of Lawnwood Medical Center, Inc., located in Ft. Pierce, Florida, and Lawnwood is owned by Hospital Corporation of America. T. 13-14. Hospital Corporation of America now operates 5,000 psychiatric beds in the United States. T. 18. Lawnwood Medical Center, Inc. (Lawnwood), submitted an application for certificate of need number 3363 on June 14, 1984, for the conversion of 12 short-term psychiatric beds to 12 short-term inpatient hospital substance abuse beds. T. 15. No construction is needed to convert these 12 beds. T. 16. The Department of Health and Rehabilitative Services (HRS) initially denied the application. T. 106. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long-term hospital inpatient hospital substance abuse beds, which is rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p. 7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five year period specified in rule 10- 5.11(27)(f)1, Florida Administrative Code. T. 107-6. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. HRS Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance 3. All references in this order to Harbour Shores Hospital shall include the Petitioner, Lawnwood, unless specifically stated otherwise. The parties stipulated that the only issue in this case is need and any ancillary issue which is based upon need. T. 4-5. HRS has a rule governing short and long term hospital inpatient hospital-substance abuse beds, which is Rule 10-5.11(27), Florida Administrative Code. Subparagraph (f)1 of the rule contains what HRS calls bed "allocations" and calculates need for a health service district as a whole. Harbour Shores Hospital is located in St. Lucie County in Health District IX. District IX is composed of St. Lucie, Indian River, Martin, Okeechobee, and Palm Beach Counties. HRS Ex. 2, p.7. The District IX Local Health Council has identified two subdistricts for purposes of allocating short-term psychiatric and substance abuse beds. Subdistrict 1 is St. Lucie, Martin, Indian River, and Okeechobee Counties, and subdistrict 2 is Palm Beach County. HRS Exhibit 2, p.7; T. 110. HRS proposes to determine need as of January 1989 using the date of the application as the starting point for the five-year period specified in Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 107-8. The basis of this decision is a new policy by HRS to implement the Gulf Court decision. There is a need for only 1 additional short-term substance abuse bed in District IX by January 1989 based upon Rule 10-5.11(27)(f)1, Florida Administrative Code. T. 109. Exhibit 1. HRS proposes also to refer to such need for short term substance abuse beds as indicated by local health council plans, relying upon rule 10- 5.11(27)(h)3, Florida Administrative Code. T. 110. The local health plan for District IX allocates needed beds based upon the subdistricts described above. HRS Exhibit 2, p. 6. Further, the local health plan has adopted the method of HRS found in rule 10-5.11(27), supra, for calculating need, and calculates such need using the HRS rule factor of .06 substance abuse beds per 1,000 population in each of the two subdistricts. HRS Exhibit 2, pp. 5 and 8, paragraph II. Using current estimates of the populations of each subdistrict in January 1909, HRS projects that subdistrict 1 will have a surplus of 15 substance abuse beds in 1989, and all net need (16 beds) will be in subdistrict 2, which is Palm Beach County. T. 111; HRS Exhibit 1. HRS has not adopted these subdistricts by rule. T. 128-29. There was no evidence to substantiate the reasonableness of the subdistricts adopted in the local health plan. T. 131. The following is a summary of the existing and approved short-term substance abuse beds in District IX, showing county of location, and occupancy rates for 1985: Humana Hospital 16 Licensed Indian River 8509 Sebastian Lake Hospital 16 Licensed Palm Beach 3558 Palm Beaches Fair Oaks 17 Licensed Palm Beach 3807 Savannas 20 Approved St. Lucie Hospital Beds Status County Patient Days Occupancy 145.7% 60.7% 60.7% The number of patient days at Fair Oaks, however, is for four months, August, October, November, and December 1985. Thus, the actual number of patient days, 1269, has been multiplied by 3 to obtain an estimate for an entire year. T. 23- 24, 61-62. The occupancy rate is the number of patient days divided by the product of the number of days in the year (365) and the number of licensed beds. Using the statistics in paragraph 10, the average occupancy rate for the three existing facilities in District IX was 88.8 percent. If one assumes, as did Petitioner's expert, that the utilization rates for short-term substance abuse beds will at least remain the same as in 1935, with the addition of the 20 new beds at Savannas Hospital, District IX may have an occupancy rate of 63.8 percent and subdistrict 1 may have an occupancy rate of 64.8 percent . The 20 new beds at the Savannas Hospital are those granted to Indian River Community Mental Health Center, Inc., and are projected to open in November 1986. T. 83. As discussed above, Harbour Shores Hospital had been in operation about five months by the time of the March 1986 hearing, and its 60 short term psychiatric beds were averaging 62 percent occupancy, which is about 15 percent above the occupancy projected in its certificate of need application. T. 38. Harbour Shores serves patients from the four counties of subdistrict 1, St. Lucie, Martin, Indian River, and Okeechobee, and serves a significant number of patients from Palm Beach County as well; three to four percent of its patients also come from Brevard and Broward Counties. T. 19. About 80 percent of the patients at Harbour Shores in the first five months of its operation had a substance abuse problem secondary to the primary diagnosis of mental illness. T. 30, 50, 63. This is consistent with experience throughout Florida. T. 63. Most of these "dually diagnosed" patients have been through a detoxification program before entering Harbour Shores Hospital. T. 30. In its beginning months of operation, Harbour Shores has had patients referred from the courts, law enforcement agencies, community and social agencies, physicians, and from HRS. T. 21-22, 59. Harbour Shores can expect to obtain substance abuse referrals from these agencies. Staff at Harbour Shores works with the DWI Board, Students Against Drunk Driving, and school administrative personnel. T. 39-40. In October and November 1985, Harbour Shores received 38 requests from physicians, the courts, law enforcement agencies, and social agencies, for admission of patients for substance abuse treatment. T. 22, 49. There is no evidence that Harbour Shores had any such requests in December 1985 or January 1986. In February 1986, it had 14 such requests, and in March to the date of the hearing, it had 5 requests. T. 48. There is no evidence as to whether these requests were for short or long-term substance abuse services, or whether these were requests from different patients or multiple requests from the same patient. There is also no evidence that the persons requesting substance abuse treatment were not adequately treated at existing facilities. Thus, the data from these few months is not an adequate basis for determining future need for short term substance abuse beds. Ms. Peggy Cioffi is the coordinator for the Martin County Alcohol and Drug Abuse Program. Deposition, Ms. Peggy Cioffi, p. 2. Ms. Cioffi testified as to the need for substance abuse services in her area. She did not testify as an expert witness. Her program is primarily designed to assist the County Court in referrals of misdemeanants and others within the Court's jurisdiction who need substance abuse services. Id. Ms. Cioffi has difficulty placing persons needing inpatient or residential treatment. Id. at p. 3. She related an example of a county prisoner who asked to be detained in jail three months for lack of an alcohol program. Id. at p. 4. Ms. Cioffi did not state whether this person needed residential or inpatient hospital care. She also had recently reviewed a 14 page county court docket and determined that 67 percent of those charged represented alcohol or drug related offenses. Id. Ms. Cioffi did not clearly show how she was able to infer this fact. Further, Ms. Cioffi was unable to tell from this statistic how many of these defendants needed short term inpatient hospital substance abuse treatment. Id. at p. 6. She stated that a very high percentage of these could benefit from some kind of services, but did not separate the kinds of services, Id. at p.7. Ms. Cioffi stated that she often had to wait to find a place for a person in the following facilities: Dunklin, CARP, and Alcohope. Id. at p. 5. Ms. Cioffi stated that these were "residential" facilities, but she did not state whether these facilities were the equivalent of short-term inpatient hospital substance abuse facilities. These facilities are located in District IX, Id. at p. 7, but are not short-term in patient hospital substance abuse beds licensed as such. See paragraph 10 above. See also T. 96-99. In summary, although Ms. Cioffi identified a generalized need for residential or hospital substance abuse treatment, she did not draw any distinction between the two services. If there was a similarity, she did not provide evidence of the similarity. Lacking evidence in the record that need for residential treatment programs can be used to show need for inpatient hospital beds, Ms. Cioffi's testimony is insufficient to show need for the services sought by the Petitioner. The Honorable Marc Cianca is a County Judge in St. Lucie County. Deposition, Judge Marc Cianca, p. 2. Judge Cianca was of the opinion that his area attracted semi-young people with substance abuse problems in greater numbers than the retirement population. Id. at 17-18. He frequently was frustrated in his efforts to find substance abuse services for defendants in his Court. Id. at 3-5. Judge Cianca felt that most of the people he saw needed long-term therapy, beginning with inpatient services, followed by long-term follow-up programs. Id. at 12-14. Like the testimony of Ms. Cioffi (which concerned the same group of persons before the County Court), Judge Cianca did not clearly distinguish need for short-term inpatient hospital substance abuse services from need for all other forms of substance abuse treatment, and the record on this point is silent as well. For this reason, Judge Cianca's opinion that 100 short-term inpatient hospital substance abuse beds are needed must be rejected. The testimony of Ms. Cioffi and Judge Cianca is insufficient as a predicate for determining need for the inpatient hospital beds sought by the Petitioner for another reason, and that is the lack of evidence that the persons identified as needing substance abuse services will have the ability to pay for such services at Petitioner's facility, or that third party payment will be available for them. The people in need in Ms. Cioffi's testimony normally do not have funds to pay for treatment. Cioffi, p. 8. Similarly, a substantial number of the people in need seen by Judge Cianca do not have insurance coverage and would not be able to use Harbour Shores unless they qualified for Medicaid and unless Harbour Shores took all of those qualified for Medicaid. Id. at 7, 15-16. A substantial number of the persons needing substance abuse treatment do not have jobs or insurance and must rely upon "welfare" for services. Id. at 15, 17. These persons cannot afford certain programs, and must rely upon state aid through programs such as those provided by Indian River Community Mental Health Center, and for these programs there is always a waiting list. Id. at There is no evidence that any of these persons are eligible for Medicaid. Ms. Sharon Heinlen, Director of Planning and Development for Harbour Shores Hospital, who testified for the Petitioner as an expert in health planning and hospital administration, had not studied the Medicaid population in the area to determine need. T. 76. Although Harbour Shores had about 15 percent of its psychiatric patient days devoted to Medicaid patients, T. 33, the validity of this percentage for substance abuse patients, or for the reasonably near future, was not established by other evidence. Petitioner's formal application for this certificate of need projects 5 percent of its gross revenues from Medicaid and another 5 percent devoted to bad debt, indigents, and Baker Act cases. Petitioner's Exhibit 1, p. 5. But the application does not state whether this percentage will be evenly distributed among psychiatric and substance abuse patients. In any event, the percentages of indigent care and Medicaid care are too small to satisfy the need identified by Judge Cianca and Ms. Cioffi. Stated another way, the need identified by those two witnesses is not relevant to Petitioner's application except with respect to a small percentage. Harbour Shores plans to have after care for substance abuse patients. T. 40. The Savannas Hospital is the name of the hospital to be completed in November 1986 to provide, among other services, 20 short term inpatient hospital substance abuse beds under the certificate of need granted to Indian River Community Mental Health Center, Inc. T. 82-83. The primary service area of the Savannas Hospital will be the same four counties as now served by Harbour Shores Hospital, as well as Palm Beach County. T. 84. The Savannas Hospital intends to be licensed. T. 84. The Savannas Hospital is located in Port St. Lucie, in St. Lucie County. T. 95-96. The service proposed is a comprehensive substance abuse service. T. 87. Five of the twenty substance abuse beds will be devoted to detoxification. T. 92. The Savannas Hospital will be operated by the Mediplex Group in partnership with Indian River Community Mental Health Center, Inc. T. 82. The land will be owned by Mediplex. T. 95. The Savannas Hospital will be a private, for profit, hospital, while the Mental Health Center will be a not-for- profit facility. T. 86. The Savannas Hospital publicly states that it will take five percent indigent patients, which does not include Medicare. T. 87. There is no commitment to provide more indigent care. T. 89. All other patients acre expected to be fully paying. T. 93. The actual figure for free or nonpaying patients has not yet been calculated. T. 94. The Savannas Hospital will not serve Medicaid substance abuse patients because it is a freestanding facility. T. 36, 86. Humana Hospital Sebastian is the closest facility to Harbour Shores currently in operation providing inpatient short-term hospital substance abuse services, and Humana Sebastian can accept Medicaid patients. T. 59. Ms. Elizabeth Dudek testified for HRS as an expert in health planning and certificate of need review in Florida. Ms. Dudek has reviewed all of the applications made in District IX for substance abuse beds since November 1983, and as a supervisor, has reviewed all of the applications in the state for substance abuse beds. T. 104. She has been in contact with the District Alcohol, Drug Abuse, and Mental Health Program Office and has attended public hearings, as well as administrative hearings, concerning substance abuse beds in District IX. T. 104-05. She also listened to all of the evidence presented at the final hearing. It was Ms. Dudek's opinion that there was no need for the substance abuse beds sought by the Petitioner. T. 127-28. Ms. Sharon Heinlen was also qualified as an expert in health planning, as well as hospital administration. T. 13. Ms. Heinlen has only recently moved to Florida, T. 11, 66, and stated that she did not know Florida well enough to know what might be the best thing to advocate in Florida with respect to whether all hospitals should provide all services. T. 65-66. She had conducted studies of District IX, however. T. 66. The average occupancy rates for District IX testified to by Ms. Heinlen were mathematically incorrect, and the correct lower rates do not support her opinion that additional short term substance abuse beds are needed. See FF 11. The fact that about 80 percent of the psychiatric patients now are at Harbour Shores Hospital also have a substance abuse problem does not necessarily support Ms. Heinlen's opinion as to need. See FF 12. This statistic is consistent with experience in all of Florida, and therefore should be accommodated by the HRS numeric need methodology. Moreover, it must be inferred that hospitalization of these patients as psychiatric patients was proper, rather than as substance abuse patients, and that even if additional substance abuse beds were available, these patients still would need to be in a psychiatric bed for treatment of the primary diagnosis. As discussed in FF 14, the data concerning recent requests for substance abuse services at Harbour Shores Hospital is not sufficient to conclude that a need exists for additional beds. As discussed in FF 17, Ms. Heinlen did not have an adequate basis for any opinion as to the need for short-term substance abuse beds for Medicaid patients in District IX. Finally, Ms. Heinlen testified that there was a waiting list for patients to be admitted to licensed short-term substance abuse beds at Fair Oaks and Lake Hospital, but the testimony was hearsay. T. 28. Since this evidence conflicts with the relatively low occupancy rates at these same facilities, and has not otherwise been corroborated by non-hearsay evidence, it must be rejected as a basis for a finding of fact. Further, due to the conflict with the low occupancy rates, it is rejected as a basis for Ms. Heinlen's expert opinion. In summary, Ms. Heinlen's expert opinion that there is a need for short-term, inpatient hospital substance abuse beds in District IX must be rejected. It is the position of HRS that even if the rule showed a need, the occupancy factor would be a factor in showing no need. T. 134. Conversely, if the rule showed no need, the occupancy factor would be one factor among others which night show need. Id.
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
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 On August 12, 1982, CPC, a hospital-operating corporation whose home office is in California, submitted to Respondent HRS an application fee and application for a Certificate of Need to construct a 60-bed adolescent acute care psychiatric and substance abuse hospital in Melbourne, Florida. Projected cost was to be $3,571,220 of which approximately $685,000 was to be in the form of local equity and the balance of approximately $2,730,000, constituting approximately 80 percent of the total cost, was to be in the form of a 20-year loan from CPC at 12 percent annual interest. Project development costs are projected to be $30,000; architectural and soil testing fees, $109,500; construction costs, $2,452,680; land acquisition, $350,000; interest during construction, $188,856; and fixed and movable equipment, $371,965. The facility will include a 15-bed locked intensive care psychiatric unit, a 25-bed open psychiatric unit, a 17-bed substance abuse unit and a 3-bed detoxification unit. The facility will have a total of almost 35,000 square feet of which almost 23,000 square feet will be devoted to the nursing units. The facility will be situated on 17 acres of land, the site plan for which calls for outdoor eating facilities, ball fields and other athletic opportunities. The intent of the developers is to make the facility as close to the campus situation as is possible, considering the nature of the operation. The facility will be built at no more than $60 per square foot, which includes all site preparation-- clearing, building, fencing, lighting, nurses' call system--all inclusive except for furniture and professional equipment. Staffing projections for the facility which are considered adequate by both CPC and state agencies include the following major categories: Registered nurses (psychiatric); Licensed practical nurses; Mental health specialists; Secretarial; Alcohol and drug counselors; Occupational therapists; Recreational specialists; Educational director; Special education teachers; Psychologists; Social workers; Administration; A medical director (1/2 time); and An alcohol and drug treatment director (1/2 time). The projected ratio of staff to patient for the first year (66.7 staff members to 33 patients) is approximately 2.07 to 1. CPC's other hospitals in Florida, both full-service hospitals as opposed to specialty hospitals, have a staff to patient ratio somewhat lower. Personnel cost is a significant factor in budgeting for total expenses. Projected equipment costs are not considered unreasonable. CPC operates 20 acute psychiatric facilities in nine states and the United Kingdom, and its hospitals are all accredited by the Joint Commission on the Accrediation of Hospitals. All CPC hospitals are contracting members of the Blue Cross Association. It anticipates charging $227 per day on the open adolescent unit, $224 per day on the closed adolescent unit and $227 per day on the alcohol and drug abuse unit during the first year. CPC anticipates that in the first year of operation, it will realize 10 percent of its patient income from Medicaid (Baker Act), 80 percent from insurance and 3 percent from private pay patients, and attributes a figure equal to 5 percent of income to indigents and 2 percent to bad debts. It is the intention of CPC to seek Baker Act patients to account for 10 percent of its patient days and will work with state and local agencies and the courts to seek patients and funds for providing care to adolescents. CPC projections, not successfully shown to be unreasonable, reflect an anticipated net income after taxes of $120,000 for the first year of operation and $335,000 for the second year. These figures are based, as was stated above, on Baker Act funding of 10 percent of the patient load. At the present time, BMHC receives all Baker Act funds in the area, and additional funds from this source may not be available. If not, the absence of Baker Act funds would have a negative impact on the local CPC facility's financial position unless those patients were replaced by patients from other programs like child services or private pay patients based on the projected need. CPC authorities feel their projected occupancy rate of plus or minus 70 percent for the second year of operation is conservative and should be higher. The lower (60 percent) occupancy rate of CPC's other two Florida hospitals, difference in program from that proposed here, nonetheless has not resulted in either being financially unfeasible. Projected equipment for the facility, though heavily attacked by HCA as being inadequate, has not been so shown. Similarly, the testimony that it would be impossible for CPC ton construct and equip the facility for the price quoted is not persuasive. There are decided differences between the facilities in design, construction and equipment. It cannot be said, however, that either is inadequate for the purpose. The differences, where they exist, appear to be primarily related to style and preference, and do not relate directly to safety or the suitability of the facility to serve as a psychiatric hospital. CPC proposes a highly structured program for each patient--all of whom will be adolescents. A team proposal for treatment of the individual patient will be developed when the patient is first admitted and will include several major factors. The first will be medical treatments, as necessary as well as the second, psychotherapy treatments by doctors, psychologists, and in group therapy when indicated. Also of importance is a school special education program using a curriculum from the patients' own school district. This program is important both to keep the patient's grade level up and as a support mechanism therapeutically. They propose, also, a structured recreational therapy and conjunctive therapy in which something is always happening for that patient. Finally, CPC will include a family therapy situation wherein, as is possible, the patient's family will come in for counseling to educate them as to the problem their patient has so that when the patient comes out, the family can cope with it. As the patient, here, improves, he or she is brought into group therapy with the family. Since the purpose of all this is to get the patient back into the community when ready for that, CPC proposes to start a program of partial hospitalization that is flexible to meet the circumstances (days out--nights in/weekdays in--weekends out). The theory will be to provide whatever is best for that patient in a sequential progression with more and more freedom and a gradual transition into a course of outpatient treatment. There is not thought of developing an outpatient treatment program for use as an initial treatment. All partial patients will develop from former inpatients. HCA, a hospital-operating corporation whose home office is in Tennessee, also submitted an application for a Certificate of Need to construct and operate a 60-bed acute care freestanding psychiatric and substance abuse hospital in Melbourne, Florida. Projected cost of the facility is to be $5,713,998 of which 40 percent would be equity and 60 percent ($3,428,399) would be long-term debt at 13 percent interest for 20 years. Project development costs are projected to be $75,000--all in legal and accounting fees; $178,323 in architectural and engineering fees; financing costs of capitalized interest of $198,747; construction costs of $3,430,866; equipment costs (fixed and movable) of $1,274,478; and land acquisition and other related costs of $556,584. The facility will include 20 adolescent psychiatric beds, 20 adolescent substance abuse beds and 20 adult/geriatric psychiatric beds. The facility will have a total of almost 39,000 square fee of which almost 19,000 square feet will be devoted to the nursing units. The remainder will be used by administrative, office and other services. The facility will be located on 31 acres of land which will also be the site for a proposed general hospital for which HCA intends to seek approval. Staffing projections for this facility, which are considered adequate by both HCA and state agencies, include the following major categories: Nursing; Psychology; Activities; Social services; Education; Administration; Business office; Medical records; Dietary; Housekeeping; and Engineering/maintenance. The projected ration of staff to patient for the first year (67.4 staff members to 33 patients) is approximately 2.04 to 1, roughly equivalent to that of CPC. HCA operates 301 hospitals throughout the United States, 23 of which are psychiatric hospitals. In addition to the psychiatric hospitals, many of its general hospitals have psychiatric units. All of its presently operating units are full accredited. It anticipates charging $260 per day during 1984-85 and $275 per day during 1985-86. HCA anticipates that during its first year of operation, it will realize 5 percent of its patient income from Medicaid, 10 percent from Medicare, 15 percent from insurance, 65 percent from private and 5 percent from other. HCA omitted any reference to Baker Act in its application because at this time such funds are fully committed elsewhere and not available and, as a result, felt it would be imprudent to include these funds in financial projections. However, if these funds were to become available, as unlikely as that may be, HCA would consider taking these patients. In any case, HCA projections reflect an anticipated net income after taxes of $2,000 for the first year of operation and $61,000 for the second year. Up until approximately two years ago, HCA only had two hospitals in its psychiatric program. Since that time, acquisitions and construction have brought the inventory up to its present strength. HCA acquired HCI, an organization which has had extensive experience in operating 20 psychiatric hospitals. HCA has a large cadre of people available to help start up new hospitals and shore up existing programs. It operates a center for heal studies, and its informational branch produces its own continuing education films and other materials. Its treatment programs are developed by its local staff based on input by professionals in the local community and designed to meet the needs of the local community. Once developed and implemented, all HCA programs are periodically evaluated by central teams who visit the local site. If a problem is found, HCA sends out experts in that problem area to fix it. It is HCA policy, however, to provide as much autonomy to the local staff as is possible, though staff, both professional and nonprofessional, are recruited locally and from other areas. HCA's position is that these factors have a major positive impact on patient care and treatment in that it insures currency of ideas and treatment modalities. HCA's proposed treatment program was described as to each category of patient. As to adults, it follows a "therapeutic community approach" which starts with a pleasing residential building and furnishings. All persons contacting patients are trained in the patient's needs and how to react to the patient. This would include such peripheral people as maintenance and support personnel. There would be a specific treatment plan for each patient with the patient's day planned out totally for every hour of the day, including recreation designed for that patient's needs. Little time is provided for the patient to be confined to the sleeping room. HCA anticipates the average length of stay (ALOS) for an adult psychiatric patient will be 21 days. As to the adolescent psychiatric patient, the prescribed treatment program will be basically the same as for adults except that HCA would provide an active school program, staffed by HCA employees, which would interface with the local school system. The patient day would be geared to the adolescent's needs. HCA proposes few children facilities because child programs require a specially designed program with a higher staff to patient ration than is anticipated here because of the need for play therapy and family involvement. HCA officials believer the child patient can successfully be integrated into the adolescent hospital unit without difficulty until the patient can be transferred to a specialized facility elsewhere. The ALOS for adolescent psychiatric patients will be 45 days. The substance abuse programs will be similar to those for the psychiatric units with specialization on drug abuse counseling and interface with Alcoholics Anonymous. ALOS here is expected to be 35 days. It must be recognized, however, that theories of treatment change rapidly. That proposed in HCA's Certificate of Need would not necessarily be that ultimately used upon approval if a change is justified. HCA's expert, Dr. Winston, contends, from a clinical standpoint, it is better to operate without locked units if possible, and categories of patients are better separated. However, he contends it is perfectly all right and may even be superior to have the different classes of patient in the same facility. This position is corroborated by other psychiatric experts who testified that one of the reasons for the need for an adolescent psychiatric hospital is the clinically undesirable requirement, currently existing in the area, for adolescent and even children psychiatric patients to be placed in units with adult psychiatric patients. It is obvious, then, that all agree that a separate adolescent unit is clinically needed in the area. The size, configuration and location remain to be established. The issue of need can and must be divided into two categories. One is the actual need for the implementation of psychiatric services for children and adults. The other is the need established for psychiatric beds in the area in accordance with the formulas established by HRS. First to be discussed is the actual service need. CPC's Vice President for Psychiatric Hospital Development, in developing the proposal for this project, first did a desk audit regarding population growth potential and the like for Brevard County and the surrounding contiguous counties. Thereafter, he made a number of visits to the area during which he spoke with as many area psychiatrists as he could. He also toured the BMHC and its inpatient facility, as well as the other two hospitals in the immediate area, Holmes Regional Medical Center, which does not have a psychiatric unit, per se, and Wuesthoff Hospital, which does. He also talked with court and school officials familiar with the area's mental health problems. From his investigation and conversations, CPC's expert found that BMHC's inpatient facility, consisting of 28 beds, was oriented primarily to adult psychiatric patients, as was Wuesthoff's 30-bed psychiatric unit. (In that regard, Wuesthoff's plan to convert five psychiatric beds to some other service, thus reducing the number of psychiatric beds in Brevard County, has been approved by HRS, if not already implemented as of this writing. From this it was concluded, and the evidence does establish, that there are no psychiatric facilities in Brevard County specifically for adolescents. The consensus among the psychiatrists and psychologists in the subject area, whose testimony was presented, was that there is a definite need in the Brevard County area for adolescent psychiatric and substance abuse beds. Adolescents requiring psychiatric or substance abuse treatment are treated on an outpatient basis if possible because of a reluctance to confine adolescents in an adult psychiatric ward. If outpatient treatment is not possible, the less than desirable alternative is to admit the adolescent patient to an adult unit for only so long as is necessary to make other arrangements for inpatient care. Currently, relatively few adolescent inpatient facilities exist. Among the better are those at the University of Florida in Gainesville, in Miami, several out of state and, while not a psychiatric hospital, a special school in Orlando--all of which have waiting lists. Community surveys were made by both marketing representatives and by facilities experts from HCA, as well. It was their opinion that a need exists in the subject service area for both adolescent and adult psychiatric beds, and that both HCA's and CPC's proposals would fill the need for substance abuse beds. HCA's position is that not all new beds would be adolescent beds. A need exists for adult beds in Brevard County because the predictions of the Bureau of Business and Economic Research (BBER), while indicating a general population increase for the area, also indicates that the adolescent population will decline. BBER projections have not been totally accurate for Brevard County in the past because of aerospace fluctuations in the area, however. In fact, the HCA prediction is for an adult population growth rate three to four times as fast as that for children and adolescents, thereby placing a strain on the available adult psychiatric beds. HCA's expert disagreed with the CPC expert's method of establishing clinical need (interviews with practictioners). It was felt this is a supply-driven opinion as opposed to a demand-driven opinion, is unsupported by data, is imprecise and not accurate, and is therefore not reliable for health planning purposes. To the contrary, the professional opinions stated by CPC's witnesses were equally as persuasive as those of their opponents. The psychiatrists and psychologists referenced above unanimously concluded that professionally it is better to admit adolescents to adolescent programs and units. Mixing of patients is quite disruptive to both categories of patient. In the opinion of the experts who testified here, where adolescent psychiatric patients are confirmed with adult patients (such as at Wuesthoff), they sleep in the same room, eat with them, smoke with them and discuss adult problems all day long. The doctors feel the continued closeness of this type is not only not therapeutic, but is sometimes counter therapeutic. In the case of adolescents, a major part of therapy is re-integration of the patient into the family; and if the unit is not near the family (as is presently the case with the out-of-town and out-of-state units referenced above), this is difficult. Also, liaison between the inpatient's doctor and the outpatient therapy is difficult when the unit is not local. As a result, at least some of the practitioners in the area have stopped seeing certain categories of patients because there is no facility currently in the area who can provide the necessary environment. For example, Dr. McClure, a psychiatrist, has stopped seeing adolescent substance abuse patients. If a facility currently in the area who can provide the necessary environment. For example, Dr. McClure, a psychiatrist, has stopped seeing adolescent substance abuse patients. If a facility became available, he would resume that segment of his practice. Dr. Slade, a clinical psychologist, has stopped seeking out patients who might need hospitalization because there is currently nothing in the area available to fill that need. It one were to come, she would again start seeing that category of patient. From the above, it can clearly be seen a clinical need for an adolescent psychiatric facility exists. Whether it should be freestanding, as proposed by both CPC and HCA, or a part of an existing hospital psychiatric unit is another question. Both proposals here are for freestanding units and, as a result, only that concept will be considered. Turning to the issue of bed need, at the time CPC's original Certificate of Need application was submitted, the Florida State Health Plan contained no methodology for establishing bed need for psychiatric hospitals. Such as now been promulgated and shows a need for 156 short-term psychiatric beds and 44 substance abuse beds in District VII, which includes Brevard, Orange, Osceola and Seminole Counties. This is based on a projected population base for the district in 1988 of 1,230,180 people. Applying the state methodology of 0.35 beds per 1,000 population, five years into the future resulted in a total projected bed need of 431 beds. Subtracting from that the 275 existing and approved beds leaves an unsatisfied psychiatric bed need of 156 for the district. Authority to designate subdistrict bed needs has been delegated to the district health councils. Brevard County has been subdivided into a subdistrict, but bed needs have not been allocated to the subdistricts. However, even if the 40 (total 60 minus 20 substance abuse) psychiatric beds are approved for Brevard County, this falls well within the total need figure for the district and leaves 116 beds remaining for the other three counties. Both CPC's and HCA's proposals call for 40 psychiatric beds. Both are, therefore, compatible with the State Plan. Rule 10-5(25)(d)5, Florida Administrative Code, states that no additional short-term inpatient hospital adult psychiatric beds shall normally be approved unless the annual occupancy rate for all existing beds in the service district for the prior 12-month period is at or exceeds 75 percent. As to adolescent beds, the criterion is 70 percent. There is not evidence of bed utilization percentages for either category districtwide. There is however, evidence establishing that the criteria have been met since 1980 for adult beds in Brevard County, a subdistrict; and since there are currently no short-term adolescent psychiatric beds in the subdistrict, that use percentage requirement is meaningless. Also, both applicants project meeting the requirements in Rule 10-5(25)(d)4 for 70 percent occupancy rate by the third year for adolescent short-term (CPC predicts 72 percent the second year). At the present time, two separate facilities provide adult short-term inpatient psychiatric care in Brevard County. They are Wuesthoff Memorial Hospital in Rockledge, Florida, which has 30 beds (predicted to be reduced to 25), and the Brevard Mental Health Center and Hospital, which operates an outpatient facility in Titusville and Rockledge and a 28-bed inpatient facility in Melbourne. This facility is a $2.6 million dollar facility constructed on 8 percent bond financing, and is fully accredited. BMHC receives all Baker Act patients in Brevard County and, in addition, provides care and treatment to indigents. Of its $1,238,000 revenue for last year, it received $468,000 for Baker Act patients, $156,000 in county matching funds and $614,000 form other patient fees. Its expenses for the same period last year were $1,250,000, for a deficit of $12,000. It is, both in theory and actuality, a nonprofit operation with 78 percent of its patients being indigent. Baker Act funds provided a total of $614,000. At $156 per day per bed, this equals 4,000 bed days, which, when divided by 365, shows that 11 paid beds are provided for Baker Act patients. In addition to Baker Act patients, BMHC also provides other beds for indigents. The terms of the Baker Act contract require all clients referred be accommodated. These additional patients provide insurance funds equivalent to 2.5 more beds, or a total of 13.5 beds provided by Baker Act matching funds and related insurance. BMHC is generally 85 percent occupied, which relates to 25.2 of the 28 beds. Subtracting the 13.5 Baker Act beds from the 25.2 leaves 11.7 beds for private patients. The average charge for private patients at BMHC is $230, which includes physicians' services. Their collection rate of 87.5 percent reduces that on average to an actual income of $200 per private bed day. Medicare, which accounts for 38 percent of BMHC's income, reimburses at a rate of $168 per day. If, as a result of the establishment of either of the two proposed facilities, BMHC were to lose one bed year of patients, it would represent a dollar loss of $73,000. This constitutes a serious thereat to a nonprofit organization, such as BMHC, because of the possibility of a loss of patients to a private hospital, even if its charges were higher. To some people, exclusiveness is more important than cost. A loss of one bed's revenue would jeopardize the free care presently provided by BMHC. A loss of two beds' revenue would make a reduction in the free care provided a certainty. Brevard County has an ongoing relationship with BMHC. It provides an annual operating subsidy for the currently existing facilities and, in addition, has guaranteed a bond issue for the building of the south county facility. It also provides a number of in-kind services. If BMHC were to become financially insolvent for any reason, the county would have to step in and pay off the bonds, but it could not and would not take over the operation of the facility. As a result of the above, the county is opposed to any threat to the financial health of BMHC. It feels that while the proposal of CPC would not constitute a threat, that of HCA would because the full range served of the latter could and probably would draw away some of the private pay patients now going to BMHC. This alternative drawing power would adversely affect BMHC's ability to stay in business eventhough, according to the HRS methodology, there is room in the county for additional adult beds for which BMHC is applying. In that regard, however, the county authorities concede that if it could be demonstrated that an additional provider could come in without adversely affecting the operation of BMHC, they would not oppose it. The District Mental Health Board for Brevard County (DMHB) has also taken a position in this area. Created by the Legislature, DMHB is charged with identifying the need for services in the county, the resources available to satisfy them and the gaps between. To a certain extent, it also funds the operations monitors them, evaluates them and produces the District Plan for them, the latest edition of which is for the years 1983 through 1987. This plan, which takes about a year to develop, is based on input provided by the mental health professionals, organizations and community representatives. It is used as a basis for the allocation of available funds and upon which to request funds from the Legislature. Neither CPC's nor HCA's application is contained in this plan; and though both applicants have made presentations to the Board, the Board has not taken a position favoring either. However, the plan as it currently exists proposes an additional 20 adult psychiatric beds which, it is anticipated , would be located under BMHC's auspices at its Melbourne site and for which BMHC made timely application. BMHC provides 80 percent of the mental health services in Brevard County now in all categories--adult, child and adolescent--and is rated excellent. In the opinion of the Director of DMHB, who is aware of BMHC's financial picture, approval of either proposal would have a negative impact, but that of HCA would be worse because of the likelihood it would draw adult paying patients away from BMHC. If that happened, it would jeopardize BMHC's financial position and its relationship with the county. In that regard, the District Plan goal, "to provide for the availability of comprehensive community alcohol, drug abuse and mental health services to persons in Brevard County, regardless of their ability to pay, "would best be complemented by the CPC proposal because: (1) it is limited to adolescents and would not risk drawing adult pay patients from BMHC; (2) it integrates with other existing services; and (3) it has the least restrictive admissions policy. On the other hand, in the opinion of Dr. Milton Schoeman, a health care consultant testifying on behalf of HCA, CPC's proposal, providing for adolescent beds only, will not help meet the need for general psychiatric beds projected for 1988. Of the 67 new beds needed, 40 would go to specialty hospitals, such as proposed by both CPC and HCA, and 27 would go to psychiatric units in general hospitals. These figures are for all ages of patients. Even though the HRS rules are silent on the issued of bed allocation between adults and adolescents, to permit CPC to use all 40 specialty hospital beds for adolescents would be inconsistent with the formula. He also is of the opinion that HCA's proposal will not materially affect BMHC's operation. To the contrary, according to HCA adolescents would be inconsistent with the formula. He also is of the opinion that HCA's proposal will not materially affect BMHC's operation. To the contrary, according to HCA witnesses, the HCA program would have a positive impact on BMHC's program in that its presence will make the community more aware and conscious of the need for mental health, and by cross- cooperation with BMHC in staffing and patient split. This has been shown in other areas where HCA was first seen as a threat by the existing hospital treating Baker Act patients. However, both hospitals now work together on joint programs to do the best possible for the patients. The fear of competition, HCA contends, is normally not realized. The type of facility represented by BMHC generally operates a shorter term, crisis intervention type program, one substantially different from that of HCA. As such, it does not lose patients to the longer term program of HCA. HRS has taken a position in opposition to HCA's proposal, concluding that CPC's application would fill the need for adolescent care with less impact on the current provider, BMHC. While HCA's programs are of high quality, they are almost identical to those currently offered by BMHC. It is unlikely that HCA will get any Baker Act funds under the current funding situation. If HCA were to be approved and built and would result in the loss to BMHC of only one bed/year in income ($73,000), this would have a severe adverse impact on BMHC's operation. On the other hand, the CPC would be less likely to duplicate services already being furnished. There are already two existing providers for adult patients; and while BMHC's utilization is high, Wuesthoff's is not, being only 62 percent after five years of operation. Under these circumstances, it would, in all probability, be a duplication of service to provide additional adult beds at this time. In addition to the differences in building layout, construction costs and equipment costs, previously found to be satisfactory in both cases, much evidence was produced by both sides to show that their proposal was economically more feasible and would result in lower patient costs. Conversely, the proposing parties presented evidence to show that the figures and statistics relied upon by their opposition were flawed and unreliable. After thorough saturation with offer and rebuttal, it is ultimately concluded that again the difference is one of style rather than substance. Neither part has been shown, by competent convincing evidence, to be materially superior to or inferior to the other. This issue will not be decided, therefore, on the basis of the ability to provide the service since both have been shown to be fully capable of doing so in a creditable fashion.
Recommendation It is accordingly RECOMMENDED That HRS approve Petitioner CPC's application for a Certificate of Need to construct and operate a 60-bed freestanding adolescent inpatient psychiatric facility in Brevard County, Florida, and deny the similar application of Petitioner HCA. RECOMMENDED this 10th day of February, 1984, in Tallahassee, Florida. COPIES FURNISHED: Morgan L. Staines, Esq. 2204 East Fourth Street Santa Ana, California 92705 Jon C. Moyle, Esq. Donna H. Stinson, Esq. 118 North Gadsden Street Suite 100 Tallahassee, Florida 32301 Eric B. Tilton, Esq. 702 Lewis State Bank Building Tallahassee, Florida 32301 John Antoon, II, Esq. 970 Michigan Avenue Building C Cocoa, Florida 32922 ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 1984. Claire D. Dryfuss, Esq. Department of Health and Rehabilitative Services 1317 Winewood Boulevard Building 1, Room 406 Tallahassee, Florida 32301 Mr. David Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue Whether a certificate of need to construct a 60-bed short-term inpatient psychiatric hospital should be granted to CPC and whether a certificate of need to construct a 24-bed short-term inpatient psychiatric hospital should be granted to Apalachee?
Findings Of Fact Introduction. CPC. Community Psychiatric Centers, Inc., a proprietary corporation, was formed in 1968 by the merger of 2 existing psychiatric hospitals. It now consists of 24 psychiatric hospitals, two of which are located in Florida, and two subsidiary corporations. On December 16, 1983, CPC submitted to the Department an application for a certificate of need to construct and operate a 60-bed inpatient psychiatric hospital. The 60-beds are to consist of 15 beds for adolescents, 20 beds for adults in an open unit, 10 beds for adults in an intensive care unit and 15 beds for geriatric patients. Apalachee. Apalachee is a not-for-profit corporation. It began approximately 30 years ago as a small clinic. It was incorporated as the Leon County Mental Health Clinic in the 1960's and later changed its name to Apalachee Community Mental Health Services, Inc. Apalachee presently serves over 7,000 clients a year, has a $6,500,000.00 budget and 300 employees. It provides services to 8 north Florida counties: Gadsden, Liberty, Franklin, Leon, Wakulla, Madison, Jefferson and Taylor. Apalachee provides specialized continuums of care for substance abuse, children and geriatrics and basic generic services, including a 24-hour, 365 days-a-year emergency telephone and/or face-to-face evaluations. It also provides a full range of case management, day treatment and residential care primarily aimed at the acute and chronically mentally ill and specific programs for children, such as an adolescent day treatment program and an adolescent residential facility. Apalachee's residential programs include a program called Positive Alternatives to Hospitalization (hereinafter referred to as "PATH"). Apalachee also operates an 8-bed non-hospital medical detoxification program in conjunction with PATH. This program is operated in the same building as PATH. It also operates 3 group homes (an adult, an alcohol abuse and an adolescent half-way house) with 10 clients each (these houses will be expanded to 16 clients each), a geriatric residential facility with 60 to 70 beds and cater Oaks, a long-term residential treatment facility for adolescents. On November 15, 1983, Apalachee applied to the Department for a certificate of need for 24 short-term inpatient psychiatric beds. In its application filed during the final hearing of these cases, Apalachee proposed to construct a facility to house the 24-beds adjacent to its current "Eastside" facility. Its Eastside facility currently houses Emergency Services, PATH and its non-hospital medical detoxification programs. All adult mental health programs of Apalachee will also be located on the site in order to consolidate the full continuum of adult psychiatric care provided by Apalachee. Statutory Criteria. The following findings of fact are made as they pertain to the criteria included in Section 381.494(6)(c) and (d), Florida Statutes (1983), and Section 10-5.11(25), F.A.C. The Need for Psychiatric Services Florida State Health Plan and the District 2 Health Plan. General. The Florida State Health Plan is outdated and the District 2 Health Plan does not contain specific goals as to the need for short-term psychiatric care for District 2, the District the facilities would be constructed in. CPC and Apalachee did, however, address both plans, to the extent applicable, in their applications. The relationship of "need" to these plans, as agreed to by the Department, is not relevant to this proceeding, however. CPC also indicated that it evaluated local bed need by studying socioeconomic, population and employment data and by interviewing local practicing psychiatrists. CPC concluded that additional services were needed and filed its application. Although the Florida State Health Plan and the District 2 Health Plan do not address the question of need, need as determined under the Department's rules is crucial. Section 10-5.11(25), F.A.C., provides that a favorable need determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under paragraph (25)(d). Under Section 10-5.11(25)(d)(3), F.A.C., bed need is to be determined 5 years into the future by subtracting the number of existing and approved beds in the District from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. The Department has projected a need for 185 total short-term psychiatric beds for District 2 for 1989. There are 82 currently licensed and 35 approved short-term psychiatric beds in District 2. Therefore, for 1989 there is a net short-term psychiatric bed need projected of 68 beds. Based upon the projected population of District 2 for 1990 (537, 567), which is 5 years from 1985, the total bed need is 188 beds. The net bed need for 1990 is 71 beds (188 total beds less 117 licensed and approved beds). The Department did not use this figure because the calculation for bed need for 1990 will not be made by the Department until July of 1985. Pursuant to Section 10-17.003, F.A.C., the total projected short-term psychiatric bed need for District 2 is allocated among 2 subdistricts. Subdistrict 2 consist of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. CPC's and Apalachee's proposed facility will be located in Subdistrict 2. Subdistrict 2 is the same area designated by CPC as its "primary" service area. This rule, which is to be "used in conjunction with Rule 10-5.11(25)(c)(d)(e)" allocates the 1988 short-term inpatient psychiatric and substance abuse projected bed need as follows: Subdistrict 1: 75 Subdistrict 2: 104 Total 179 Because the projected bed need for Subdistrict 2 under this rule is based upon 1988 projections, it is clearly in conflict with the requirement of Section 10-5.11(25)(d)(3), F.A.C., that bed need is to be projected 5 years into the future. The total bed need projected for the District for 1988 is 179 beds; for 1990, the total is 188 beds. Based upon the allocation of total bed need in Section 10- 17.003, F.A.C., the net bed need for Subdistrict 2 for 1988 is 44 beds: 104 total beds less 60 licensed and approved beds in Subdistrict 2. If it is assumed that the 9 additional total beds projected for 1990 should be allocated to Subdistrict 2, the net bed need for 1990 in Subdistrict 2 would be 53 beds (100 beds less 50 licensed and approved beds). No evidence was presented, however, to support the assumption that all 9 additional total beds will be allocated to Subdistrict 2. It is more likely that only 1 or 2 additional beds will be allocated to Subdistrict 2. Based upon the foregoing, the total net bed need for District 2 projected to 1990 is 71 beds and for Subdistrict 2 it is between 44 and 53 beds. CPC. CPC attempted at the hearing to show that its proposal is consistent with the bed need for District 2 as determined under Section 10-5.11(25)(d)(3), F.A.C. In the alternative, CPC has attempted to prove that there is a sufficient need in District 2 for additional short-term psychiatric beds based upon other methodologies and the state of psychiatric care currently being provided in Subdistrict 2. Sources of referral to the proposed CPC facility, according to Mr. John Mercer, will include physicians, the judiciary and legal system, the school system, employers and law enforcement. Referrals are inspected by Mr. Mercer based upon his conversations with physicians (Mr. Mercer did not interview persons from the other referral sources) , his personal experience and the fact that there will be a community relations or marketing position at the proposed facility. Local psychiatrists did testify that they would refer patients to CPC if its facility is approved. They did not, however, testify that they would refer all of their patients to CPC. They also testified that the CPC facility is needed. The local psychiatrists did not, however, indicate that they were aware of all of the facts as established during the proceeding. CPC, in its application, projected, based upon conversations with local physicians, that the facility will serve most of the area designated by the Department as District 2. District 2 is subdivided by CPC into a primary service area, consisting of Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties, and a secondary service area, consisting of Clay, Calhoun, Gulf and Jackson Counties in Florida and several counties located in extreme southwest Georgia. In Mr. Mercer's opinion, the proposed facility will serve persons from southwest Georgia; specifically, Brook, Decatur, Grady, Seminole and Thomas Counties. Mr. Mercer's opinion was based upon the availability of services in Georgia and conversations he had with Tallahassee physicians. Mr. Mercer's opinion, however, has been given little weight in determining the need for additional short-term psychiatric beds in District 2 based upon the testimony of Jay D. Cushman, an expert in health planning and development. Mr. Mercer's opinion that southwest Georgia residents will use the proposed CPC facility implies that there may be a need for additional short-term psychiatric beds. Mr. Mercer, however, failed to consider travel time and barriers to travel, patient origins or the effect, if any, of outmigration--the number of persons in District 2 who may leave the District for treatment outside the District. Although Mr. Mercer's conversations with local physicians are relevant and of some supportive weight, the local physicians' opinions should have been supported with other evidence. They were not. CPC, in its exhibit 3, projected a bed need of 14.67 beds attributable to southwest Georgia. This figure was arrived at by first assuming a bed need in the area of .35 beds per 1,000 population (119,051). This results in a gross bed need in southwest Georgia of 41.67 beds. From the gross number of beds, 27 existing beds were subtracted to arrive at a net bed need in District 2 attributable to southwest Georgia residents of 14.67 beds. No evidence supporting a conclusion that such a bed need exists in District 2 was presented at the hearing other than Mr. Mercer's opinion that the proposed facility will serve residents from southwest Georgia. It is therefore concluded that there is not a need for 14.67 beds in District 2 attributable to southwest Georgia residents. In its application, CPC projected a need for an additional 195 short- term psychiatric inpatient beds for District 2. This figure was based upon an average of bed need projected by using three different bed need methodologies. The three different methods resulted in a projected bed need of 64 beds, 266 beds and 255 beds. Application of the method which resulted in a bed need of 266 was modified during the hearing. The modification resulted in a bed need of 75.8 beds. Therefore, the bed need based upon the average of all 3 methodologies, as amended would be 131.6 beds. The three methods used by CPC in its application are different than the method used by the Department. None of the methods, based upon Mr. Cushman's testimony, are sound; they are structurally unsound, applied in an unsound manner or both. Under Method I, CPC starts with a projected short-term psychiatric bed need of 1988 of 44 beds, the net bed need as determined in Section 10-17.003, F.A.C. This figure is then increased by 9.44 beds for in-migration and 11 beds attributable to an adjustment for "desired occupancy level." As clearly established by Mr. Cushman's testimony, neither of the adjustments are sound. The projected bed need of 64 beds for 1988 pursuant to method I is therefore not a reliable figure. Pursuant to Method II, as modified during the hearing, CPC projected a bed need of 75.8 beds. Method III resulted in a projected net bed need of 255 beds. These projections are based upon a projected average length of stay of 30 days. No evidence was presented to support this projection; in fact, it is unrealistic when compared with the average length of stay of 16 days at similar facilities in Florida. CPC's Florida facilities have also not been able to achieve an average length of stay of 30 days. These formulas are also unrealistic because population figures used were for all of District 2. But existing beds taken into account only included the beds in Subdistrict 2. Finally, occupancy was not taken into account in either of the methods. CPC's Methods II and III are not sound, based upon the foregoing. Apalachee. Apalachee's application is for only 24 inpatient psychiatric beds, which is well below the bed need projected under the Department's methodologies for the District and the Subdistrict. Apalachee has projected that its proposed facilities will serve persons in the 8 counties it currently serves. These counties are the same counties which make up Subdistrict 2. Apalachee has not assumed that any patients will come from outside of the Subdistrict. Apalachee has shown that the patients who will use its facility are clients within its own present system, based upon historical data. This historical data establishes that an average of 10 to 12 Baker Act patients have been admitted to Tallahassee Memorial's psychiatric facility during past years. These persons would be admitted to Apalachee's new facility. Additional patients would consist of Apalachee clients which Tallahassee Memorial's facility will not admit and clients currently going into other Apalachee programs. Accessibility to Underserved Groups. CPC is willing to provide care for Baker Act patients. It has been projected that 5 percent of the proposed facility's patient days will be attributable to Baker Act patients. CPC is also willing to treat Medicaid patients and has again projected that 5 percent of the facility's days will be attributable to Medicaid patients. In addition, CPC has projected that 5 percent of its gross revenue will be set aside for the care of indigent patients which consist of those persons who are unable, at the time of admission, to pay all or a part of the charges attributable to their care. Indigent care may not be provided, however, if the facility is losing money. The provision of indigent care is based upon a CPC policy which was recently agreed upon and applies to new CPC facilities. The policy does not apply at the two existing CPC Florida psychiatric hospitals since they were established before the policy was adopted. Pursuant to the Florida Mental Health Act, Chapter 394, Part II, Florida Statutes, the Department's district administrator designates a facility in the district as the public receiving facility for Baker Act patients. In Subdistrict 2 of District 2, Apalachee has been designated as the public receiving facility. Apalachee is therefore responsible for ensuring that emergency care, temporary detention for diagnosis and evaluation and community inpatient care is available to Baker Act clients. As the public receiving facility in Subdistrict 2, Apalachee will clearly serve Baker Act patients. It has projected that in the first year of operation 40 percent (39.7 percent in the second year) of its patients at the new facility will be indigent and that the indigent patients will be primarily Baker Act patients. Seventy percent of Apalachee's clients are persons who need some type of financial assistance; Medicare, Medicaid and Baker Act. Apalachee has proposed to continue to serve these persons in the new facility. Apalachee's purpose in requesting a certificate of need is to allow Apalachee to provide a continuum of care for more Apalachee clients. In the past, Apalachee has experienced difficulty in obtaining inpatient care for certain Baker Act clients. Additionally, even though those problems have been minimal in the past year, there are some Baker Act clients who need inpatient care who are not appropriate patients for Tallahassee Memorial's psychiatric hospital. These patients are sometimes violent and "acting out." Although Tallahassee Memorial is providing adequate care for most Baker Act patients, some Baker Act patients are not admitted. Additionally, removal of Baker Act patients who are admitted by Tallahassee Memorial from Tallahassee Memorial's facility, as discussed infra, will improve the quality of care at Tallahassee Memorial. The cost of providing inpatient care to Baker Act patients will be less if Apalachee is granted a certificate of need for the requested 24 beds. At present, because of limited Baker Act funds, some Baker Act clients who need inpatient care are placed in other programs. With reduced cost for inpatient care, these clients will be able to receive the inpatient care they need. Additionally, Apalachee will serve forensic clients -- those mental health clients with criminal charges. A full-time forensic psychologist has been provided by Apalachee at the Leon County jail to facilitate this type service. The psychologist also evaluates for Baker Act qualification. According to the Director of the Leon County jail, persons in the jail with psychiatric problems are placed in a single "bull pen." Apalachee's work with forensics has been helpful. Like and Existing Psychiatric Services. The only "like and existing" psychiatric health care services in Subdistrict 2 are provided by Tallahassee Memorial. Tallahassee Memorial is a not-for-profit corporation. It currently owns an existing 60-bed short-term inpatient psychiatric facility located in Subdistrict 2. The facility is operated as a separate department of Tallahassee Memorial. Tallahassee Memorial's psychiatric facility has been continuously operated by or for Tallahassee Memorial since 1979. It was initially known as Goodwood Manor. In 1983, however, the management of the facility was taken over by, and its name was changed to, Behavioral Medical Care (Tallahassee Memorial's facility will be hereinafter referred to as "BMC"). From 1977 to 1979, the facility was owned and operated by Tallahassee Psychiatric Center, Inc., which failed for financial reasons. Prior to 1977 Tallahassee Memorial operated a small psychiatric unit as pert of its hospital. The occupancy rate at BMC for the 12-month period ending September, 1984, was 37 percent. The occupancy rate since 1979 has been consistently low and is low at the present time. There are a number of reasons for the low occupancy rate: a) The physical location and physical plant of BMC. BMC is located in a 2-story building near Tallahassee Memorial. BMC occupies the top floor of the building and a nursing home is located on the first floor. In order to get to BMC, it is necessary to travel through the nursing home. Also, the building is surrounded by a parking lot so there is inadequate outdoor and recreational space around the facility. The facility, which was originally designed as a nursing home, presently consists of one closed unit and one open unit. Patients of all ages and with various problems have to be housed in these 2 units together. Because of the physical plant, patients cannot be separated into adult, adolescent and geriatric units. There also is not enough space for therapy rooms and common areas. b) The reputation of the facility. The reputation in the community of Goodwood Manor has carried over to BMC. The facility is perceived by some as a "crazies place," a place "where violent people go." This reputation is partly attributable to the lack of credibility that psychiatry as a discipline enjoys. It is also partly attributable to the operation of BMC as Goodwood Manor prior to 1982 when Behavioral Medical Care took over management of BMC. c) The type of programs offered. To date, no program has been separately offered and provided or adolescents, children, substance, alcohol and drug abuse patients, or geriatrics. Basically only one structured program has been provided which has been more suited to adult psychotic patients. Closely related to this problem is the fact that BMC has had a poor patient mix. This has been caused in part by the physical plant and in part by the type of patients BMC has had to take in. Some of those patients have been suffering from problems other than psychiatric problems, i.e., persons suffering from DT's, which is a medical disorder, and persons suffering from organic problems which cause behavioral difficulties. d) Marketing. There has been a lack of an effort to market the availability of the facility. e) Training. The programs offered are not as advanced because of the lack of necessary training. f) Practice patterns. Practice patterns of psychiatrists in the community have contributed to the low occupancy. Because there are only a few psychiatrists in the area and the fact that the Tallahassee Memorial facility has primarily been involved in crisis intervention, the average length of stay (6 to 7 days) is much lower than the average length of stay in other parts of the country. This average length of stay has also, however, been caused by the shortage of Baker Act funds. Closely related to this problem is the fact that there are a large number of nonphysicians providing mental health services in Tallahassee who do not admit patients to the hospital and a large number of health maintenance organizations. g) Communication. The low occupancy rate has also been caused, at least in the minds of Drs. Speer, Sebastian and Moore, by the lack of solicitation of their input into the operation of the facility. At least partly because of the problems at BMC, a few patients have been referred to facilities outside of District 2 for care. Tallahassee Memorial has committed itself to eliminating the low occupancy rate at BMC. In 1982, the administration of Tallahassee Memorial felt it had to decide whether it was going to make a commitment to the facility or get out of psychiatric care. It opted for the former. After making the commitment, 2 primary actions were taken. One was to contract for the services of Behavioral Medical Care; the other was to apply for a certificate of need to replace its 60-bed facility with a new one. Behavioral Medical Care is a joint venture formed by 2 corporations, Comprehensive Health Corporation and Voluntary Health Enterprises. Comprehensive Health Corporation is the largest private provider of chemical dependency rehabilitation services in the country. Voluntary Health Enterprises is an affiliate of Voluntary Hospitals of America which services 70 of the nation's largest not-for-profit hospitals, including Tallahassee Memorial. Behavioral Medical Care was formed to provide the highest quality, lowest cost psychiatric and chemical dependency rehabilitation programs possible. Behavioral Medical Care provides consultation services and/or actually carries out programs and is now providing 20 different programs at 16 different facilities. Of these 20 programs, 5 to 8 are psychiatric programs. The first consultation concerning the psychiatric program at Tallahassee Memorial began in the late winter or early spring of 1983. This consultation was provided by Dr. Russell J. Ricci, now chairman of the board and medical director of Behavioral Medical Care. Dr. Ricci reviewed the status of Tallahassee Memorial's program at that time and recommended significant changes be made in 2 phases: one phase to begin immediately and the second to begin after construction of a new psychiatric hospital. Tallahassee Memorial agreed with Dr. Ricci's proposal and contracted with Behavioral Medical Care to carry out the proposal. Behavioral Medical Care began BMC with an orientation period during which time the existing staff was analyzed, new staff members were hired and the entire staff was trained to implement the new program. During this period, admitting physicians were invited to participate in the implementation program. A new inpatient psychiatric program at BMC was then begun. The program was established to achieve the following goals: to restore patients to their optimum mental health; to make patients as comfortable as possible; to maintain the patients' sense of dignity and self worth; to maintain modern and efficient treatment modalities through research and education; to provide maximum freedom of patients to interact with family and community; and to educate the community. The program was established along interdisciplinary lines and is basically an adult program. It includes individual and group therapy, lectures and seminars, social and nursing assessments, physical examination and psychological testing. The ultimate program provided for a patient, however, depends upon the treatment plan prescribed by the attending physician. The program is, however, limited because of the type of patients at BMC and especially because of the physical plant, which consists of only an open unit and a locked unit. Separation of patients for specialized treatment based upon other factors, such as age, is not achievable in the existing facility. The program at BMC is an adequate program but can be improved. The program is, however, intended only as an interim type program. Treatment of geriatrics and adolescents is available but specialized programs for these groups are not available. Dr. Sebastian agreed that since Behavioral Medical Care had begun managing BMC, the programs had improved. Dr. Moore testified that BMC had attempted to change. As part of the interim program, BMC has established more restrictive admission guidelines; not based upon ability to pay but upon clinical needs. Attempts have been made to eliminate psychotics, geriatrics and persons with significant medical problems. These restrictions on admission are designed to limit admission to persons who will benefit from the new program and are consistent with the existing physical plant. The existing staff, established by Behavioral Medical Care, is adequate. Training of the staff began during the orientation period at BMC and continues today. Educational activities have also been directed toward the medical profession in the community in order to gain more credibility for the discipline of psychiatry. Other steps to improve BMC which have been or will soon be taken include the reclassification of BMC as a department of Tallahassee Memorial and the initiation of a crisis intervention and liaison service in the emergency room of Tallahassee Memorial's main hospital. This new service in the emergency room is designed to identify persons being admitted to the hospital with a need for psychiatric services. As a department, BMC conducts formal monthly meetings of physicians at which input into the operation of BMC may be made. Input by psychiatrists is therefore possible at BMC. The second phase of the changes recommended by Dr. Ricci will begin after completion of the second action to be taken by Tallahassee Memorial as part of its commitment to a psychiatric program: the construction of a new 60- bed facility. Tallahassee Memorial filed an application to replace its present facility with a new 64-bed facility. That application was ultimately granted but for only 60 beds. An application to build another facility considered at the same time was denied. As a result of the issuance of the certificate of need to Tallahassee Memorial, construction of a new psychiatric facility has begun and should be completed in the summer of 1985. The total cost of this new facility is $7,225,000.00. This amount, plus the cost of new programs and staff, has been committed by Tallahassee Memorial to BMC. The facility, a two-level structure, is being constructed on a wooded, sloping site next to the present building BMC is located in. Each level will have 30 beds. It will be a state-of-the-art facility and was designed by architects who specialize in the design of psychiatric facilities. The building was designed with input from the medical staff and Behavioral Medical Care. It is being constructed to accommodate separate psychiatric programs and allows flexibility to accommodate changes in the type of programs offered. Once the new facility is completed, BMC will initiate the second phase of Dr. Ricci's proposal. This phase will consist of the implementation of separate specialized psychiatric programs not available at BMC today. Dr. Ricci has recommended the offering of adult, adolescent, geriatric and chemical dependency programs. Tallahassee Memorial has decided to add an adult program, an adolescent program and will probably add a geriatric program. Other programs, such as a chemical dependency program will be considered. The geriatric program will be added if there are a sufficient number of patients in need of such a program admitted to BMC. Based upon the testimony of Dr. Sebastian, there are a sufficient number of patients who need a geriatric program. Assuming that Dr. Sebastian is correct, a geriatric program should be added to BMC. Even if a separate program is not added, geriatric psychiatric services will be available at the new facility. The construction of the new facility will not eliminate all of the problems which have contributed to the low occupancy at BMC. Phase 2 of Dr. Ricci's proposal to Tallahassee Memorial and the other actions which Tallahassee Memorial has indicated they plan to take should, however, eliminate or at least reduce most of the problems. Dr. Sebastian testified that there will not be enough open space around the new facility The new facility will, however, have 2 open court yards, woods on 3 sides of the building and a greenhouse. The reputation of BMC as being a "crazies place" should be improved with the opening of the new facility and the providing of new, more advanced programs. Efforts to educate the medical community will also help. Also, if Apalachee is granted its certificate of need, the elimination of some of the Baker Act patients cared for by BMC who will be cared for by Apalachee should help improve the reputation of BMC. Finally, BMC has already taken some steps to improve its reputation by initiating an interim program, hiring new staff and limiting its admissions. Instituting specialized programs will also help alleviate the low occupancy problem at BMC. The new facility will allow BMC to establish programs which are needed by allowing the separation of patients which could not be accomplished in the existing facility. Again, eliminating some Baker Act patients will help reduce the problems created by the poor patient mix at BMC. Efforts are being made to market BMC's services. Establishing a liaison in Tallahassee Memorial's emergency room, which is planned, should contribute to increasing occupancy. Tallahassee Memorial projected that sizeable numbers of patients in the general hospital need psychiatric services. This program could reach those patients. BMC, however, needs to institute marketing efforts to reach the general public. Formal training of the staff at BMC was started with Behavioral Medical Care's orientation phase and has continued since that time. Not much can be done directly by BMC to improve the practice patterns of psychiatrists in the community. The new facility and improved programs may help. Transfering Baker Act patients to a new facility operated by Apalachee should allow for more economical treatment of those patients and thus allow for longer lengths of stay. Providing specialized programs also should promote longer lengths of stay. Converting BMC to department status and the holding of monthly meetings of admitting physicians has improved the ability of psychiatrists in the community to have a voice in the operation of BMC. Not enough of an effort is being made in this area, however. Three psychiatrists testified about the lack of solicitation of their input. They are obviously dissatisfied. Despite this fact, Dr. Brodsky, the Medical Director of BMC, testified that BMC was working cooperatively with psychiatrists in the community. In the undersigned's opinion, BMC, Tallahassee Memorial and the psychiatrists in the community need to continue to work toward resolving their differences and to work together to improve the occupancy and the psychiatric care provided at BMC. The perceived effect of CPC's proposal and Apalachee's proposal of the various witnesses was mixed. Drs. Speer, Sebastian and Moore all testified that they supported the CPC proposal. Dr. Speer indicated that she supported CPC's proposal over that of Apalachee and that she thought there was a need for CPC. Dr. Speer's opinion was based almost exclusively on a brochure provided to her by CPC. She did not have any familiarity with existing CPC hospitals. She also had only "some familiarity" with Apalachee's programs. The only reason Dr. Speer specifically gave for supporting CPC was the amount of effort CPC had exerted to solicit physician input and the need for cohesiveness among psychiatrists which she felt was promoted by support of the CPC proposal. Dr. Sebastian testified that he supported the CPC proposal because a new hospital would promote competition which would in turn improve the quality of care. Dr. Moore testified that he was familiar with CPC's and Apalachee's proposals and that he supported CPC's. He also stated that the addition of another psychiatric hospital would improve the availability of medical care because of competition. Dr. Moore also testified that a new facility was needed to provide care for the "private segment" which he described as "those people who choose not to go to the local mental health center for treatment, those people who choose to go to psychiatrists for treatment. " Dr. Brodsky testified that the addition of a new facility to the community might improve BMC because of the added competition. Mr. Honaman and Dr. Ricci both agreed that, if CPC's proposal was approved, a new facility could have an adverse impact on BMC which has been operating at a loss of $300,000.00 a year. Dr. Ricci explained that in order to have specialized programs a hospital must have a sufficient number of patients who need the specialized program. Because of the low occupancy rate at BMC, there is concern as to whether a sufficient number of patients will be available to warrant the specialized programs BMC plans to start if the CPC proposal is approved. Apalachee's proposal will not adversely effect BMC. In fact, Mr. Honaman and Ms. Pamela McDowell, both of whom testified on behalf of Tallahassee Memorial, indicated that if Apalachee's facility was approved BMC's ability to provide quality care would be enhanced. Tom Porter, testifying on behalf on the Department, indicated that CPC's and Apalachee's proposals should both be denied because of the low occupancy at BMC and the adverse effect approval of either proposal would have on BMC. Mr. Porter's opinion, however, was based only upon his review of the Petitioners' applications. Mr. Porter made no independent studies as to the impact of the proposals on BMC and was not aware of most of the evidence presented at the hearing. The Ability of the Applicant to Provide Quality of Care. CPC. The services to be available at or provided by the proposed CPC facility include psycho-physiological diagnosis and evaluation, emergency service, milieu therapy (immersion into the clinical environment for structured daily treatment), individual and group therapy, family therapy, occupational therapy, an adolescent school program, a partial hospitalization program, aftercare, community education and related medical services (which will be provided by contracting with other area health care providers). Actual programs to be provided at the facility are to be developed by the physicians who join the medical staff of the facility with the assistance of CPC which has developed model programs which may be used. The staffing projections for the facility are adequate. The manpower projected can provide quality of care and will comply with the standards of the Joint Commission on Accreditation of Hospitals. CPC's experience in operating its 24 existing psychiatric facilities and its philosophy that it will provide quality of care support a finding that CPC does have the ability to provide quality of care. 1/ CPC's proposed physical facility is designed to provide quality of care. The facility will be located in northeast Tallahassee. It will be constructed on a little less than one acre of a 10-acre parcel of land which CPC has a contract to purchase for $400,000.00. Part of the remaining 9-plus acres will be used for parking and recreational space and a substantial portion will be left in its natural state as a buffer. The hospital building itself will consist of a one-story structure with a separate section for each category of proposed beds, a lobby, business and general offices and storage rooms. One section will be used as a 20-bed open adult unit. Another section will be used as a 10-bed adult intensive care unit. This section will be locked. A nursing station will separate the adult intensive care unit and the open adult unit and is designed for visibility down the halls of both units. Two seclusion rooms will be located at the nursing station also to allow for observation from the nursing station. The location of the nursing station will reduce staff responsibility thus reducing the cost of operating the facility. The other two units will consist of a 15-bed adolescent open unit and a 15-bed geriatric unit. These units will be separated by a nursing station designed in the same manner as the nursing station separating the adult units. These units will also be separated by a locked door. There will also be a support structure built next to the hospital which will contain a kitchen, dining hall for all patients, 4 classrooms, 4 multi-purpose rooms, an occupational therapy room and a half-court gymnasium. There is no covered access from the main building to the support structure. The floor plan for the facility is similar to the floor plans used for other CPC hospitals. Therefore, the design costs of the facility will be less than for a new one-of-a-kind facility. Apalachee. In order to ensure quality of care, Apalachee has established a Quality Assurance Committee. Additionally, Apalachee is inspected by the Department and is accredited by the Joint Committee on Accreditation of Hospitals. No evidence was submitted which raises any question as to Apalachee's ability to provide quality of care. The existing building to which Apalachee's proposed facility will be added is located at Apalachee's Eastside facility. Eastside is located on 10 acres of land in northeast Tallahassee. Eastside presently consists of a building in which PATH, the detoxification program and emergency services is located. The building has 12 semi-private rooms and 24 beds. The new facility will be added to the existing building. A total of 13,000 square feet will be added. It will consist of an 18-bed open unit and a 6-bed closed unit. Also to be located at the Eastside facility is a 16-bed long-term adolescent psychiatric hospital which the Department has indicated it will approve. If this facility and the proposed 24-bed facility are built, Apalachee will have a total of 96 beds providing a variety of services. The Availability and Adequacy of Other Psychiatric Services. Apalachee currently provides a wide range of psychiatric health services in Subdistrict 2, including a crisis stabilization unit and short-term residential treatment programs. These services have been used as an alternative to inpatient care in some cases. CPC gave no consideration to these programs in its application. Apalachee did consider these programs and showed that its proposal would compliment its existing programs. As suggested by CPC in its proposed recommended order, Apalachee's existing programs are not a substitute for acute inpatient psychiatric services. Joint, Cooperative and Shared Psychiatric Services. CPC. CPC's operation of 24 psychiatric hospitals provides the potential for joint, cooperative or shared health resources in the operation of its proposed facility. Very little evidence was presented, however, that such potential would be realized if CPC's proposed facility is approved. Evidence was presented that model programs will be "available" for use in developing programs for the proposed facility. CPC also showed that standardized equipment selection and purchasing, and standardized floor plans would be used in establishing the facility. This will effect the short-term financial feasibility of the proposal. Apalachee. By placing the facility at the same location of other Apalachee programs, Apalachee will be able to share some services among programs and thereby reduce costs. For example, kitchen and dining services, staffing, security, purchasing, and maintenance and administrative services will be shared. The integration of Apalachee's existing programs with the proposed facility will promote a continuum of care and thus improve the quality of care. The Need for Research and Education Facilities. 106. Apalachee currently provides training to practitioners pursuant to an agreement with the School of Social Welfare at Florida State University. It also provides internship programs for psychology majors at Florida State University and nursing students at Florida State University and Florida A&M University. It is probable, therefore, that the new facility will be available for training purposes. No proof was offered, however, that indicates there is a need for training programs not being currently met which will be met if either of the proposed facilities is approved. Availability of Resources. 107. Health manpower and management personnel are available to staff the CPC or the Apalachee proposal. CPC and Apalachee also have adequate funds to build the proposed facilities. The adequacy of funds to build and operate the facilities is discussed further, infra. The Immediate and Long-Term Financial Feasibility of the Proposal. CPC. The projected cost of CPC's facility was $5,086,000.00. This amount will be increased for inflation if the facility is delayed another year. CPC will contribute 20 percent of the projected cost of the facility in the form of cash and liquid assets CPC has on hand. Eighty percent of the projected cost will constitute debt of the facility to CPC payable at a 12 percent interest rate over a 20-year period. The immediate financial feasibility of CPC's proposal has clearly been shown. In its application, CPC projected that its facility would generate a net income after taxes in each of the first 2 years of its operation. In its proforma, patient revenues were based upon the following charges per patient day: Adolescent $225.00 Adult, I.C.U. 215.00 Adult Open Unit 210.00 Geriatric 200.00 These projected rates were based upon a 1985 opening date. The rates will therefore be higher if the facility opens in 1987, but, according to Mr. Mercer, the bottom line profitability of the facility will not change. The projected rates, according to Mr. Mercer, are based upon rates charged at other CPC hospitals in Atlanta, New Orleans, Jacksonville and Ft. Lauderdale and interviews with Tallahassee physicians. According to Alton Scott, an expert in health care finance and financial feasibility, the proposed rates are considerably lower than the average rate at CPC's Jacksonville and Ft. Lauderdale hospitals, which was $240.00 for their fiscal year ending in 1984. Mr. Scott did not indicate that he considered the rate at CPC's Atlanta or New Orleans facility, however, which Mr. Mercer also considered in projecting rates for the proposed facility. Mr. Scott's testimony, however, raises a question as to the reasonableness of the proposed facility's rates. CPC's projected gross patient revenue is based upon an occupancy rate of 53 percent in the first year of operation and 75 percent in the second year. CPC projects $2,476,160.00 of gross patient revenue in the first year (an average $212.00 per day rate x 11,680 patient days) and $3,597,075.00 of gross patient revenue in the second year (an average $219.00 per day rate x 16,425 patient days). CPC's average occupancy rates are directly related to the number of admissions and the average length of stay of a patient. In support of the number of admissions projected by CPC, CPC offered the 3 need methodologies discussed, supra. Those methodologies have, however, been rejected as unsound. CPC's admission rates are based only on an assumed census. The assumed census is based upon conversations with physicians and the corporate experience of CPC. Although conversations with physicians and the corporate experience of CPC should be considered, these factors should be considered as support for other evidence as to possible admissions which has not been presented by CPC. What physicians have told Mr. Mercer is not alone sufficient to support assumed admissions. There is no guarantee that local physicians will refer clients only to CPC's facility or that their case load will remain the same. CPC's corporate experience as to length of stay does not add much support since the overall corporate experience of CPC's facilities for the year ending November 20, 1983, shows that the overall occupancy (excluding its Valley Vista facility) was 56.3 percent. This rate of occupancy is well below CPC's projected second year occupancy rate for the Tallahassee facility. The occupancy rate of CPC's Ft. Lauderdale and Jacksonville hospitals was 50.6 percent and 60 percent respectively, which is low for the State. Of all of CPC's psychiatric hospitals only 1 has an occupancy rate over 80 percent. Another problem with CPC's projected occupancy rate is that CPC has projected that 5 percent of its patient days will be attributable to Baker Act patients and 5 percent will be attributable to Medicaid Patients. In order for the proposed facility to receive Baker Act patients it will be necessary that it enter into a contract with Apalachee. No evidence was presented that such a contract could be obtained from Apalachee. As to the percentage of Medicaid patients, it is clear that CPC would not be entitled to receive reimbursement from Medicaid for these patients since its facility will be a free-standing facility and Medicaid does not reimburse for inpatient psychiatric services at free-standing hospitals. Based upon these facts, it appears that the assumption of CPC that a total of 10 percent of its patient days will be attributable to Baker Act and Medicaid patients is of questionable validity. Mr. Mercer's testimony that, even without the Baker Act and Medicaid patients, the projected occupancy could be met is illogical. If the projected revenue attributable to Baker Act and Medicaid patients is eliminated along with the projected expenses attributable thereto, CPC still projected a net after tax profit for its first two years of operation. CPC offered no evidence, however, sufficient to conclude that its projections as to occupancy of other types of patients can be achieved. CPC's projected average length of stay of 30 days is also suspect. It is not consistent with the average length of stay locally, in Florida, nationwide or in CPC's experience. Based upon the foregoing, CPC's projected occupancy levels are not realistic. This directly effects the projected revenues for the proposed facility. Salary and other expenses projected for the facility are also questionable. Nonsalary expenses are significantly lower than CPC's existing Florida facilities which are the lowest in Florida. Salary expenses, projected 2 years in the future, are also lower than present salary levels at CPC's Florida facilities. Again, the salary levels at CPC's 2 Florida hospitals are among the lowest for the 10 Florida facilities providing similar services. These low salaries are also based upon projections for a project which will not open for 2 more years. Despite this fact, they are lower than current salaries at CPC's existing Florida facilities and salaries being paid locally. Apalachee. The projected cost of the addition of the 24-bed facility to Apalachee's existing PATH and detoxification facility is $1,114,339.00. Apalachee will provide $114,339.00 of the necessary funds from its operating fund and the remaining $1,000,000.00 will be obtained from the sale of industrial revenue bonds. The bonds will be 15-year bonds, with a 7 year balloon and were projected at a 10.75 percent annual interest rate (75 percent of the Chase Manhattan Bank prime interest rate). First National Bank has committed to purchase $3,000,000.00 of industrial revenue bonds, which includes the $1,000,000.00 for this project. The immediate financial feasibility of Apalachee's proposal has clearly been shown. In projecting its gross charges for the first 2 years of operation, Apalachee has predicted an occupancy rate of 62.5 percent in the first month of operation increasing to 87.4 percent in the last month of operation of the second year. Gross charges are projected at $1,557,940.00 the first year (6,385 patient days x $244.00 per day rate) and $1,883,648.00 the second year (7,358 patient days x $256.00 per day rate). Apalachee' s projections are reasonable. Although it will be a free-standing psychiatric facility, Apalachee will be able to receive some Medicaid funding under the Department's "centers and clinics" option. Apalachee's projections as to gross charges, deductions from gross charges, and operating expenses are reasonable. Based upon its projections, Apalachee will realize a profit from the new facility in each of its first 2 years of operation. Competition. CPC. The addition of CPC's facility will promote competition in Subdistrict 2, as testified to by Dr. Brodsky, the Medical Director of BMC, among others. Because of the low occupancy at BMC, however, such competition at this time would be harmful. Apalachee. Apalachee's proposed facility will not compete with BMC. Although Apalachee's facility will initially reduce BMC's occupancy, removing the patients Apalachee will serve from BMC will improve the quality of care provided at BMC. Construction. CPC Construction and related costs of the CPC facility will consist of the following: Parking $27,500.00 Project development costs 22,000.00 Architectural/engineering fees 135,000.00 Site survey and soil investigation report 25,000.00 Construction supervision 10,000.00 Construction manager 4,000.00 Site preparation 100,000.00 Construction 3,000,000.00 Contingency 100,000.00 Inflation 270,000.00 These costs are all adequate to cover the cost of these items. These amounts will also be adequate even if construction does not begin until the end of 1985. The projected cost of equipment and furnishings was $500,000.00. This amount is adequate to equip the facility properly. In fact, the projected cost is probably substantially overstated. 2/ Although CPC failed to list in its application all of the equipment and furnishings (only major movable equipment was listed) necessary to equip the facility, adequate equipment and furnishings will be provided. Apalachee. The projected cost of constructing Apalachee's facility consists of the following: Architectural/engineering fees Site survey and soil investigation $75,740.00 report 2,000.00 Construction 876,620.00 Contingency 43,831.00 Inflation 26,298.00 These amounts are sufficient to construct the facility. The cost per square foot of the construction will be $60.00. The cost of equipment needed to equip the new facility is projected at $53,850.00. This amount is adequate for the purchase of the equipment listed in Apalachee's application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need application filed by CPC, case number 84-1614, be denied. It is further RECOMMENDED: That the certificate of need application, as amended, filed by Apalachee, case number 84-1820, be approved. DONE and ENTERED this 10th day of April, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 10th day of April, 1985.
