The Issue The issue presented by the instant case is whether Petitioner's application for a certificate of need to provide inpatient cardiac catheterization services at Pembroke Pines General Hospital should be granted.
Findings Of Fact Based on the evidence received at hearing and matters officially recognized, the Hearing Officer makes the following Findings of Fact: Petitioner and its Parent Corporation Petitioner is a for-profit Florida corporation formed on February 1, 1985, by Encino, California-based Nu-Med Hospitals, Inc. (NM), of which it is a wholly-owned subsidiary. NM provides various administrative services to Petitioner. In return for these services, Petitioner pays NM an annual fee. The fee in 1987 was approximately $1.8 million. In 1988, it was about $952,000. NM has also advanced loans to Petitioner. One such loan was in the amount of approximately $31.4 million at an interest rate of 15.6%, the same interest rate that NM had to pay to obtain the money which was the subject of the loan. Although interest rates have declined, the loan has not been refinanced. The failure to refinance has added substantially to Petitioner's costs. Furthermore, there is a significantly greater cash flow from Petitioner to NM than would be the case had the loan been refinanced. The total pre-tax cash flow from Petitioner to NM, including the amount attributable to the "excess interest" of the aforementioned loan, was $7,900,000 (or roughly 40% of NM's equity investment in Petitioner) in fiscal year 1987 and $4,387,000 (or roughly 23% of NM's equity investment in Petitioner) in fiscal year 1988. In addition to providing administrative services and making loans to Petitioner, NM has also invested more than $17 million over the past four years in Petitioner. Petitioner had an after-tax profit of $852,300 in fiscal year 1987. In fiscal year 1988, it had an after-tax loss of $346,600. Preliminary figures reveal that Petitioner suffered an after-tax loss of slightly more than $1 3l0 in fiscal year 1989. Pembroke Pines General Hospital. Petitioner owns and operates Pembroke Pines General Hospital (PPGH). PPGH is an acute- care hospital with a licensed capacity of 301 beds. It is fully accredited by the Joint Commission on Accreditation of Health Care Organizations. The hospital's bed complement includes 24 intensive care beds (12 coronary beds and 12 surgical beds) 2/ and 32 telemetry beds. Its telemetry unit will be expanded to 48 beds in the near future. In July, 1988, PPGH instituted an eleven bed obstetrical unit. Prior to the acquisition of the hospital in 1985, NM conducted a due diligence study to seek information about the hospital and became aware of the extent of the services provided by the hospital. According to 1987 actual data collected by the Hospital Cost Containment Board (HCCB), PPGH earned a 7.1% return on tangible equity and ranked 7th in this category of the 18 hospitals in Broward County reporting such information; PPGH had a cash flow to total debt ratio of .112% and ranked 9th in this category of the 20 hospitals in Broward County reporting such information; and its total margin percent was 2.6% and it ranked 8th in this category of the 20 hospitals in Broward County reporting such information. According to 1988 actual data collected by the HCCB, in terms of gross revenue per adjusted admission, PPGH ranked 8th of the 30 hospitals in HCCB Group 5 and 3rd of the 20 hospitals in Broward County reporting such information; and in terms of net revenue per adjusted revenue, PPGH ranked 7th of the 30 hospitals in HCCB Group 5 and 5th of the 20 hospitals in Broward County reporting such information. PPGH is located in Respondent's District x, the boundaries of which mirror those of Broward County. It is situated in the southwest quadrant of the county on the corner of Sheridan Street and University Drive. In the area surrounding the hospital is a large concentration of physicians' offices, including one housing a five-member group which limits its practice exclusively to cardiology and is the largest such group in Broward County. The group provides total cardiovascular care to its patients, including echocardiography and nuclear, invasive and clinical cardiology services. It has an active patient case load of 5,000 to 6,000. Of the members of the group, only Dr. Joseph Horgan and Dr. Barry Schiff practice invasive cardiology. Their practice is not confined to invasive cardiology, however. They are also clinical cardiologists. Both are board-certified in internal medicine, as well as cardiology. The Horgan-Schiff group accounts for 15 to 35 patients a day at PPGH, which has an active cardiology service, notwithstanding that it does not offer open heart surgery. The group provides on-site coverage at PPGH from 8:00 A.M. to 7:00 or 8:00 P.M. during the weekday. At other hours members of the group are on call and are able to quickly respond to emergencies at the hospital. Approximately 25 to 30 physicians in the area surrounding the hospital refer their patients who need cardiac catheterizations exclusively to the group. PPGH's primary service area, as defined by Petitioner, is bounded on the north by State load 84, on the south by the Broward County/Dade County line, on the east by the Florida Turnpike, and on the west by the eastern boundary of the conservation area. Included in this area are the cities of Pembroke Pines, Miramar, Davie and Cooper City. Most of Dr. Horgan's and Dr. Schiff's patients reside in PPGH's primary service area. While PPGH is not the only acute-care hospital that serves the residents of this area, it is the only hospital that is located within the area's geographic boundaries. Intervenor PPGH's primary service area is within the jurisdictional boundaries of the South Broward Hospital District (SBHD). SBHD is an independent taxing district which encompasses roughly the southern third of Broward County. It was created in 1947 by a special act of the Legislature to provide quality health care services to the residents of the district regardless of their ability to pay. Hollywood Memorial Hospital SBHD operates several facilities in the district, including a 24-hour walk-in medical center in Pembroke Pines, a freestanding ambulatory surgical center, an oncology center and a radiation therapy center. Its flagship, however, is Hollywood Memorial Hospital (Memorial), a public acute-care hospital that has grown from a 100-bed facility to a 737-bed facility offering a wide variety of health care services. Memorial is located six or seven miles east of PPGH outside of PPGH's primary service area. It is the closest hospital to PPGH. Many of the physicians who have privileges at PPGH also have privileges at Memorial. For instance, 13 of the 16 clinical cardiologists on the medical staff of PPGH, including Dr. Horgan and Dr. Schiff, are also on the medical staff of Memorial. The Horgan-Schiff group is responsible for 10 to 30 patients at Memorial on any given day. Charity Care, Medicaid and Medicare Memorial is the major provider of charity care to residents of the SBHD. In fiscal years 1987, 1988, and 1989, it provided $16,928,000, $22,728,000, and $22,258,000, respectively, in gross indigent charity care 3/ and $6,153 000, $13,739,000, and $7,587,000, respectively, in net unfunded (by tax revenues) indigent charity care. For fiscal year 199(), Memorial projects that it will provide $24,442,000 in gross indigent charity care, of which $14,211,000 will be funded by tax reVenues. A sizeable portion of the hospital's indigent charity care is funded by its operating revenues. During fiscal year 1989, the hospital earned slightly less than $3 million from its operations. Total revenues over expenses that year, however, exceeded $12 million, more than $8 million of which was attributable to returns on its investments. For fiscal year 1988, the hospital's total revenues over expenses was almost $14 million. In calendar year 1986, PPGH furnished 1.1% of the indigent charity care provided in Broward County. It ranked in the top 50% of hospitals in the county in this regard. Memorial ranked 2nd in the county, providing 22.8% of the county's indigent charity care during the calendar year. In calendar year 1987, PPGH provided $596,295 in indigent charity care. This constituted 1.29% of its gross patient revenues. In comparison, during this same period, Memorial provided $18,248,517, or 9.79% of its gross patient revenues, in indigent charity care. In terms of indigent charity care provided during calendar year 1987 as a percentage of gross patient revenue, PPGH ranked 5th of the 12 hospitals reporting in the county and 118th of the 209 hospitals reporting in the state. Memorial, on the other hand, ranked 3rd in the count, behind two other public hospitals, and 19th in the state In calendar year 1988, PPGH ranked 16th of the 30 hospitals in HCCB Group 5 in this category. Of the 20 hospitals reporting in the county, PPGH ranked 10th and Memorial ranked 2nd. Both Memorial and PPGH participate in the Medicaid program. As participants in the program, they are reimbursed for the services they provide to Medicaid patients, but generally not in the amount private pay patients are charged for the same services. The difference between what they receive from Medicaid and what they would have received from a private pay patient is referred to as a "Medicaid deduction." In calendar year 1988, PPGH's "Medicaid deductions" represented .76% of its gross patient revenues. In this category, it ranked 26th of the 30 hospitals in its HCCB group and 8th of the 20 hospitals in Broward County. Memorial, whose Medicaid deductions were 5.29% of its gross patient revenues, ranked 2nd in the county. Based on PPGH's operating budget for calendar year 1989, it ranks 192nd of the approximately 230 acute-care hospitals in the state in the amount of "Medicaid deductions" as a percentage of gross patient revenues. A further comparative review of calendar year 1989 operating budgets reveals that of the 22 hospitals in its HCCB group in calendar year 1989, PPGH ranks last in Medicaid days as a percentage of total patient days. During the third quarter of calendar year 1988, 1.3% of PPGH's gross patient revenues and 5.4% of Memorial's gross patient revenues were attributable to Medicaid patients. PPGH's 1.3% was the 8th highest and Memorial's 5.4% was the third highest of Broward County's 20 hospitals. Pursuant to a contractual arrangement with Respondent, PPGH provides medical services to patients at South Florida State Hospital, a mental health facility operated by the state. In return for the provision of these services;, PPGH is reimbursed at rates comparable to those that apply to Medicaid patients. South Florida State Hospital patients constitute approximately 2 to 5% of PPGH's Average Daily Census. Unlike Memorial, PPGH does not receive any tax revenues to help defray its expenses. PPGH has offered to serve indigent patients who live in the SBHD if the SBHD will reimburse it the same rate the SBHD reimburses Memorial for such services. The SBHD, however, has refused the offer. In terms of Medicare utilization, 1988 HCCB actual data reflects that PPGH ranked 13th of the 30 hospitals in its group and 11th of the 20 hospitals reporting in Broward County. District X Population and Demographics The Executive Office of the Governor, in a report prepared June 22, 1988, estimated that on January 1, 1988, the adult population (15 years of age and over) of Broward County was 1,001,822, and projected that it would increase to 1,047,900 on January 1, 1991. PPGH's primary service area in southwest Broward County has experienced rapid and sustained population growth in recent years. It is the site of several significant retirement communities, including a Century Village development which is expected to have 17,000 residents at build-out. Nonetheless, the population of this area is younger than that of Broward County as a whole. Approximately, 23% of the total population in southwest Broward County is over 55 years of age. While this is two percentage points higher than the national average, it is considerably lower than the countywide figure. Individuals aged 45 to 74 constitute 33.5% of the County's total population, but only 29.7% of the total population of southwest Broward County. The leading cause of death in Broward County is heart disease, a disease to which individuals become more susceptible as they age. Average Daily Census, Occupancy Rates, and Market Scare Notwithstanding the substantial population growth in Broward County, there is now, and has been since at least 1983, a large number of excess hospital beds in District X. The occupancy rates of Broward County hospitals, excluding PPGH, were as follows for calendar years 1983 through 1988: 1983- 65.4%; 1984- 61.3%; 1985- 57.1%; 1986- 55.5%; 1987- 56.2%; and 1988- 52.6%. PPGH, which had a capacity of 301 licensed beds throughout the period, had even lower occupancy rates. During the period, its Average Daily Census (ADC) and, consequently, its occupancy rate declined each year as follows: 4/ Calendar ADC Occupancy Rate 42.5% 37.9% 37.2% 34.1% 32.9% 30.9% Year 1983 127.9 1984 114 1985 111.8 1986 102.6 1987 98.9 1988 93 Based upon statistics for the first six months of calendar year 1989, however, it appears that the hospital's ADC for the entire calendar year will not further decline, but rather will increase to 100.6. 5/ Calendar Year ADC 1983 570.7 1984 533.7 1985 513.6 1986 538.7 1987 552.6 1988 560.5 During calendar years 1983 through 1988, Memorial's occupancy rates far exceeded those of PPGF, as reflected below: Occupancy Rate 78.6% 72.5% 69.7% 73.1% 75.0% 76.1% Based upon statistics for the first six months of calendar year 1989, it appears that for the entire calendar year Memorial's ADC will be 526.5 and its occupancy rate will be 71.3%. Memorial's occupancy rates have been higher than PPGH's due, at least in part, to the fact that Memorial has been able to offer heavily used specialized services not available at PPGH, including neonatal, rehabilitative, and short-term psychiatric care. Furthermore, while PPGH and Memorial both have pharmacy, 6/ physical therapy, nuclear medicine, and cardiac rehabilitation programs, the regular hours of operation of these programs are longer at Memorial. Based upon their ADCs, PPGH's and Memorial's share of the total Broward County market for calendar years 1983 through 1988 was as follows: 7/ Year PPGH 1983 3.6% 1984 3.1% 1985 3.3% 1986 3.1% 1987 3.0% 1988 2.8% Calendar Memorial 16.2% 14.7% 15.1% 16.2% 16.9% 17.2% January, 1988, through June, 1988, discharge data reveals that during that period PPGH and Memorial were responsible for 19.2% and 61.8%, respectively, of the total number of patients from PPGH's primary service area who were discharged from PPGH and District X hospitals with existing or approved inpatient cardiac catheterization programs. Although the ADC for PPGH's total bed complement declined from 1983 to 1988, the number of emergency room visits and emergency room admissions at PPGH increased 18.2% and 31.6%, respectively, during that period. The percentage increases are even greater if only the latter four years of this five-year period are considered. In terms of the average number of critical care beds occupied on a daily basis PPGH has experienced an increase of 28.9% from 1983 to 1988 and an increase of 35.4% from 1984 to 1988. Data reflecting PPGH's performance during the first five and six months of calendar year 1989 indicate that the increase in the number of emergency room visits, emergency room admissions and critical care beds occupied on a daily basis at PPGH has continued. Cardiac Catheterization As accurately described by Respondent in its rules a cardiac catheterization is a medical procedure requiring the passage of a catheter into one or more cardiac chambers of the left and right heart, with or without coronary arteriograms, for the purpose of diagnosing congenital or acquired cardiovascular diseases, or for determining measurement of blood pressure flow. Cardiac catheterization also includes the selective catheterization of the coronary ostia with injection of contrast medium into the coronary arteries. The flow of contrast medium through the coronary arteries may be recorded on x-ray film. The x-ray picture, or angiogram, that is produced can provide information quite helpful to the patient's physician. If it reveals a clot or other blockage restricting the flow of blood to the heart, a balloon-tipped catheter may be used to dilate or open the affected artery. Such a procedure is referred to as a coronary angioplasty. In contrast to cardiac catheterization, which is a diagnostic tool, coronary angioplasty is a therapeutic procedure. A high percentage of patients who receive a coronary angioplasty require open heart surgery immediately following the procedure. Cardiac catheterizations are generally, but not always, elective procedures which need not be performed immediately. There are occasions, however, where a patient is in the throes of a heart attack and requires an emergency coronary angioplasty to restore the flow of blood to the heart to minimize damage to the heart muscle. Under these circumstances, an emergency diagnostic cardiac catheterization, which can be completed in as little as five to six minutes, must also be performed so that the cardiologist will know precisely where in the arterial tree the blockage is located. Respondent permits health care providers to perform such emergency inpatient procedures regardless of whether they possess a certificate of need. Cardiac catheterizations are performed in equipped laboratories and, in the absence of complications, are usually completed within 60 minutes. They may be done on an inpatient or outpatient basis, depending on the condition of the patient. The equipment used is the same, however, whether the procedure is performed on an inpatient or on an outpatient. Recent technological advancements have made it possible to perform more procedures on an outpatient basis than previously. Smaller-sized catheters can now be used. As a result, the entry wound typically heals faster and there are fewer vascular complications. Dr. Horgan and Dr. Schiff were among the first invasive cardiologists in South Florida to employ these smaller- sized catheters. Physicians performing cardiac catheterizations are assisted by technicians and nurses who have specialized skills and training. These technicians and nurses are, at times, in short supply. Competition amongst hospitals to recruit and retain these support staff members is therefore sometimes keen. The majority of cardiac catheterizations are performed on individuals 45 to 74 years of age. 39 There has been no showing that there are any alternative diagnostic procedures which are preferable to cardiac catheterization. District X Inpatient Cardiac Catheterization Programs Broward County is not divided into cardiac catheterization subdistricts. The following seven facilities in Broward County, each of which is within two hours travel time of 90% of the county's population, provide inpatient cardiac: catheterization services pursuant to certificates of need granted by Respondent: Broward General Hospital; Florida Medical Center; Holy Cross Hospital; Memorial; North Broward Regional Medical Center: North Ridge Hospital; and Plantation General Hospital. Broward General, North Broward, and Plantation General each have one cardiac catheterization laboratory. Memorial also has one laboratory, but has plans to construct another pursuant to a "major renovation certificate of need" granted several years ago. It is unclear, however, as to when construction will begin. North Ridge has two laboratories. Florida Medical and Holy Cross each have two laboratories as well, plus one backup laboratory. The average hospital charge and the average length of stay per inpatient admission to these inpatient cardiac catheterization programs during calendar years 1986 and 1987 and the first nine months of calendar year 1988 were as follows: Calendar Average Average Stay 3.71 days 3.27 days 3.43 days 2.98 days 3.70 days 3.00 days Year Charge 1986 (All $4,365.14 Patients) 4936 (Excluding $3,932.44 Medicaid and Medicare) 1987 (All $4,359.92 Patients) 1987 (Excluding $4,041.80 Medicare and Medicaid) 1988 (All $5,054.17 Patients) 1988 (Excluding $4,393.60 Medicare and Medicaid) Cardiac catheterizations are also performed on an outpatient basis at these seven existing facilities. The number of cardiac catheterizations performed in Broward County increased almost 60% from 1985 to 1987, an increase that can be attributed to the aging of the county's population and the advances in cardiac catheterization technology. During the period from April, 1987, through March, 1988, there was a total of 9,289 cardiac catheterization admissions, both inpatient and outpatient, at these facilities, an amount substantially less than their combined capacity. During the period from July, 1987, through June 1988, they also collectively operated well below their combined capacity, handling a total of 9,236 inpatient and outpatient cardiac catheterization admissions Each of the existing laboratories in Broward County can handle at least 1,000 to 1,200 cardiac catheterizations a year during their normal hours of operation with their regular staff. 8/ These laboratories appear to be operating efficiently and to be available to all segments of the county's adult population requiring routine/diagnostic cardiac catheterization services. Furthermore, there is no indication that the quality of care offered at these laboratories is in any way lacking. In addition to these seven existing programs, Respondent has also granted certificates of need authorizing routine/diagnostic inpatient cardiac catheterizations to be performed at two other health care facilities: Imperial Point Hospital and Humana Bennett Hospital. Humana Bennett's primary service area overlaps PPGH's service area. It takes approximately 15 to 20 minutes by car to get to Humana Bennett from PPGH under normal driving conditions. The programs at Imperial Point and Humana Bennett are not yet operational. If their laboratories have hours of operation and staffing levels comparable to those of the laboratories in the county that are currently in operation, these laboratories will also each have the capacity to handle at least 1,000 to 1,200 cardiac catheterizations annually. The same can be said for Memorial's proposed second laboratory. Memorial's Inpatient Cardiac Catheterization Program Since 1981, Memorial's inpatient cardiac catheterization program has been open only to those cardiologists who devote their entire practice to performing cardiac catheterizations. It is closed to cardiologists, like Dr. Horgan and Dr. Schiff, who are not full-time invasive cardiologists. While it has its disadvantages, closing the program in this manner is a policy decision that, on balance, tends to enhance, rather than compromise, the program's efficiency as well the quality of care received by the program's patients. Other cardiac catheterization laboratories in Broward County are "closed" like Memorial's laboratory. The majority of the county's cardiac catheterization laboratories, however, including those at Broward General, Florida Medical, North Broward Regional and Plantation General, have laboratories that are open to any qualified invasive cardiologist. In addition, the laboratories at Humana Bennett and Imperial Point will be "open" when they become operational. In 1984, Dr. Horgan applied for privileges at Memorial's cardiac catheterization laboratory. Following a hearing before the SBHD's Board of Commissioners, final action was taken by the board to deny Dr. Horgan's application. Dr. Horgan appealed the board's decision to the Fourth District Court of Appeal. The board's decision was affirmed by the appellate court. Thereafter, in early 1987, at the request of the administrator of Memorial, Dr. Horgan, as well as his partner Dr. Schiff, discussed with Memorial representatives the possibility of their performing cardiac catheterizations at Memorial. Although approval of such an arrangement was initially given by the hospital, it was later withdrawn after members of the hospital's cardiology department complained about the arrangement. At present, three full-time invasive cardiologists, Dr. Mario Sperber and his partners Dr. Barry Alter and Dr. Michael Mareke have privileges to perform cardiac catheterizations at Memorial. They charge $1-500 for a routine/diagnostic left and right heart catheterization. Included in this charge is a fee of $191 that is passed on to the radiologist who assists in the interpretation of the angiogram. Because it has an open heart surgery program, Memorial is also authorized to perform routine/non-emergency angioplasties. These angioplasties are performed in Memorial's cardiac catheterization laboratory. The total number of procedures done in this laboratory during fiscal year 1988 was 1,635, seven of which were performed on Medicaid patients and 176 of which were performed on an outpatient basis. The total number of procedures, including angioplasties, done in Memorial's cardiac catheterization laboratory during fiscal year 1989 increased slightly to 1,650. The number of those procedures performed on an outpatient basis, however, almost doubled. The ratio of routine/diagnostic inpatient cardiac catheterizations to routine/diagnostic outpatient cardiac cathetrizations performed at Memorial has decreased from about 6 to 1 to approximately 4 to A further decrease is likely in view of the technological improvements that have been made. During calendar year 1988, 1,238 routine/diagnostic cardiac catheterizations, 234 angioplasties, and 512 open heart surgeries were performed at Memorial. During the first six months of calendar year 1989, there ware 680 routine/diagnostic cardiac catheterizations, 168 angioplasties, and 241 open heart surgeries done at Memorial. Approximately 23% of the total number of inpatient procedures performed in Memorial's cardiac catheterization laboratory during the first six months of calendar year 1988 were done on patients who resided in PPGH's primary service area. From fiscal year 1988 to fiscal year 1989, the revenues over direct expenses of Memorial's cardiac catheterization laboratory increased slightly. PPGH's Cardiac Catheterization Laboratory In addition to the previously mentioned cardiac catheterization laboratories in Broward County, there is also a 695-square foot cardiac catheterization laboratory located inside the operating room suite at PPGH. Cardiac catheterizations are performed at this laboratory, however, exclusively on an outpatient basis. It is the only such outpatient laboratory in Broward County and it was the first of its kind in South Florida. The laboratory at PPGH is leased to a Florida limited partnership, University Heart Institute, Ltd (Partnership) which operates the outpatient cardiac catheterization program at the hospital. 10/ The leasing of a department of a hospital is not an uncommon practice in Broward County. Petitioner provides the space needed to operate the outpatient cardiac catheterization program at PPGH, as well as other support services, pursuant to a management agreement with the Partnership. In return for the space and services it provides, Petitioner receives a nominal sum of $1.00 a month from the Partnership. The management agreement has a termination provision which permits Petitioner to terminate the agreement if, at any time after the first twelve months, "the Partnership has a negative cash flow over a period of six or more calendar months." Petitioner is a 50% general partner of the Partnership. Accordingly, pursuant to generally accepted accounting principles, Petitioner must reflect: the financial activities of the Partnership on its balance sheet as though they were its own. The other general partner in the venture is University Hospital, Inc., (UHI), a corporation controlled by Dr. Horgan and Dr. Schiff and their partner, Dr. Dweck. Petitioner and UHI have equal control over the Partnership. There are also about 20 limited partners, all of whom are physicians. The profits and losses of the Partnership are divided as follows: 50% to Petitioner; 25% to UHI; and 25% to the limited partners. During the first year of operation of the cardiac catheterization laboratory, the Partnership earned a profit of approximately $100,000. PPGH's cardiac catheterization laboratory began operation on April 29, 1988, after the area of the hospital in which it is located received less than $50,000 worth of renovation work. Two-hundred and forty-eight outpatients received cardiac catheterizations at the laboratory in the first twelve months of its operation. During the thirteenth month of its operation, cardiac catheterizations were done on an additional 22 outpatients. Of the 270 outpatients who received cardiac catheterizations during the first thirteen months of the laboratory's operation, only one was a Medicaid patient. The overwhelming majority of outpatients who have received cardiac catheterizations at PPGH's laboratory have been from southwest Broward County and have been referred to the laboratory by Dr. Horgan and Dr. Schiff. Dr. Joseph S. Horgan, M.D., P.A., and Dr. Barry H. Schiff, M.D., P.A., are the exclusive providers of cardiac catheterization services at PPGH's laboratory pursuant to a professional services agreement they entered into with the Partnership. Under the agreement, only "physicians that are associated with, employed or otherwise engaged under contract with" these two Florida corporations run by Dr. Horgan and Dr. Schiff, respectively, may use the laboratory. Dr. Horgan and Dr. Schiff therefore have the sole authority to determine who may perform cardiac catheterizations at PPGH's laboratory. They also serve as co-medical directors of the laboratory and, in these capacities, are responsible for the development and implementation of all policies pertinent to the operation of the laboratory. To date, only Dr. Horgan and Dr. Schiff have performed cardiac catheterizations at the laboratory. A third invasive cardiologist, however, will soon join Dr. Horgan and Dr. Schiff in providing such services at the hospital. The hospital's laboratory will be closed to all other invasive cardiologists. Dr. Horgan and Dr. Schiff charge $950 for a routine/diagnostic right or left heart catheterization and $1,175 for a routine/diagnostic right and left heart catheterization. These charges are consistent with the provision of the professional services agreement with the Partnership which requires that their fees "be competitive with the usual and customary fees charged in the community for similar services." Under the agreement, Dr. Horgan and Dr. Schiff are entitled to keep the fees they receive for the professional services they render. Most of Drs. Horgan's and Schiff's patients receive a right and left heart catheterization. As a result, they average 1.8 procedures per patient and their average charge per patient is $1,100. Unlike the invasive cardiologists who practice at Memorial's laboratory, Dr. Horgan and Dr. Schiff do not utilize radiologists to assist them in interpreting the angiograms they produce. Dr. Horgan and Dr. Schiff have proven to be highly competent and skilled invasive cardiologists and they offer high quality care to the outpatients they catheterize at PPGH's laboratory. There have been no moralities at the laboratory and only a few outpatients have experienced complications after being catheterized. Furthermore, approximately 91% of the catheterizations performed at the laboratory reveal some abnormality. This high rate of abnormal catheterizations suggests that Dr. Horgan and Dr. Schiff are exercising sound judgment in referring outpatients to the laboratory, as opposed to making these referrals without justification. In the professional services agreement with the Partnership, Dr. Horgan and Dr. Schiff have agreed "not to provide outpatient cardiac catheterization and peripheral vascular procedure services within Broward or Dade Counties, Florida for a two (2) year period after the commencement of the term of this Agreement [at any facility other than PPGH] except that [they) shall continue to provide such services at Plantation General Hospital, Florida Medical Center, University of Miami, Jackson Memorial Hospital and Cedars Medical Center of Miami." Most of the cardiac catheterizations that Dr. Horgan and Dr. Schiff perform are done on an outpatient basis. They do cardiac catheterizations on an inpatient basis only if the patient's medical condition warrants. They perform these inpatient cardiac catheterizations at Florida Medical and Plantation General. Between May 1, 1988, and April 30, 1989, they performed inpatient cardiac catheterizations on about 125 to 150 patients in these two facilities. Florida Medical and Plantation General are each within a half hour driving time of PPGH. Florida Medical offers open heart surgery and routine/non-emergency angioplasty. Plantation General has received preliminary approval from Respondent to provide open heart surgery services. Dr. Horgan's and Dr. Schiff's patients receive good care at Florida Medical and Plantation General. In addition to performing these inpatient cardiac catheterizations at Florida Medical and Plantation-General, during the one year period ending April 30, 1989, they also referred approximately 160 patients to Memorial for cardiac catheterization services. If Petitioner had the certificate of need that it is seeking in the instant case, none of these referrals would have been made. When they are performing cardiac: catheterizations at PPGH, Dr. Horgan and Dr. Schiff are assisted by a highly qualified and well-trained support staff consisting of a catheterization technician and three Registered Nurse's, one of whom is the staff director. All four staff members are employees of Petitioner, not the Partnership. Their combined annual salaries total about $119,000. Collectively, they receive approximately another $36,000 from Petitioner in fringe benefits. The Partnership reimburses Petitioner for monies expended “0 compensate these staff members for the work they perform in PPGH's cardiac catheterization laboratory. These staff members, however, do not work full-time in the laboratory. They are also assigned to other-areas of the hospital, most notably the intensive care unit. The majority of cardiac catheterization laboratories in Broward and Dade Counties have support staffs similar in size to the support staff assigned to PPGH's laboratory. The equipment in PPGH's cardiac catheterization laboratory was purchased by the Partnership from Dr. Horgan at Dr. Horgan's cost. Dr. Horgan paid approximately $250,000 for the equipment when he purchased it from EWA Industries, Inc., shortly before the opening of the laboratory. A portion of the money Dr. Horgan used to pay for the equipment came from a loan he received from Petitioner. At the time of its original purchase, the equipment was, for the most part, newly reconditioned. The equipment is not "state-of-the-art." It lacks certain features that are available on other equipment, such as digital/computer analysis capability. These features, however, are of relatively insignificant value. Despite lacking these features, the equipment in PPGH's outpatient cardiac catheterization laboratory is more than adequate, as evidenced by the high quality of Dr. Horgan's and Dr. Schiff's angiograms. Furthermore, although the equipment is made of parts manufactured by different manufacturers, obtaining parts for repair is not a major problem. They are readily available from EWA, which is based in Miami. In addition, there are two distributors and service centers located in Broward County from whom replacement parts may be obtained. Although PPGH has the medical and support staff and the equipment, as well as the ancillary services, necessary to provide routine/diagnostic cardiac catheterization services to inpatients at the hospital, it has not been authorized to do so by Respondent. PPGH's inability to offer these inpatient services places it at a competitive disadvantage relative to those facilities in the county that are authorized to provide these services. For instance, it makes it more difficult for PPGH to compete for contracts with health maintenance organizations and other third party payers. More significantly, PPGH's competitors offering inpatient cardiac catheterization services are able to capture patient revenues that would otherwise be received by PPGH if it were able to provide such services. PPGH's situation, however, is not unique. The majority of hospitals in Broward County are not authorized to offer inpatient cardiac catheterization services. Moreover, even though its competitive position would be enhanced if it were able to offer such services, its inability to do so does net threaten its survival as a health care facility in the Broward County market. If an inpatient at PPGH needs a routine/diagnostic cardiac catheterization that, because of the patient's unstable medical condition, cannot be performed on an outpatient basis, the patient must be transferred to another facility that is authorized to provide inpatient cardiac catheterization services. During fiscal year 1988, PPGH transferred 106 such patients to other facilities to receive inpatient cardiac catheterizations. Even if PPGH had been able to provide inpatient cardiac catheterization services to these patients, some of them would have had to have been ultimately transferred to another facility in any event to receive routine/non- emergency angioplasty or open heart surgery. Patients transferred from PPGH to another facility to receive cardiac catheterizations on an inpatient basis are generally transported by ambulance. A round-trip ambulance ride from PPGH typically costs between $500 and $700. In addition to increasing these patients' costs, such transfers may also cause them to experience additional stress. Clearly, in hindsight, it can be said that these transferred patients would have been better off if they had been initially admitted to a facility with inpatient cardiac catheterization capability instead of PPGH. Unfortunately, however, it is often difficult to determine at the time of admission whether a patient will need cardiac catheterization services. Furthermore, there are occasions where a patient arrives at PPGH's emergency room in such a medically unstable condition that he must wait at the hospital until his condition improves before he can be transported to another facility. It is not uncommon for Dr. Horgan's and Dr. Schiff's patients who need to be transferred from PPGH to receive an inpatient cardiac catheterization to have to wait two or three days before there is an opening in the cardiac catheterization laboratory schedule at Florida Medical or Plantation General that is convenient to them and their physician. During this time, these patients remain at PPGH, thus increasing the length of their stay there and they undergo expensive diagnostic testing designed to provide information that may be useful in managing these patients until they are able to be transferred and catheterized. While such scheduling problems have been experienced in the past, the situation should improve when the laboratories at Imperial Point and Humana Bennett become operational. Furthermore, there has been no Chowing that the patients who had to wait two or three or more days to be transferred from PPGH to Florida Medical or Plantation General could not have received such services at another existing provided, such as Memorial, had they so desired. Patients of Dr. Horgan and Dr. Schiff have died at PPGH while waiting to be transferred to another facility to receive an inpatient cardiac catheterization. A significant number of these patients could have survived had they received an emergency cardiac catheterization and angioplasty. Although the necessary equipment and staff were available at PPGH to perform these procedures, these procedures were nonetheless not performed. Because these were emergency situations where the 34 patients' lives were threatened, PPGH's lack of a certificate of need did not preclude Dr. Horgan and Dr. Schiff from performing these procedures at PPGH. Petitioner's Application for a Certificate of Need Approximately five months after the first outpatient cardiac catheterization procedure was performed at PPGH, Petitioner submitted an application for a certificate of need to provide inpatient cardiac catheterization services at the facility. Petitioner proposes to use, in providing these services, the same laboratory, equipment and staff it now uses for its outpatient program. The application estimates that the total cost of the project will be only $10,000, which represents "the legal and consulting fees associated with the Certificate of Need Application." There will be no financing, refinancing, professional services, construction or equipment costs, according to the application. In estimating the total cost of the project, Petitioner does not include the costs that were incurred to commence operation of PPGH's outpatient cardiac catheterization program, notwithstanding that these costs were incurred in contemplation of the filing of the instant application. 11/ The application also contains an estimate of revenues and expenses for the first two years of operation of the proposed project. The estimate includes projected revenues and expenses attributable to both the inpatient and outpatient operations of the laboratory. Petitioner projects in its application that 532 patients (320 inpatients and 212 outpatients) will visit PPGH's cardiac catheterization laboratory the first year it is able to offer inpatient services 12/ and that 592 patients (355 inpatients and 237 outpatients) will visit the laboratory the following year. Given Dr. Horgan's and Dr. Schiff's track record 13/ and reputation and the financial interest they have in the successful operation of the laboratory, 14/ it is not unreasonable to believe that they will attract these projected numbers of patients to the laboratory. Moreover, they, along with the third invasive cardiologist who will soon join them, should easily b able to handle such patient case loads at the laboratory during reasonable hours of operation with the laboratory's existing support staff and equipment. In projecting the gross revenues that will be generated by the inpatients who visit the laboratory, Petitioner assumes that these inpatients will be charged an average of $4,935 per patient the first year and $5,176 per patient the second year. These charges are consistent with the average charges of existing providers in the county. With respect to outpatients, Petitioner assumes that they will be charged on the average $2,300 per patient the first year and $2,415 per patient the second year. These charges are consistent with the laboratory's current average charge per outpatient. In view of the foregoing, Petitioner's projections in its application regarding gross revenues are reasonable. Of the patients that will visit the laboratory during the first two years of the inpatient program, Petitioner projects in its application that 2% will be Medicaid recipients and 3% will receive charity or free care. In view of PPGH's past performance in these areas, it appears unlikely that these percentages will be realized.15/ Accordingly, Petitioner's projections in its application regarding the deductions from gross revenues for Medicaid contractual allowances and charity care are unreasonably high. The projections made by Petitioner regarding direct and indirect expenses, in the aggregate, are not unreasonably low, notwithstanding that the application's statement of projected revenues does not make specific reference to certain expense items relating to inpatient care, such as nursing care and food supply costs. If anything, Petitioner has overestimated total expenses.16/ Providing only outpatient services, which generate less net income per patient than do inpatient services, the laboratory at PPGH returned a profit of approximately $100,000 in its first year of operation. The profitability of the laboratory will likely increase, as Petitioner projects, if it is able to offer inpatient, in addition to outpatient, services. In both the short-term and the long-term, Petitioner' proposal to provide such services is financially feasible. As evidenced by the attachments to Petitioner's application, as supplemented in response to Respondent's October 13, 1988, omissions letter, PPGH has transfer agreements with St. Francis Hospital and Florida Medical, both of which are within thirty minutes driving time of PPGH and have open heart surgery capability. Potential Impact of Granting the Application While Petitioner will benefit if its application is granted, the same cannot be said for existing providers of 16 For example, Petitioner allocates the entire salary of each of the four support staff members to the cardiac catheterization laboratory, even though these employees also work in other parts of the hospital. 38 inpatient cardiac catheterization services in Broward County. They will have to contend with another effective competitor seeking a share of the already highly competitive Broward County inpatient cardiac catheterization market. Collectively, the existing facilities will lose inpatient cardiac catheterization patients and net revenues they otherwise would have had if the laboratory at PPGH did not offer inpatient services.17/ Memorial will be among those `facilities suffering the greatest such losses. While it is difficult to predict the precise extent of these losses, they no doubt will be significant and therefore adversely impact Memorial's ability to provide charity care. At the very least, Memorial will lose to PPGH the inpatient cardiac catheterization patients that Dr. Horgan and Dr. Schiff now refer to Memorial's laboratory and the net revenues these patients generate. As previously mentioned, Dr. Horgan and Dr. Schiff referred 160 patients to Memorial's laboratory during the year ending April 30, 1989.96. Routine/non-emergency angioplasties and open heart surgery will not be performed at PPGH if Petitioner's application is granted. Accordingly, Memorial will not lose to PPGH any patients requiring these services as a result of the granting of the application. Although patients at PPGH who require routine/diagnostic inpatient cardiac catheterization services will not have to be transferred to another facility to receive inpatient cardiac catheterizations if the application is granted, it will still be necessary to transfer patients needing routine/non-emergency angioplasty and open heart surgery. With the advent of an inpatient cardiac catheterization program at PPGH, the hospital will attract, in far greater numbers than it does presently, individuals who require, not only inpatient cardiac catheterization services, but also routine/non emergency angioplasty or open heart surgery and who therefore must be transferred to another facility. Therefore, there likely will be more, rather than fewer, total transfers of patients than there would be if PPGH did not offer inpatient cardiac catheterization services.18/ Although cardiac catheterization support staff are generally difficult to recruit and retain, the granting of the instant application will not make it any more difficult for existing providers in Broward County to attract and keep such staff members inasmuch as Petitioner already has a support staff assigned to its cardiac catheterization laboratory at PPGH and it does not intend to expand its staff if it is given authorization to provide services at the laboratory on an inpatient basis. Regardless of whether Petitioner's application is granted, the adult population of Broward County requiring inpatient cardiac catheterization services will be able to receive such services from existing and approved providers in the county, which have the collective capacity to meet the population's demand for these services. It is more efficient to make greater use of the current collective capacity of these providers than to add to the county's overall capacity to serve cardiac catheterization inpatients. Furthermore, there is no reason to believe that PPGH will provide quality of care appreciably different from that offered by any existing or approved inpatient cardiac catheterization provider. Even if Petitioner's application is denied, patients of Dr. Horgan and Dr. Schiff who live in the area surrounding PPGH will still be able to receive routine/diagnostic cardiac catheterizations from these two invasive cardiologists, albeit at a facility that is slightly further from their homes and Dr. Horgan's and Dr. Schiff's offices than is PPGH. If an inpatient cardiac catheterization program is established at PPGH, the program's charges will be comparable to those of its competitors. They will neither be excessive, nor unusually low, in relation to those of other programs. Accordingly, approval of the program will have no significant impact on costs and patient charges. Florida Administrative Code Rule 10-5.O11(1) Respondent has adopted procedures governing its review of applications, such as Petitioner's, for certificates of need authorizing the establishment of an inpatient cardiac catheterization program. These procedures are found in Florida Administrative Code Rule 10- 5.011(1)(e).41 Respondent published notice in the April 22, 1988, edition of Florida Administrative Weekly of the amendments it proposed to make to the rule as it existed at that time. (The version of the rule that Respondent sought to amend Bill be referred to hereinafter as the "old rule.") These proposed rule amendments were the subject of rule challenge petitions filed with the Division of Administrative Hearings. The petitions were voluntarily dismissed after the challengers and Respondent negotiated a settlement, pursuant to which Respondent made certain modifications to the proposed amendments to Rule 10- 5011(1)(e). Among the modifications was the addition of the following language relating to the intent of the rule: It is the intent of the department to allocate the projected growth in the number of cardiac catheterization admissions to new providers regardless of the ability of existing providers to absorb the projected need. In addition, the prefatory language of the provision relating to need determination was modified to read as follows: In order to assure patient safety and staff efficiency, to foster competition among providers, and to achieve maximum economic use of existing resources, the following criteria shall be considered in the approval of Certificate of Need applications for new adult cardiac catheterization programs. The minimum annual projected net program volume need for the establishment of a new adult cardiac catheterization program shall be at or exceed 300 admissions for the service planning area. Applicants shall demonstrate that they will be able to reach an annual program volume of 300 admissions within 2 years after the program becomes operational. Notice of these changes and the other modifications that were made to the April 22, 1988, proposed rule amendments was published in the July 29, 1988, edition of Florida Administrative Weekly. Eleven days earlier, these proposed rule amendments, as modified, (hereinafter referred to as the "new rule") had been filed with the Secretary of State. In August 1988, the new rule was challenged on the ground that Respondent had not complied with the procedural requirements of Section 120.54, Florida Statutes, in making changes to the proposed rule amendments originally published on April 22, 1988.19/ The hearing officer assigned to these cases treated the rule challenge petitions as having been filed pursuant to Section 120.54, Florida Statutes, rather than Section 120.56, Florida Statutes, notwithstanding that the new rule had been filed with the Secretary of State more than 20 days prior to the filing of any of these petitions. Following a hearing on the matter, the hearing officer, on June 29, 1989, entered a final order holding that "the amendments to paragraph 2 (h), paragraph 3(c) III, and paragraph 6(a) and the amendment regarding the definition of `inpatient visit' are an invalid exercise of delegated legislative authority, because they were adopted without adhering to the proper procedures for adoption delineated in Section 120.54, Florida Statutes." On or about July 27, 1989, Respondent appealed the hearing officer's final order to the First District Court of Appeal. The appeal is still pending. Since August, 1988, Respondent has been applying the new rule in evaluating inpatient cardiac catheterization certificate of need applications. It applied the new rule in making its preliminary determination to deny Petitioner's application, which was in the first batching cycle after the effective date of the new rule.20/ Although the packet of application materials Respondent sent to Petitioner did not contain any express indication that the new rule would be applied in evaluating its application, Petitioner conceded in its completed application that it had "been informed [through other means) by [Respondent) that the [new rule would] likely be used in evaluating this CON application." In view of this advisement, Petitioner addressed in its application the various provisions of the new rule as they related to its application. The State Health Plan Issues relating to cardiac catheterization are discussed in the 1985-1987 State Health Plan. Among such issues is that of minimum case loads. Regarding this issue, the plan contains the following discussion: Up until 1977 the literature showed a consensus on the need for minimum case loads. Since 1977, expert opinion has become more divided on the issue with many provider representatives advocating that the standards now reflected in federal and many state laws are no longer necessary and justifiable. However, a general opinion among the medical profession is that a certain minimum number case load is essential to assure quality results. A number of complications can occur in catheterization programs if all personnel are not experienced and active. Studies may have to be repeated because inadequate data were received. This could result in unnecessary exposure of patients to radiation and hazards caused by the injection of of engaged contrast materials and the manipulation catheters. The established federal and state minimum standards of 300 procedures annually for adult and 150 for pediatric cardiac catheterization laboratories are believed to be adequate to maintain the expertise of the professional team in this highly specialized service. The plan also addresses the "concern surrounding. . . the physical proximity and the relationship between the [cardiac catheterization] diagnostic facility and a cardiovascular surgical program." It notes that the "Inter-society Commission on Heart Disease Resources (ISCHDR) stresses the need for a very close relationship between the two services;" "national health planning guidelines support this emphasis through a recommendation that no new cardiac catheterization unit be opened in any facility not providing open heart surgery;" and the "Florida rule requires that cardiac catheterization laboratories where coronary angioplasty (e.g., plastic surgery upon blood vessels) is performed must be located in health care facilities which also provide open heart surgery." One of the goals of the State Health Plan is to ensure the appropriate availability of cardiac: catheterization services at a reasonable cost. An objective of the plan is to "maintain an average of 600 cardiac catheterization procedures per laboratory in each district through 1990." The project proposed by Petitioner in the instant case conforms with this goal and objective to the extent that the services offered at PPGH will be competitively priced and that it is likely that the laboratory at PPGH will average at least 600 procedures annually. Local Health Plan The 1988 District X Comprehensive Health Plan contains the following analysis and recommendation with respect to the provision of cardiac catheterization services in Broward County: AVAILABILITY AND ACCESSIBILITY The hospitals offering cardiac catheterization services are well located throughout the County for geographic accessibility. Financial barriers continue to raise questions about accessibility of these services to the poor. QUALITY All of the facilities offering cardiac catheterizations in Broward County are providing in excess of the minimum number of procedures recommended.21/ RECOMMENDATION 1 Applicants for Certificate of Need approval should document either their intention and/or experience in meeting or exceeding the standards promulgated by the appropriate national accreditation body and by HRS. RECOMMENDATION 2 Applicants proposing to initiate or expand cardiac catheterization must make those services available to all segments of the population regardless of the ability to pay. RECOMMENDATION 3 Outpatient cardiac catheterization services should continue to be regulated under the Certificate of Need program. Petitioner has demonstrated that the inpatient cardiac catheterization program it proposes to establish at PPGH will meet or exceed the accreditation standards referred to in Recommendation 1 of the plan. Petitioner's stated policy is to make the services of PPGH available to all segments of the population regardless of their ability to pay. Petitioner's past performance in the area of indigent care suggests, however, that Petitioner may not be firmly committed to implementing this policy. The suggestion is also made in the plan that "[a)11 else being equal applications to establish new cardiac catheterization laboratories in Broward County in facilities with existing open heart surgical capability will receive priority - when being considered for certificates of need."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent enter a final order denying Petitioner's application for a certificate of need to establish an inpatient cardiac catheterization program at Pembroke Pines General Hospital. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 12th day of January, 1990. Administrative Hearings Parkway 32399-1550 of the Administrative Hearings January, 1990. STUART M. LERNER Hearing Officer Division of The DeSoto Building 1230 Apalachee Tallahassee, Florida (904) 488-9675 Filed with the Clerk Division of this 12th day of
Findings Of Fact A. whether the "Grandfather" Issue Should Be Determined. The Petitioner, Mease Hospital and Clinic (Mease), operates a 278 bed hospital in Dunedin, a 100 bed hospital in Countryside, and a medical clinic. All are located in north Pinellas County, in the North Pinellas subdistrict of HRS District 5. In 1982, Mease applied for a certificate of need to equip and operate a cardiac catheterization laboratory (CCL). At the time, Mease was of the view that a CCL would be a new service and would therefore require a certificate of need. When Mease determined that approval would not be likely under then current rules, Mease withdrew its application because it understood that a final denial legally would preclude Mease from re-applying for three years. On July 11, 1986, the Respondent, HRS, entered a Final Order adopting a Recommended Order and acknowledging that Humana Hospital Northside, also located in Pinellas County, HRS District 5, continuously had been providing cardiac catheterization services since before July 1, 1977, the effective date of certificate of need regulation of CCLs, and therefore was not required to obtain a certificate of need for a CCL as a new service. Final Order, Humana Hospital Northside v. Department of Health, etc., 8 F.A.L.R. 3910 (DHRS July 11, 1986). When Mease reviewed the Humana Northside Final Order and final hearing transcript, it concluded that it, too, should be "grandfathered." Mease was doing the same type catheterization procedures as Humana Northside. Mease decided to re-apply for a certificate of need both on the basis of need for a CCL at Mease and on the basis of the "grandfather" claim. In October, 1986, Mease filed the pending certificate of need application. In addition to the more typical components of a CON application, the Mease application states in pertinent part: EQUIPMENT/SERVICE TYPE: Mease Hospital and Clinic maintains that the Cardiac Catheterization Program is not a new service, as procedures similar to those performed at Humana Northside, which was recently approved on a grandfathering basis for cardiac catheterization have been performed at Mease Hospital and Clinic in Dunedin for more than 20 years. * * * ADDITIONAL PROJECT DETAILS/REMARKS: Mease Hospital and Clinic believes its historic performance of procedures identical to those for which Humana Northside was grand fathered a cardiac catheterization lab is sufficient to justify similar action, resulting in approval of Mease' proposal. HRS' State Agency Action Report (SAAR) was completed in April, 1987. It evaluated the Mease proposal as a typical certificate of need application and denied it on the basis of lack of need. There was no direct mention of the "grandfather" claim, but the SAAR concludes in pertinent part: "Deny a certificate of need for [the Mease] project [among others] in its entirety... Reasons for decision: Insufficient need for an additional cardiac cath lab." Mease's petition for formal administrative proceedings on the denial does not specifically address the "grandfather" claim, either. During the pendency of this proceeding, Mease continued to seek a "grandfather" exemption apart from this proceeding. But Mease's prehearing proceedings in this case were conducted in a way that indicated its assumption that the "grandfather" issue would be determined by final agency action in this case, if not before by informal means. The other parties recognized this assumption and were not prejudiced by Mease's failure to formally specify the issue in its pending petition for formal administrative proceedings or by amendment to it. By letter dated November 23, 1987, HRS finally responded to Mease's continued efforts to obtain "grandfather" status and denied the request. Mease still did not amend its petition for formal administrative proceedings (nor did it file a new, separate petition in response to the November 23 letter.) But it continued to conduct prehearing procedures in a manner so as to have the "grandfather" claim heard as part of this case. HRS and the Intervenor, Morton Plant Hospital, Inc. (Morton Plant) first objected on the record to consideration of the "grandfather" issue in this case in the Prehearing Stipulation filed on January 6, 1988. The "grandfather" issue should be determined in this proceeding. Whether Mease Has A "Grandfathered" CCL. Before July 1, 1977, and continuously since, Mease has operated a special procedures room at its Dunedin hospital. The special procedures room is the largest room in the x-ray department, with adjoining rooms that contain sinks for sterile technique and housing computers. Equipment in the room includes an x-ray generator with a high MA capability to do moderately rapid sequence films and fluoroscope. There is a table of special design to allow movement in all directions to facilitate fluoroscopy. Three different film changers are used. The room contains a large array of catheters, wires and needles for use in the catheterization process. There is a defibrillator monitor, pressure monitors, and various physiologic monitors also in the room. Finally, there is a digital vascular imaging ("DVI") machine to facilitate the computerized processing of digital subtraction studies. The DVI machine has been used to perform coronary arteriographies. During the time the special procedures room has been operational, it has been staffed with persons specifically trained in critical care of patients, with special knowledge of cardiovascular medication and catheterization type equipment. There has always been ample support staff available for patient observation, handling blood samples, performing blood gas evaluations and monitoring physiological data. The catheterization team usually consists of the physician, a special procedures nurse (an R.N. with critical care training) and at least two dedicated radiographer technologists with special knowledge of the equipment. A special procedures log is maintained by physicians using the special procedures room. Procedures typical of those contained on the log prior to and consistently since 1977 include renal arteriograms, pulmonary arteriograms, cerebral arteriograms and femoral arteriograms. Pulmonary arteriograms involve passing a catheter through a right side chamber of the heart into the lungs; the other procedures do not involve passing a catheter into the heart. Pulmonary angiograms, right ventriculography and right atrial injections are all currently performed at Mease in the radiology laboratory. Right heart catheterization procedures are being performed in the CCU units and the special procedures lab at Mease. The special procedures room is not used by radiologists or cardiologists to do any therapeutic or diagnostic studies of the left chambers of the heart. Unlike procedures such as pulmonary arteriograms, in which the catheter is inserted into or through a chamber on the right side of the heart, fluoroscopy is required for insertion of a catheter into a chamber of the left side of the heart. With fluoroscopy, left heart catheterization procedures involve no significantly increased danger to the patient. Left heart catheterization procedures require faster film sequencing equipment for fluoroscopy because the left heart is a higher pressure (faster flow) system than the right heart chambers. Mease's cardiologists perform these procedures in a CCL at either Morton Plant or Largo Medical Center in Clearwater. The Mease special procedures room does not have, and has not had, the more sophisticated equipment needed to perform catheterization procedures in the left chambers of the heart. The sophisticated equipment needed for left heart catheterizations customarily is part of a CCL. It is commonly understood that a CCL is a laboratory which includes this equipment and uses this equipment for left heart catheterizations. Mease shared this understanding until it learned of the Final Order in Humana Hospital Northside. It never contested the omission of cardiac cath services from its hospital license, never reported cardiac cath procedures to the local health council and applied for a CON for a CCL in 1982. On review of the Humana final order and the record of the case, Mease correctly concluded that its special procedures room was being operated in the same way as Humana Northside's. Mease also concluded that it, too, was entitled to "grandfather" status. But the Humana final order points out: The respondent HRS offered no evidence to dispute the fact that petitioner has indeed been providing cardiac catheterization services on a regular and continuous basis from pre-July 1, 1977 to the present time. Instead, HRS takes the position that since petitioner never reported to the Local Health Council that it was performing such services, it is now somehow estopped from claiming a "grandfather" exemption from Certificate of Need review. There is competent and substantial evidence demonstrating that petitioner began performing cardiac catheterization procedures prior to July 1, 1977, at a time when Certificate of Need review was not required, and has continued to perform such services on a regular basis. Accordingly, petitioner was exempt from Certificate of Need review when it initiated such services and continues to maintain that exempt status so long as it regularly and continuously performs such services. In this case, there was persuasive evidence disputing that Mease has been operating a CCL. Mease's special procedures room had some, but not all, of the equipment customarily used in cardiac catheterization. Its special procedures room is not the kind of room customarily used to perform cardiac catheterization procedures. This is why Mease never before claimed entitlement to "grandfather" status but rather presumed that it did not have a CCL and would need a CON to open a CCL. Mease has not been operating a CCL continuously since July 1, 1977. Need For Mease's Proposed CCL. Mease filed the pending CON application in October, 1986. At the time, the local health council for District 5 was reporting an inventory of four CCLs: St. Anthony's; Morton Plant; Largo; and All Children's. Mease also knew that HRS had entered a final order in July, 1986, recognizing "grandfather status" for Humana Northside and allowing Humana Northside to upgrade its CCL by adding up-to-date equipment required for left heart catheterization procedures. At the time of the State Agency Action Report (SAAR) denying Mease's application in April, 1987, HRS was aware of, and also counted in the inventory at the time of the SAAR, a second CCL at Morton Plant which was added without CON review. The second Morton Plant CCL became operational in July, 1986, but was not reported to the local health council until early 1987, and was not reported by the local health council until September, 1987. A second CCL also opened without CON review at Largo Medical Center. But the evidence was not clear when the second Largo lab opened. It was not reported to, or by, the local health council before the SAAR either, and HRS did not count it in the inventory for purposes of the SAAR. Since the SAAR, two additional CCLs have been approved without CON review at Bayfront Hospital/All Children's Hospital in St. Petersburg. Finally, on November 24, 1987, the District Court of Appeal, First District, rendered an opinion reversing HRS' final order denying an application for a CON for a CCL at Bayonet Point Regional Medical Center in Pasco County in District 5. This CCL was approved for purposes of meeting the need existing as of 1986. The actual District 5 CCL use rate for the period July, 1985, through June, 1986, using local health council data, was 308.47 procedures per 100,000 population. The year in which the proposed CCL would initiate service, but not more than two years into the future, is July, 1988. The District 5 population in July, 1988, is projected to be 1,124,986. The number of procedures projected for District 5 in July, 1988, is 3470. Allocating 600 procedures per CCL, 3470 procedures would create a numerical need for 6 CCLs in District 5 in July, 1988. The local health council did not report any procedures done at the "grandfathered" CCL at Humana Northside, and none were included in the data for the time period July, 1985, to June, 1986. Counting the "grandfathered" Humana Northside CCL in the inventory at the time of the SAAR without attributing any procedures to it for purposes of calculating the use rate for July, 1985, to June, 1986, amounts to a recognition that Humana Northside, while given "grandfather" status based on the facts presented in DOAH Case No. 84-4070, was not in fact operating a CCL continuously since July, 1977. Refusal to attribute procedures to Humana Northside reflects a rational policy decision in this case not to perpetuate the error resulting from the apparently less-than-adequate HRS presentation of its case in the Humana Northside case. There was evidence officially recognized in this case without objection--namely, the Final Order, Bayonet Point Medical Center v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 4342 (DHRS 1986)--that 1200 Pasco County (District 5) residents were being referred to Tampa for cardiac catheterization and open heart surgery in the year preceding June, 1986. (300 were open heart surgery patients.) But there was no evidence to prove how many of the 900 cardiac catheterization patients who were referred to Tampa in the period July, 1985, to June, 1986, would have had the procedure performed in District 5 if Bayonet Point had a CCL. It necessarily follows that there was no evidence to prove that any additional cardiac cath procedures for Pasco County patients performed in District 5 as a result of the Bayonet Pont CCL will not be absorbed by and performed at the Bayonet Point CCL. District 5 has the highest percentage of 65 and over population in the state (29.7 percent for calendar year 1986), but next to the lowest number of catheterizations per thousand of all the districts in the sate. District 5 also has a large cohort of population age 45 to 64. Over 50 percent of the population in District 5 is in the age cohort for which cardiac catheterization is most frequently needed as a diagnostic or therapeutic tool. Seasonal fluctuations increase the elderly winter population. Resident death rate from heart disease is almost 50 percent higher in District 5 than it is for the state of Florida. These factors combine to create an actual use rate in District 5 that, for the past two years (1986 and 1987) has exceeded (or, for 1987, was projected to exceed) the projected horizon year (July 1988) use rate derived from using the 1985 use rate data. The actual use rate for January through September 1987, when extrapolated for the entire calendar year of 1987, shows that the number of procedures expected to be actually performed in District 5 in 1987 is 46 percent (approximately 1,000 procedures) greater than the number of procedures projected to be needed in July 1988 using the 1985 use rate. The projection of procedures for July 1988 is 700 procedures less than actually occurred in District 5 in 1986. Use of July, 1985 to June, 1986, use rate in a demographic configuration like that found in District 5 underestimates projected procedures for July, 1988. Some trends in health care and area population growth do not support the addition of a cath lab at Mease. While the population of north Pinellas County, where Mease is located, is equal in age distribution to south Pinellas County, the new growth in north Pinellas and Pasco is younger than south Pinellas. Increased use of non-invasive diagnostic procedures, such as MRI and CAT scan, will reduce the growth of cardiac cath procedures in the future. The growth in the use rate in cardiac caths is in the number of therapeutic caths, which by rule are required to be done in a facility with open heart surgery and therefore cannot be done at Mease at this time. Indeed, the number of right heart caths being done at Mease has remained constant over the past several years. Also, death from heart disease is decreasing due to improvements in life style. All the cath labs in District 5 are within a two hour drive time of 90 percent of the population in District 5. Morton Plant is six miles from Mease Dunedin. Mease Countryside is twelve miles from Morton Plant and eight miles from Mease Dunedin. One-third of the Mease cardiologist's patients are at Mease Countryside and for catheterization these patients would have to be admitted at or transported to Mease Dunedin where the proposed lab would be located. There is sufficient capacity in the existing cath labs to serve growth in the near future. Approximately 600 more procedures could be done at Morton Plant. There is no problem scheduling caths at Morton Plant. There has been some difficulty getting beds for Mease patients before and after the procedure, but Morton Plant just opened new ICU beds with specially trained nurses to accommodate Dr. Gibbs' patients. The existing labs in District 5 are financially accessible. A significant number of the labs are located in not- for-profit hospitals that serve all types of patients. E.g., Morton Plant, which has an overlapping service district with Mease, offers twice the number of Medicaid days as Mease. In addition, as previously mentioned, new approved labs at Bayfront/ALL Children's (2) and Bayonet Point (1) will be coming on line to provide additional capacity (and bring the total number of CCLs in District 5 to ten.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that HRS enter a final order: (1) denying Mease's request for recognition of a "grandfathered" CCL at its Dunedin hospital; and (2) denying its application for a CON for a CCL at its Dunedin hospital, CON Action No. 5108. J. LAWRENCE JOHNSTON 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 12th day of May, 1988.
Findings Of Fact Procedural issues. In June 1983, Petitioner filed an application for a certificate of need to operate a cardiac catheterization laboratory at Hollywood Medical Center. Respondent, the Department of Health and Rehabilitative Service (HRS) denied the application, and Petitioner filed this petition for administrative review. Notice of hearing was given by order dated August 6, 1984. Two days before the hearing, SOUTH BROWARD HOSPITAL DISTRICT moved to intervene. The petition was denied because it was filed less than five days before the hearing, and was therefore untimely. Rule 28-5.207, F.A.C. Also shortly before the hearing, HRS filed a motion in limine, seeking to exclude evidence of cardiac catheterization utilization other than a base year of 1981. The motion was denied because the relevant rule, rule 10-5.11(15) allows proof of "not normal" circumstances. Prior to the hearing, the parties filed a joint prehearing stipulation, agreeing to certain issues of law and fact. Pursuant to that stipulation, the following criteria are either not applicable in this case or have been satisfied by the Petitioner: section 381.494(6)(c)(3), (4), (5), (6), (7), (8), (10), (11), and (13), Fla. Stat., section 381.494(6)(d), Fla. Stat., and rule 10-5.11(15)(a) through (f), (g), (h)(1) and (2), (i)(1) through (3) and (5), (j), (m), (n), and (o)(2). It was further stipulated that the Petitioner will not be performing coronary angioplasty in its proposed cardiac catheterization laboratory. HRS further stipulated that if the Petitioner satisfies all other applicable criteria, the project will be financially feasible. Remaining at issue in this case are subparagraphs (6)(c)(1), (2), and (12) of section 381.494, Fla. Stat., and subparagraphs (h)(3), (i)(4), (k)(1), and (o)(1) and (3) of rule 10-5.11(15). F.A.C. The central issue in this case is whether pursuant to the relevant statutory and rule criteria there is a need for a cardiac catheterization laboratory at Hollywood Medical Center. The Hollywood Medical Center is located in the southern portion of Broward County. It is a 334 licensed bed medical/surgical hospital, and its medical staff covers all major medical specialties. The hospital has 24 hour emergency service, 14 intensive care beds, a full service operating room, and does cardiovascular surgery, but does not do open heart or bypass surgery. Hollywood Medical Center, based on zip codes from its own patient records, serves patients primarily from the Dade County line a few miles south to the New River Canal on the north and from the ocean on the east to the Collier County line on the west. In this service area, physicians tend to be located in the eastern section, and do not typically have staff privileges at hospitals in northern Broward County, nor do they tend to refer patients to hospitals in the northern section of Broward County. Patients at Hollywood Medical Center who need cardiac catheterization procedures are now referred to Memorial Hospital, which is approximately 2 miles away. In the south Broward County area, there is no other alternative. There was no evidence of any cardiac catheterization facility in northern Dade County accessible to patients from southern Broward County with the exception of a newly granted certificate of need to Humana Biscayne. There was no evidence as to when Humana Biscayne will be open and providing services. In northern Broward County, there are five operating cardiac catheterization laboratories. The one closest to Hollywood Medical Center, Broward General Medical Center, is approximately 6 miles to the north. Rule 10-5.11(15)(1), F.A.C., establishes a method of projecting the number of cardiac catheterization procedures expected for the year in which the proposed new service would begin. This number is the product of the projected population for the service area and the number of procedures performed in 1981 in the service area for one hundred thousand population. HRS interprets this rule to require analysis based upon HRS district data. The HRS district in this case is district ten, which is Broward County. Once the projected number of procedures is determined, that number is divided by 600 to determine the number of catheterization laboratories needed. This number is derived from rule 10- 5.11(15)(o)3., which forbids approval of a new laboratory if the average volume for all laboratories in the service area drops below 600. HRS now argues that the number 600 is only a floor to protect existing providers, and is not to be used to compute need. In the normal computation of need under the rule, this is not true. Thomas Porter, supervisor of the certificate of need section at HRS calculated his Projections of need using 600 procedures per unit in the district as the means to determine the need for a new laboratory. Mr. Porter testified: "Well, in terms of what I would agree with is in terms of numerically determining the need for the number of labs, we divide by 600 procedures. . . . HRS based its denial of the certificate of need in this case by using a use rate for Broward County in 1981 of 329.5 procedures per one hundred thousand population. This use rate in turn was based upon a 1981 population of 1,046,646 and 3,449 procedures in the county for that year. Since the projected population for Broward County in 1986, two years from the date of the hearing, is 1,179,205, HRS concluded that by 1986 the county will need 6.475 laboratories, which rounds to 6. There are 5 licensed and operating laboratories now in Broward County, and 2 additional laboratories have been approved by HRS in the final order in PLANTATION GENERAL HOSPITAL v. HRS, et al., DOAH case number 84-1838, 6 FALR 6796 (1984). Using the method proposed by HRS to calculate need, there is no need for an additional laboratory as sought by Petitioner in this case. Petitioner's exhibit 4, table 5, computes the same formula set forth above, but uses a 1981 rate of 340 catheterization procedures per one hundred thousand. This rate is incorrect. On table 2 of this exhibit the actual procedures for each Broward County facility is recorded for 1981, and the total number of procedures has been incorrectly added. The correct total is 3,449, not 3,546, and the resultant rate (which is based upon a slightly lower estimate of 1981 population, 1,042,941) is 330.7 procedures per one hundred thousand. Correcting table 5 using the 330.7 rate, the need for cardiac catheterization laboratories is: YEAR DISTRICT 1985 6.3 1986 6.5 Thus, if the rule for determining need in a normal situation is followed, the record in this case shows no need for the catheterization facility proposed by the petitioner. Subpart 15(f) of the rule, however, allows approval of an application if the circumstances are other than normal, in which case approval can occur even though need is not shown by subpart 15(l) and 15(o), above, pertaining to calculation of need using the 1981 use rate, future population projections, and division by 600. Mr. Porter testified for HRS that the 1981 use rate has been a fairly accurate predictor of actual use rates in subsequent years, but that it has not yet been accurate in Broward County. In 1981 the use rate, as corrected above, was 329.5, accepting as true the HRS population estimate for Broward County in 1981. In 1982 the use rate was 393.6. This figure differs from Petitioner's exhibit 4, table 3, because the columns are incorrectly added on table 2. The correct total of procedures for 1982 is 4211. The correct total for 1983 is 5008. In 1983 the use rate was 457.9 using the 5008 figure. Thus, in two years, Broward County has increased its use of cardiac catheterization by 39 percent over the 1981 base rate. HRS argued that the 1981 planning rate should continue to be used because current data may be anomalous, and not reflective of the long range trend. This might be true if the base rate were reflective of a stable prior trend, but it is not. It is only the data from one year, and as such, is less persuasive as a predictor of the future. The trend for at least Broward County in the six years from 1977 is reflected in Petitioner's exhibit 4, table 3. In 1977, the use rate in Broward County was 174 procedures per one hundred thousand. The actual rate has increased steadily each year for six years to the rate indicated above for 1983, 457.9 per one hundred thousand. This is an increase from the 1977 rate of about 263 percent. At least in Broward County, this data indicates that the 1981 rate is probably not static, but is only a point on a trend that shows significant increases annually. There was partial evidence that the trend indicated above may be slowing down. Dr. Silvio Sperber, who is a cardiologist in charge of the cardiac catheterization laboratory at Memorial Hospital, testified that Memorial Hospital had had 673 cardiac catheterization procedures from January 1984 through September 1984. He testified that his laboratory was running about 15 percent fewer procedures than the year before. This was not accurate. From Petitioner's exhibit 4, table 2, Memorial Hospital experienced 942 procedures in 1983. By the end of September 1984, it should have experienced about 75 percent of that number at a zero rate of increase, or 706 procedures. Its actual experience in nine months, 673, is only 4.7 percent less than the 1983 expected number of 706.3. The Memorial Hospital experience in 1984 is some evidence that the rate of increase in Broward County may be less or even stabilize in the future at the 1983 utilization rate, but this is evidence from only one hospital. The other four operating laboratories may have experienced a similar decline, or an increase, but there is no evidence on the point. And in any event, Use small decline at Memorial does not persuasively indicate a return to the significantly lower 1981 Broward County rate. There was additional evidence to support the conclusion that the 1983 rate of use would not decline again to the 1981 rate. Atherosclerotic heart disease is the number one cause of death in the United States today. Cardiac catheterization is the best tool currently available for evaluation of the condition of the heart. From 1978 to 1982, Broward County has experienced a higher death rate for major cardiovascular disease than Florida as a whole. The death rate was 16.6 percent higher in Broward County in 1982 than in Florida generally. Additionally, cardiac catheterization seems to he coming more and more useful in the treatment of heart disease. Three years ago, when HRS established the 1981 base rate, catheterization was not considered a state-of- the-art procedure for treatment of an acute heart attack. Today, catheterization during the first few hours of a heart attack for the point injection of a clot dissolving substance, streptokinase, is proving to be a remarkably effective means of reducing the long-range damage of clot caused heart attacks. Further, use of catheterization during the attack itself has enabled physicians to see for the first time that most heart attacks are caused by clots. As good uses for catheterization increase, it is only reasonable to expect that the utilization rate will increase. While the foregoing is some evidence that application of subpart 15(l) and (o) of the rule in this case in Broward County produces a "not normal" result, justifying consideration of additional evidence of need, it still does not necessarily follow that the application herein should be granted. First, using the 1983 use rate of 457.9 procedures per one hundred thousand population, and the 1986 predicted population of 1,179,205 in Broward County, the number of expected procedures by 1986 is 5400. There will be 7 approved laboratories by 1986, and thus each would be able to perform approximately 771 procedures, if there is an even distribution within the county. This would be considerably less than approximate maximum capacity of a catheterization laboratory, which is somewhat less than 1300. Dr. Sperber testified that his laboratory could perform 5 procedures per day, 5 days a week, or 1300 per year. This, however, fails to account for emergency work and angioplasty, both of which take more than two hours. Angioplasty at Memorial now runs about 15 percent of all procedures. It is urged by petitioner that once the number of procedures is predicted for 1986, then the need for laboratories should be derived by dividing that number by 600, which is in subpart 15(o) of the rule. While this is the procedure for determining need in the normal case, as found above, it does not follow that the standard of 600 continues to apply to determine need in the abnormal case. The "not normal" exception of subpart 15(f) of the rule operates to except analysis of need not only from the 1981 use rate (subpart 15(l)), but also the 600 procedures standard (subpart 15(o)). Since the 600 standard is only about 50 percent of maximum capacity, it constitutes a rather low threshold number for commencement of a new laboratory. In effect, although the 1981 use rate apparently predicts only 72 percent of the need as compared to the 1983 rate, the 600 standard overpredicts need by at least the same amount. As indicated above, even if the 1983 use rate is used, the seven approved laboratories would be easily able to handle this need since the average spread among these laboratories would be about 771 procedures per laboratory. Though petitioner sought to show that there would be unmet need in the area actually served by Hollywood Medical Center, the evidence falls short of demonstrating a "not normal" situation of actual unmet need in that area justifying approval of its application. This evidence will be considered in the following findings. HRS does not consider district lines to be absolute if the facts justify consideration of services available in an adjacent district. In Broward County the local health council has debated the issue of dividing the district service area into subdistricts, but has not chosen to do so. Mr. Porter testified that he could think of as many reasons to divide the county as reasons not to divide the county. Broward County is divided north and south by the legislature into two hospital districts, however. As found above, physicians in the southern portion of Broward County tend to refer patients to hospitals in the same area, and do not use hospitals in northern Broward County. These physicians tend to use hospitals closer to their offices, and consequently do not usually have staff privileges at hospitals in the northern portion of the county. These patterns of use, however, have not been shown to be an immutable condition, but simply reflect current practices. Patients at Hollywood Medical Center who currently need cardiac catheterization are transferred to Memorial Hospital, a few miles away. Memorial Hospital is about a ten minute drive from Hollywood Medical Center. The cost of transfer is about 5300 to 5400. Although Hollywood Medical Center cardiac patients needing diagnostic catheterization at times must wait a day or two before Memorial can provide that service, such delays were not typically of major significance or life-threatening. A more significant problem experienced on occasion by Hollywood Medical Center has been inability to transfer unstable patients to Memorial for diagnostic catheterization. Acutely ill patients at times may need catheterization for diagnostic purposes, but are too ill to be transferred by ambulance to Memorial for the procedure. However, the record does not contain evidence of how frequently this occurs. In any event, these inconveniences are normal and expected where not every hospital has cardiac catheterization facilities. Stated another way, the above would be evidence of a "not normal" condition only if the normal condition was for all acute care hospitals to have catheterization laboratories, which is not the case. As discussed above, cardiac catheterization is also used for emergency treatment of heart attack by the injection of streptokinase directly to the clot causing the attack. Cardiac catheterization facilities must be available at the hospital initially receiving the heart attack patient because these patients are usually too unstable to be transferred from the emergency room of the receiving hospital to Memorial. Treatment by streptokinase injection is therapeutically most beneficial only in the first few hours of the heart attack, or at least within six hours of the emergency, because it is during this period that the permanent damage caused by the clot will occur. Dr. Stephen Roth, a cardiologist on the staff of Hollywood Medical Center, had from 5 to 10 heart attack patients in 1984 who needed streptokinase injection by catheterization, and who suffered a deterioration of their condition due to the unavailability of facilities for catheterization at Hollywood Medical Center. He implied that his two other partners had a similar experience, but the record does not contain competent evidence to support a finding as to the magnitude of the problem for them. Dr. Jeffrey Erlich, also a cardiologist, has had a similar problem of having heart attack patients arrive at Hollywood Medical Center in need of emergency streptokinase injection by catheterization, but did not testify as to the magnitude of the problem. In Dr. Erlich's opinion, every acute care hospital that treats heart attack victims should have a cardiac catheterization laboratory to provide emergency injection of streptokinase. Dr. Silvio Sperber, who is one of the only three physicians who run the cardiac catheterization facility at Memorial Hospital, testified that he had performed about 7 streptokinase injection procedures since the beginning of 1984. The foregoing is insufficient evidence of a "not normal" need for a cardiac catheterization laboratory at Hollywood Memorial Hospital. The number of emergencies are not that great, the problem is not atypical of other hospitals not having cardiac catheterization facilities, and there is no evidence of any failed efforts to have emergency vehicle operators take all heart attack patients directly to the available laboratories in the area. See paragraph 24, ahead. Administratively, the process of transferring a patient from Hollywood Medical Center to Memorial for cardiac catheterization causes the sort of problems normally associated with transfer of ill patients. Though the drive is only ten minutes, the time preparing the patient and actually transferring the patient is much longer, and is a hardship on the patient. However, almost all of the cardiologists at Hollywood Medical Center are on the staff of Memorial, and can follow their patients at that facility without much difficulty, since it is only ten minutes away. In 1983, Memorial Hospital had 942 catheterization procedures. If the 1984 experience continues at 4.7 percent less than 1983, Memorial Hospital will perform about 898 procedures. If thereafter it experiences only a 10 percent growth rate, Memorial Hospital will perform 1086 procedures in 1986, and 1195 procedures in 1987. It is reasonable to conclude that it will reach its maximum capacity in a few years, probably by 1988. However, although not currently used by Hollywood Medical Center, there are or will be two catheterization facilities within less than eight miles. Broward General Hospital is the next closest, apparently about six miles away. In 1983, Broward General performed only 551 procedures, indicating significant future capacity. Additionally, a new laboratory has been approved for Plantation General Hospital, about eight miles away. Since this laboratory will be new, it will have a long way to go before it reaches a 1200 capacity. The driving distance to these two other facilities may be a few miles more than this, but the distance is not significantly greater than Memorial. Although Petitioner's physicians testified that they did not consider the hospitals further north to be acceptable as alternatives to Memorial, the distance alone does not pose a significant problem. The major problem is not in the driving distance, as long as the trip is 10 or 20 minutes driving time, but the administrative preparation time at either end, which would be the same inconvenience for transportation regardless which alternative was used. Typically patients who suffer a heart attack are transported to the emergency rooms of any number of hospitals in Broward County. Dr. Erlich testified that his prior patients do not usually call him before arriving at a hospital, and that he has no ability to direct his patients to a hospital having cardiac catheterization capability. Thus, he felt that all such hospitals should have the capability. There is no evidence that Memorial Hospital could not handle more heart attack patients, or that emergency vehicle operators could not transport more heart attack patients to Memorial. An ambulance carrying a heart attack patient could just as easily arrive at the emergency room of Memorial than it could at Hollywood Medical Center, only ten minutes away. The problem of having heart attack patients arrive in an unstable condition at Hollywood, where there is no catheterization facility, ought to be solved at least in part by greater coordination with emergency vehicle operators in the vicinity of the two hospitals. Dr. Sperber and his two partners apparently have a monopoly over the performance of cardiac catheterization procedures at Memorial Hospital. This factor is somewhat relevant to the issue of need for the proposed new catheterization laboratory, but absent additional evidence that patients will in fact be denied the service, or will receive service of poor quality or at unreasonable expense due to this apparent monopoly, this one factor alone does not show sufficient need to warrant approval of the application. Some patients prefer to go to Hollywood Medical Center, which is a smaller, for-profit hospital, but patient preference of this sort does not show a "not normal" need for the proposed catheterization laboratory. Based upon all of the foregoing, there is not sufficient evidence on this record demonstrating a "not normal" condition of need by 1986 to justify granting this application. However, if there were a need shown by the evidence, the following additional findings are made. Thomas Porter testified for HRS that the requirement that there be adequate care for indigents is satisfied if such care is provided by the District as a whole, and that there was no question that indigents were adequately served in District X. Petitioner will provide cardiac catheterization for indigents only on an emergency basis, and will rely upon Memorial to provide other indigent care. Based upon the testimony of Mr. Porter, the criteria with respect to indigent care, rule 10- 5.11(15)(h)3, F.A.C., has been satisfied. Since nearly all of the cardiologists on the staff of Hollywood Medical Center are also on the staff of Memorial Hospital, it is probable that Hollywood Medical Center would do a substantial number of catheterization procedures in the first year of operation, which is projected to be 1986. By the third year of operation, 1989, the Hollywood Medical Center facility would satisfy the requirement of rule 10-5.11(15)(i)4, F.A.C., that it annually perform at least 300 procedures within three years of initiation of service. For these limited purposes it is appropriate to consider the proximate population served, since this population is the most reliable source of patients and revenue. Most of the patients for the Hollywood Medical Center catheterization laboratory will come from its current actual service area, which was defined by the evidence to be a region in southern Broward County. Given the shared cardiologist staffing at both hospitals, it is not at all unreasonable to project that Hollywood Medical Center will service 30 percent of the need in the southern region of Broward County. Based on the 1983 Broward use rate, Hollywood Medical Center would do 518 catheterizations in 1989 if it handled only 30 percent of the need. Memorial would handle the remaining 70 percent, doing 1207 procedures annually. Even using the lower 1981 use rate provided by HRS, 329.5 per 100,000, Hollywood Medical Center would do 372 procedures in 1989, using the assumed market share of 30 percent. (As noted above, however, these figures do not demonstrate need, however, since existing facilities will be able to serve this same population adequately.) As already found above in calculation of need, rule 10- 5.11(15)(o)1 and 3, F.A.C., is satisfied if the 1983 use rate is used. Beginning with 1986, and in every year thereafter, there will be enough catheterization procedures needed so that the average volume for all facilities in the district will be at least 600 annually. HRS stipulated that if all other criteria were satisfied, the project proposed by Petitioner would be financially feasible. From the foregoing findings, all other criteria in dispute have been satisfied, and the project would be financially feasible. All other findings of fact proposed by the parties which have not been discussed above have been considered and have been deemed to be irrelevant.
The Issue The basic issue in this case is whether Deering Hospital's application for a certificate of need to operate an inpatient cardiac catheterization program should be granted or denied.
Findings Of Fact Deering Hospital, formerly known as Coral Reef Hospital, is located at 9333 Southwest 152nd Street, Miami, Florida, in HRS District 11, Dade County. Deering Hospital has a total of 260 beds: 170 medical/surgical, 54 adult psychiatric, 16 adolescent and child psychiatric and 20 substance abuse beds. It is an acute care hospital. Deering's primary geographic service area is north to the town of Kendall, west to the Everglades, east to Biscayne Bay and south to 232nd Street. The secondary service area is south to the Florida Keys. Deering's primary service is defined by 62 percent of its admissions, its secondary service area by 17 percent, and all other areas, including North Monroe County, comprise 21 percent of all its admissions. Competitors in Deering's primary and secondary service areas include Kendall Regional Medical Center, Baptist Hospital, South Miami Hospital, and South Miami-Homestead Hospital, which was previously called James Archer Smith Hospital. These hospitals have shared a service area as long as they all have existed. South Miami-Homestead Hospital does not have a cardiac catheterization laboratory. Deering is within 30 minutes travel time of three full service cardiac catheterization programs located in facilities with open heart surgery, including two of the challengers to its application. On June 18, 1990 South Dade Health Care Group, Ltd., was formed in order to acquire Coral Reef Hospital. South Dade Health Care Group, Ltd., at the time of the application was and is currently licensed by HRS to operate Deering Hospital. Columbia Hospital Corporation of South Dade ("Columbia') is the general partner of South Dade Health Care Group, Ltd. Columbia, acting on behalf of South Dade Health Care Group, Ltd., acquired Coral Reef on September 26, 1990. Coral Reef changed its name to Deering Hospital on April 2, 1991. Deering's CON application in this batch cycle was submitted on March 25, 1991. The June 18, 1990, audited balance sheet for South Dade Health Care Group, Inc., was prepared for a development stage enterprise and is an audit of costs to start up the hospital after the acquisition by Columbia. The December 31, 1990, audit covers a 97 day period from September 26, 1990, (date of acquisition) to December 31, 1990, and included development and organizational costs. Since the applicant/entity/licensee did not exist before June 18, 1990, and the hospital was not acquired by that entity before September 26, 1992, there are no other financial statements that could have been prepared before the Deering application was submitted on March 25, 1991. South Dade Health Care, Group, Ltd., submitted a timely and valid letter of intent and a timely application for Certificate of Need ("CON") 6664 to provide in the July 1993 planning horizon inpatient cardiac catheterization services at Deering Hospital. South Dade Health Care Group, Ltd., and Columbia have authorized Deering Hospital's participation in this case. The capital projects list in the application is complete. When Deering was purchased by Columbia in 1990, Deering had a special procedure room that was apparently equipped and had the capacity to provide diagnostic coronary catheterizations as well as peripheral (i.e., the extremities) vascular diagnostic and therapeutic procedures. Although outpatient catheterizations had been performed in the special procedure room in the past, none were being done when Columbia acquired the hospital in September 1990. In late 1990, following evaluation of the equipment, Deering recruited an experienced CCRN cardiac catheterization laboratory nurse, hired a qualified CV tech, and began offering outpatient cardiac catheterization services. The decision to begin outpatient cardiac catheterization services was based in part on the idea that there would be no capital costs since the equipment to perform the procedures already existed. In December of 1990, the existing outpatient cardiac catheterization laboratory did about nine procedures and experienced some equipment failures. As a result of the equipment failures, Deering temporarily stopped doing outpatient cardiac catheterization, but was able to continue doing special procedures (vascular and arterial catheterizations, not coronary) in the room. After exploring various possibilities, Deering entered into a lease to obtain new equipment for its existing outpatient cardiac catheterization laboratory and signed a renewal lease to continue the lease of the equipment that was already in the outpatient laboratory. In January of 1992 the hospital resumed doing outpatient cardiac catheterization procedures and ten outpatient cardiac catheterizations have been performed in the room since January 31, 1992. From 1985 through April of 1991 the Deering outpatient cardiac catheterization program has done a total of twenty-nine outpatient procedures. The lab was closed temporarily to outpatient cardiac catheterization procedures from March 1991 through January 1992 in order to bring in new equipment. The hospital has been diligent and persistent, from the date Deering was acquired by Columbia to the present, in its efforts to maintain and enhance its outpatient cardiac catheterization program. Currently, however, if a Deering inpatient needs a cardiac catheterization, that patient must be taken past an active outpatient catheterization laboratory at Deering, only to be transferred to another hospital with an inpatient cardiac catheterization certificate of need. In health planning, it is generally desirable to use existing facilities and equipment to do additional procedures. By its application in this case, Deering proposes to use its existing outpatient cardiac catheterization laboratory to perform inpatient cardiac catheterization. For calendar year 1991, about 50 cardiac catheterization inpatients were transferred from Deering to other hospitals. Patients requiring inpatient cardiac catheterization or open heart are transferred from Deering to South Miami Hospital, Baptist Hospital, or Kendall Regional Medical Center. At Deering the spatial relationships between the existing outpatient cardiac catheterization laboratory and related services such as telemetry and intensive care appear to be adequate. Deering has 16 telemetry beds and they can be easily increased if needed. An uncomplicated inpatient cardiac catheterization typically results in one day in telemetry. Deering has ample capacity for over 300 additional telemetry patient days. At Deering the intensive care unit and the coronary care unit are collectively referred to as the critical care service (CCS). Deering has 14 CCS beds where a patient can be directly connected to a cardiovascular monitor allowing monitoring of any clinical changes. The current CCS average daily census is ten (10). Deering's application is not by or on behalf of an HMO. No evidence was presented to show that HMO's in District 11 have unmet cardiac catheterization needs or that Deering's application would fulfill any needs of HMO's. To the contrary, HMO's have a tendency to prefer cardiac catheterization services at facilities with open heart surgery. Typically an uncomplicated diagnostic cardiac catheterization does not require a CCS stay. Even if 50 percent of Deering's cardiac catheterization inpatients required CCS during their stay, Deering has the capacity to accommodate the 150 additional CCS patients annually. The physical space which comprises the existing outpatient cardiac catheterization laboratory is clinically adequate in its current configuration to facilitate communication during the procedure and time savings. The dark room, computer room and procedure room are all adjunct. There are no medical or clinical reasons why the space is not adequate. According to the medical director, who has extensive experience at other hospitals and who has performed outpatient cardiac catheterizations in Deering's procedure room, Deering's procedure room is more than adequate for performing inpatient cardiac catheterization. If the inpatient certificate of need is granted, the procedure room where outpatient catheterizations are currently performed will continue to be a mixed used room, i.e., peripheral angioplasties and coronary catheterizations will be scheduled in the same room. Deering Hospital is JCAHO accredited. It received a three year accreditation in 1991. The laboratory currently used for outpatient procedures was surveyed by JCAHO as a special procedure room. Deering has never been cited in any JCAHO or HRS licensure survey for any inadequacy in life, safety, or fire codes in the outpatient cardiac catheterization special procedure room. Deering currently has all of the equipment, staff and ancillary services described in, and required by, the applicable rule. Deering has two physicians on staff that serve and are compensated as co-directors of the existing outpatient cardiac catheterization laboratory. Dr. Palomo is co-medical director of the existing outpatient cardiac catheterization program and will be co-medical director of the inpatient program if the program is approved. Dr. Palomo is Board certified in internal medicine and Board certified in cardiovascular diseases. He was previously an assistant professor of medicine at the University of Miami and ran the cardiac catheterization lab at the Veteran's hospital in Miami. Last year Dr. Palomo performed 300 cardiac catheterizations in the Miami area. Dr. Palomo has cardiology staff privileges at six Miami hospitals, including two of the challengers to this application, Baptist Hospital and South Miami Hospital. He lives ten minutes from Deering Hospital and his office is located eight minutes from Deering. There is no industry standard for credentialing cardiac catheterization laboratory nurses, but it is generally agreed that all cardiac catheterization personnel should be ACLS trained. All Deering nurses who are cross-trained for the cardiac catheterization laboratory are ACLS certified. Deering has also cross-trained an ECHOvascular technician into the scrub roll in the laboratory. All current cardiac catheterization laboratory staff and all cross-trained cardiac catheterization laboratory staff are already full time Deering employees. Current staff can accommodate the projected volume of inpatient cardiac catheterizations and the current rate of peripheral and outpatient catheterizations. If awarded the service, Deering would be able to implement the service the day of the award. The current staff is adequate regardless of whether they are performing an inpatient, outpatient, or peripheral procedure. The staffing of the inpatient lab would be the same as the current outpatient laboratory; i.e., a physician, RN and a CVT. There would not be any need to add staff if the number of procedures increased between 300 and 1,000 annually. Accordingly, Deering does not intend to recruit additional professional personnel from the local market. The capacity of Deering's existing laboratory, when used for inpatient cardiac catheterization procedures, can conservatively be calculated as follows: 1 hour from arrival at the procedure room to departure from the procedure room, times an 8 hour day, times a 5 day week, times 52 weeks a year equals 2,080 case theoretical capacity. One-half that theoretical capacity is four cases a day or 1,040 cases a year. A cardiac catheterization laboratory can typically do between 1,000 and 1,500 cases per year. Four cases per day (1,040 cases per year) is a reasonable number to express the capacity of Deering's existing laboratory to accommodate inpatient procedures with current space, equipment and staff. The existing inpatient cardiac catheterization laboratories in District 11 have similar capacities. With additional staffing, Deering or any of the existing laboratories might have even greater capacities. If granted inpatient cardiac catheterization services, Deering would not do coronary angioplasties because it does not have open heart surgery in the same facility. Deering maintains transfer agreements with other facilities for services that Deering does not provide. Deering has developed an adequate protocol outlining how an open heart or angioplasty backup patient would be transferred. Deering has established medically appropriate criteria for granting and maintaining privileges in its outpatient cardiac catheterization laboratory that would be suitable for the proposed inpatient cardiac catheterization program. Deering has developed adequate and appropriate forms to manage its patient care in the outpatient program which would be suitable for the inpatient program. Deering has developed clinically adequate and appropriate protocols for temporary pacemaking, recording hemodynamic data, and insuring the emergency availability of staff in the cardiac catheterization laboratory. Deering has a policy and procedures statement to orient new employees to the cardiac catheterization laboratory. Generally, there is no alternative to cardiac catheterization when catheterization is medically indicated. However, there are alternatives to Deering's application, such as allowing existing providers to achieve efficient levels of utilization. Deering is not proposing joint, shared, or cooperative health care services. Deering is not proposing to provide services for research or teaching purposes. Deering does not propose to provide a substantial portion of its services to individuals not residing in the service district. Indeed, inpatient cardiac catheterization services are readily available in adjoining service areas. Deering is not proposing any new construction in its application. Deering is not proposing to add nursing home beds. No service reductions will occur as a result of this proposal. Financial feasibility of a project means the project can be accomplished within the financial resources of the overall institution. Short- term financial feasibility means the applicant can cover the start-up project costs. Long-term financial feasibility means the project will generate a surplus of operating revenue over operating expenses within two years. The proposed project would most likely be financially feasible in the short and long-term, even though (for reasons addressed below) it is unlikely to achieve the results projected in the pro formas. This is because Deering is already operating an outpatient cardiac catheterization laboratory and would have very little additional expense if it began performing inpatient cardiac catheterizations using the existing staff and the existing equipment. If the project were to be approved, the hospital as a whole would probably have a positive cash flow in the first and second year, because with a mere four or five inpatient procedures it would recover the additional costs associated with converting the existing outpatient lab to an inpatient lab. A contribution margin is the difference between the variable expenses and variable revenues on a per unit basis or in the aggregate. For additional inpatient cardiac catheterization services on a per case basis, Deering projects a positive contribution margin of $2,500 per procedure. This is similar to the contribution margins of other hospitals performing inpatient cardiac catheterizations in Deering's service area. Break-even analysis determines how many procedures must be done before incremental fixed costs are covered. Since incremental fixed costs are $10,000, after only 4 or 5 inpatient procedures the service would break-even. For a number of reasons mentioned below, it is very unlikely that Deering would be able to achieve its projected utilization levels. Specifically, it is unlikely that Deering would be able to achieve a utilization level of 300 admissions per year by the end of its second year of operation. The analysis on which Deering bases its much higher utilization projections appears to be flawed in several respects and is also contrary to reasonable expectations based on the average historical performance of diagnostic-only cardiac catheterization programs in District 11. In an effort to demonstrate that Deering would perform in excess of 300 procedures per year, Deering's health planning expert, undertook the following analysis: The number of MDC-5 (circulatory diagnoses) at Deering in 1990 was approximately 750. It was assumed, from data in the Winslow report and the Dade County actual data that one third of the MDC-5 admissions would receive a cardiac catheterization. Multiplying 750 times one third results in 250 admissions at Deering who would receive a catheterization, or approximately 20 per month. Because some people would refuse to have a catheterization, or would undergo it at another facility, it was assumed that 17 patients per month, or approximately 195 per year, would be cathed at Deering in the first year of operations. It was assumed that the growth at Deering between year one and year two of operations at Deering would be equal to the projected growth in catheterizations in Dade County between July, 1989 and January, 1994. It was assumed that all of the cases projected above would be inpatients. Based on this analysis, it was projected that Deering would be able to do in excess of 300 cases per year starting in its second year of operations. The greater weight of the evidence indicates that this methodology suffers from a number of flaws. The "one third" factor applied in step 2, above, is erroneous and was incorrectly applied even if correct. The Winslow paper provides no support for the proposition that one third of all MDC-5 admissions will require catheterization. The actual statistic from Dade County is that all inpatient catheterizations, including those done in anticipation of open heart surgery and for angioplasty, constitute 21 percent of the number of MDC-5 admissions. Of the catheterizations done in Dade County, 9 percent (1,382 catheterizations out of a total of 16,155) were performed in conjunction with open heart surgery and 16 percent (2,700 of 16,155) were angioplasties. Because Deering will be unable to do either open heart surgery or angioplasty, a full 25 percent of the catheterization case load is unavailable there. Applying the 21 percent factor (percent of actual inpatient catheterizations to MDC-5 admissions) would result in 158 potential catheterizations. Dropping out 25 percent of those (the percent requiring open heart surgery and angioplasty) results in 118 potential cases. Using then the 85 percent figure (to reflect those who refuse to be catheterized or must go elsewhere because of managed care agreements, etc.) leaves approximately 100 inpatient cases in the first year, or roughly half of what Deering projects. There is no persuasive support for the idea advanced by Deering that its growth between year one and year two of operations would be the same rate of growth that all Dade County providers experienced between 1989 and 1994. To the contrary, such an experience is most unlikely. First, the projected rate of growth assumes that Dade County's use rate will continue at the same rate. This is optimistic. Second, it assumes that Deering will reflect the growth in the number of cardiac catheterizations in Dade County even though it is only providing diagnostic catheterizations (i.e. no angioplasties or catheterizations during open heart surgery). Finally, it assumes that Deering's rate in providing cardiac catheterizations will be the same as four and one half years experience in Dade County. If the actual annual rate of increase in Dade County were applied to Deering's own projected first year utilization, it would still only be likely to do 230 cases in the second year. The actual number of patients transferred from Deering for inpatient catheterizations plus its actual number of outpatient procedures provides a more accurate guide to the number of cases Deering could be expected to do. Based upon these figures, Deering might be expected to do between 70 and 150 cases the first year and less than 200 the second. One assumption made by Deering to support its utilization projections was that there would be a growth in the utilization of cardiovascular services at Deering. The historical use pattern at Deering fails to reveal any trend that would suggest such an increase. According to data reported to the HCCCB, there was an overall decline in the number of intensive care days at Deering between 1985 and 1991. Similarly, emergency room visits have also declined during the same period. Emergency room admissions account for 60 percent of all admissions to Deering. As a result, the total number of patient days at Deering has declined from 47,089 in 1985 to 40,975 in 1991. Thus, although Deering is projecting a large increase in utilization to project satisfactory utilization of its proposed laboratory, the historical record does not support that record. According to Deering, indicators of cardiac volume include the following services: EKGs; echocardiograms; holter monitors; treadmills; pulmonary function tests; thallium exams; and, coagulation studies. According to data presented by Deering, none of those "cardiac volume indicators" showed an increase in utilization between 1988 and 1990. In its financial analysis, Deering assumed that all of the 195 procedures in the first year and all 360 in the second year would be inpatient procedures. In Dade County for the 12 months ending September 30, 1991, 39 percent of all catheterizations were done on an outpatient basis (6,240 outpatient procedures out of 16,165 total cases). That percentage would be even higher at facilities that are unable to provide open heart surgery. (For example, currently 80 percent of the cardiac catheterization procedures at Doctors' Hospital are outpatient procedures.) In all of Florida approximately 50 percent of all cardiac catheterizations are inpatient. The trend in Dade County, in Florida, and nationally is that the number, and percentage, of outpatient procedures is increasing. The significance of this fact as it relates to Deering's financial projections is that Deering did not make any adjustment in its utilization projections to account for outpatient utilization and projected the pro formas by assuming that income associated with each case would be the income associated with a full inpatient admission. Thus, the pro forma projections are overstated to the extent that the projected procedures will actually be performed on an outpatient basis. At least 35 percent of Deering's procedures are likely to be on an outpatient basis with the trend indicating that outpatient utilization will actually be much higher. In projecting the average length of stay to be attributed to each inpatient catheterization at Deering, it was assumed that it would be the same length of stay as the District 11 average. The District 11 average includes the average inpatient stay associated with open heart surgery, which is much longer than for a routine diagnostic catheterization. Thus, Deering has overstated its projected average length of stay. In addition, the average length of stay for inpatient catheterizations has been dropping. This compounds the extent to which the number of inpatient days associated with catheterizations has been overstated in Deering's pro formas. One assumption in Deering's financial analysis is that patient days at Deering would increase at the same rate as the population increase in Dade County. This assumption finds no support in the evidence presented at hearing. In fact, it was demonstrated that the actual number of patient days have been declining at Deering since 1985. In 1985, Deering has 47,089 patient days; in 1991 it had 40,975 patient days, a drop of 13 percent. This drop occurred even though Dade County has had continuous steady growth. The financial assumption that Deering's inpatient days will grow at the same rate as the population as a whole is found to be unsupported. One reality check of Deering's projection that it will perform in excess of 300 procedures in its second year of operations is to measure its proposed "capture rate" against that of the other hospitals it will be competing against. In 1990 there were a total of 491 cardiac catheterizations performed on patients who reside in Deering's primary service area. Of these, Baptist, which is a full service provider, was able to capture only 203 cases, or 41 percent. If Deering, with one catheterization lab which is also used to do peripheral procedures, were to capture 300 procedures from its primary service area, this would represent in excess of 60 percent of the procedures from that area, or one and one half times better than Baptist is able to do with a full service catheterization facility, three dedicated catheterization laboratories, four full catheterization teams, and angioplasty and open heart capabilities. It is most unlikely that Deering can achieve such a projection. Deering proposes to provide a diagnostic-only program. Of the 13 cardiac catheterization programs in Dade County, nine are traditional and four are diagnostic-only. The diagnostic-only laboratories in District 11 have historically operated at significantly lower volumes than the laboratories in facilities with open heart surgery. During calendar year 1991 the four diagnostic-only providers performed the following number of procedures: Doctors' Hospital 301 Humana Hospital-Biscayne 55 Palmetto General Hospital 432 Parkway Regional Med. Center 262 TOTAL 1050 The total of 1050 procedures constitutes an average of 262.5 procedures for each of the four existing providers. If this pool of 1050 procedures were to be divided five ways to accommodate a new provider, there would be an average of 210 procedures per diagnostic-only provider. It would require an increase of almost 50 percent in the number of procedures being done by diagnostic-only laboratories for five such laboratories to be performing an average of 300 procedures per year. This is yet another reason for which it is most unlikely that Deering would achieve the utilization levels it projects. There appears to have been little physician acceptance of the outpatient catheterization laboratory at Deering. From 1985 through the date of hearing, Deering only performed 29 cardiac catheterizations. Dr. Palomo is the medical director of the Deering cardiac catheterization laboratory. One of his duties as medical director is "promoting" the laboratory. In 1992, through June 16, Dr. Palomo performed only two or three cardiac catheterizations at Deering; in calendar year 1991, he did four to six cardiac catheterizations at Deering. Dr. Palomo does approximately 300 catheterizations per year. It is unlikely that Deering will perform over 300 catheterization cases per year when its own medical director is doing less than 2 percent of his cases there. South Miami is an acute care hospital located in Dade County. South Miami has a open cardiac catheterization program which means any physician within the community can apply for privileges, and, if granted, perform cardiac catheterizations at South Miami. Until recently, it was a closed program. Baptist is a large, full service acute care hospital located in South Miami, Dade County, District 11. Baptist provides a full array of cardiac services at its Miami Vascular Institute. These include cardiac catheterization, open heart surgery, and angioplasty. Baptist is within the primary service area of Deering. It is approximately eight minutes drive from Deering. Deering currently transfers its cases needing inpatient catheterizations to other hospitals, including Baptist. If Deering were to be approved, and if it were able to perform 360 cases in its second year of operations as it projects, it would most likely be performing something in the neighborhood of 150 cases that otherwise would have been done at Baptist. 3/ This was calculated as follows: There were a total of 491 catheteriza- tions performed in 1990 on patients residing in Deering's primary service area. Of those 491 cases, Baptist performed the catheterizations for 203 patients. If Deering were to perform 360 inpatient catheterizations in its second year of operations, it is projected that Baptist would lose cases in the same relation as its current market penetration, i.e. 41 percent. This equates to 149 cases. This methodology presents a reasonable projection of the number of cases that Baptist would be likely to lose if Deering's application for inpatient cardiac catheterization were approved and Deering were able to achieve its projected utilization levels. Baptist has a contribution margin of approximately $2,560 per cardiac catheterization. This figure is the average revenue per case less the variable costs per case. Using the methodology described above, it is projected that the net annual loss at Baptist, if Deering were approved, would be in the neighborhood of $380,000.00. If Deering were to achieve its projected utilization levels, it is likely that it would also be performing a substantial number of cases that otherwise would have gone to South Miami Hospital or one of the other nearby existing providers. Doctors' Hospital is a 255-bed acute care hospital located in Coral Gables, Dade County, Florida. Doctors' has had a cardiac catheterization program since December of 1986, and is authorized to perform diagnostic catheterization on both inpatients and outpatients. With its current staffing compliment, the Doctors' cardiac catheterization laboratory could comfortably perform four catheterizations per day or between 800 and 900 per year. Doctors' performs cardiac catheterization on all patients regardless of ability to pay. Since 1988, the Doctors' cardiac catheterization laboratory has experienced declining utilization. The following chart represents the utilization of Doctors' cardiac catheterization laboratory since 1988: TOTAL INPATIENT AND CALENDAR YEAR OUTPATIENT CARDIAC CATHS 1988 484 1989 400 1990 380 1991 295 1992 240 (estimated) The Doctors' inpatient cardiac catheterization program is at a crossroads. The current volume is well below the minimum quality threshold which is acceptable for cardiac catheterization laboratories. In its early years of operation, the Doctors' cardiac catheterization laboratory generated a profit. Such is no longer the case. Several factors have resulted in the declining utilization of Doctors' cardiac catheterization laboratory. One of the factors is that more of the existing laboratories have become open staff versus closed staff. Doctors' laboratory has always had an open staff policy. At the time that Doctors' established its cardiac catheterization laboratory, it was one of only two that had an open staff policy. Another factor in the decline of utilization at Doctors' has been a shift from inpatient to outpatient cardiac catheterization. Therefore, the opening of outpatient-only cardiac catheterization laboratories, including the one at Deering, has resulted in a reduction in the number of outpatient cardiac catheterization procedures done at Doctors'. Doctors' does not offer angioplasty or open heart surgery. Doctors' diagnostic-only cardiac catheterization capability has contributed to its declining utilization since Doctors' is unable to compete with full service hospitals for cardiac catheterization patients that require the services of a full service hospital. Another factor which has resulted in the decline in utilization at the Doctors' cardiac catheterization laboratory is a change in HMO service patterns to facilities that can provide full-service cardiology services, including cardiac catheterization, angioplasty, and open heart surgery. The primary reason Doctors' Hospital catheterization laboratory is now losing money is its decrease in utilization. As utilization of a cardiac catheterization laboratory declines, the per unit cost of providing a catheterization increases. Based upon the current market share of inpatient cardiac catheterization patients in District 11, and assuming Deering would be able to achieve its projected year two utilization of 360 new inpatient cardiac catheterization patients, a small number of those patients probably would have otherwise gone to Doctors' Hospital. Because of the declining utilization at the Doctors' cardiac catheterization laboratory, and the fact that its program is not co-located with open heart surgery, the loss of even a small number of patients may be significant to the future viability of the cardiac catheterization program at Doctors' Hospital. If the Deering inpatient program were to be approved, both the Deering and Doctors' programs would likely be low volume programs operating at utilization levels well below the minimum for maintaining quality standards and well below the minimum for economic efficiency. There are 13 providers of inpatient cardiac catheterization services in Dade County which operate a total of 24 catheterization laboratories. These providers are geographically well dispersed in the population centers of the county. The existing inpatient cardiac catheterization providers in District 11 are available, provide high quality care, are appropriate, and are accessible. In District 11 there is an ample excess capacity to provide additional inpatient cardiac catheterizations at existing facilities. The existing catheterization laboratories are not producing sufficient numbers of cases to be operating efficiently. The practical capacity of a typical catheterization laboratory is somewhere between 1,000 and 1,500 cases per year. Given that there are 24 existing catheterization laboratories and four more expected to come on line soon, the existing providers are operating at approximately half of their capacity. These programs have not reached a level of optimal efficiency in terms of operations. Optimal efficiency for health planning purposes should be measured at a level of approximately 80 or 85 percent of capacity. The economic efficiency of the existing providers of inpatient cardiac catheterization would be enhanced if new entries into the market were precluded until existing providers were operating at approximately 80 or 85 percent of their practical capacity. It is well accepted in health planning that a catheterization laboratory must perform at least 300 cases per year in order to maintain proficiency and quality. There appears to be a relative correlation between the number of cases performed in a laboratory and the skill of the staff. In District 11, HMO's and PPO's have shifted their service patterns to facilities that can provide full cardiac services including angioplasty and open heart surgery. The shift in use patterns has had a significant effect on cardiac catheterization laboratories unable to provide angioplasty and open heart surgery. This effect would likely be felt at Deering Hospital if its inpatient lab were approved and supports the conclusion that Deering, as a provider of diagnostic catheterizations only, would be unlikely to achieve its utilization projections. Cardiac catheterization services are highly competitive in District As such, the approval of Deering's application will have little beneficial improvement by way of increased competition. Additionally, the trend in District 11 is for third party payers to contract for the provision of cardiac services at full service providers. As such, Deering would be unable to effectively compete with the nine full service providers of which three, Baptist, South Miami, and Kendall, are in Deering's primary service area. There is no evidence that any patient has had, or is likely to have, problems accessing inpatient catheterization services if this proposal is not approved. The geographic access standard contained in the applicable rule is met by the existing providers. Additionally, none of the programs or doctors have been unable to schedule catheterizations because of heavy utilization at any District 11 catheterization provider. Accordingly, patients are not likely to experience any difficulty in accessing inpatient cardiac catheterization services if Deering's application is denied. Currently and historically, cardiac catheterization has been regulated by HRS as an inpatient institutional health service, not a tertiary service. On February 8, 1991, HRS published official notice of the need for one more inpatient cardiac catheterization program in District 11 for the 1993 planning horizon, calculated in accordance with the methodology in the applicable rule. The fixed need pool in this case was never challenged by Petitioners. The projected number of procedures by population in the planning horizon using the methodology in Joint Exhibit 1 and actual data collected by HRS show that there are enough procedures in the marketplace for Deering to perform 300 in the second year of operation and for the protestants in this case to maintain their annual current volumes. However, major portions of that rule- based methodology have been found to be invalid in the Final Order issued this same day in the related rule challenge cases.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that a Final Order be issued in this case denying the subject certificate of need application. DONE AND ENTERED this 1st day of April, 1994, at Tallahassee, Leon County, Florida. MICHAEL M. PARRISH, 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 1st day of April, 1994.
The Issue The issue in these cases is whether certain rules proposed by the Agency for Health Care Administration (AHCA) related to adult interventional cardiovascular services are an invalid exercise of delegated legislative authority.
Findings Of Fact By stipulation of the parties, all Petitioners and Intervenors in these cases are acute care hospitals licensed in Florida pursuant to Chapter 395, Florida Statutes; are substantially affected by the proposed rules at issue in these cases; and have standing to participate in this proceeding. AHCA is the state agency responsible for licensure of hospitals pursuant to Chapter 395, Florida Statutes, and responsible for promulgation of the proposed rules at issue in these cases. This dispute specifically involves proposed rules related to the licensure of adult cardiovascular services in Florida hospitals. Such services include percutaneous cardiac intervention (PCI), also referred to as percutaneous transluminal coronary angioplasty (PCTA). PCI involves the insertion of a device placed into an artery and directed to the site of a coronary artery blockage. The device is used to compress or remove the blockage material and restore arterial blood flow to heart tissue. A mechanism called a "stent" may be left in place at the site of the former blockage to reduce the potential for re-blockage ("restenosis") of the artery. The procedure is performed in a cardiac catheterization laboratory ("cath lab"). PCI that is performed on an emergency basis to open an arterial blockage causing myocardial infarction (heart attack) is referred to as "primary" or "emergent" PCI. PCI performed to resolve symptoms of coronary artery disease manifesting in presentations other than through myocardial infarction is referred to as "elective" PCI. Previous law restricted PCI services to those hospitals with onsite cardiac surgery (commonly referred to as "open heart" surgery). Hospitals are required to obtain a Certificate of Need (CON) from AHCA to operate a cardiac surgery program. Accordingly, in order to offer PCI services, a hospital was required to obtain a cardiac surgery program CON from AHCA. As cardiac catheterization procedures have become more widely available and physician training and experience have increased, the relative safety of the procedures has improved. The volume of open heart cardiac surgery has declined as the patient outcomes for non-surgical coronary artery disease treatments have improved, yet Florida hospitals seeking to provide PCI were still operating under the CON-based restrictions. There is an ongoing debate within the medical community related to the issue of whether non-emergent patients should receive PCI services at hospitals which lack cardiac surgery programs. The historic rationale for restricting the availability of elective PCI procedures to hospitals where onsite cardiac surgery was also available was related to the possibility that an unsuccessful PCI would require immediate resolution through surgery. The evidence establishes that PCI-related events requiring immediate access to onsite cardiac surgery have become less frequent, at least in part due to increased training and experience of practitioners, as well as an increased technical ability to resolve some events, such as arterial ruptures or perforations, within the cath lab. Nonetheless, there is also evidence that the outcomes of cardiac catheterization procedures performed in hospitals with onsite cardiac surgery may be superior to those performed in hospitals where onsite cardiac surgery is not available. In 2004, the Florida Legislature adopted two bills that, insofar as are relevant to this proceeding, had an impact on the regulatory process related to adult interventional cardiovascular services. The effect of the legislation was to shift the regulation of PCI programs away from CON-based restrictions and towards a licensing process. Both bills established a two-level classification of hospitals providing adult interventional cardiology services. House Bill 329 limited the provision of PCI at hospitals without onsite cardiac surgery to emergent patients and provided, in relevant part, as follows: In establishing rules for adult interventional cardiology services, the agency shall include provisions that allow for: Establishment of two hospital program licensure levels: a Level I program authorizing the performance of adult primary percutaneous cardiac intervention for emergent patients without onsite cardiac surgery and a Level II program authorizing the performance of percutaneous cardiac intervention with onsite cardiac surgery. (Emphasis supplied) Senate Bill 182 did not limit PCI services on the basis of onsite cardiac surgery availability and provided, in relevant part, as follows: Section 2. Notwithstanding conflicting provisions in House Bill 329, Section 408.0361, Florida Statutes, is amended to read: * * * In establishing rules for adult interventional cardiology services, the agency shall include provisions that allow for: Establishment of two hospital program licensure levels: a Level I program authorizing the performance of adult percutaneous cardiac intervention without onsite cardiac surgery and a Level II program authorizing the performance of percutaneous cardiac intervention with onsite cardiac surgery. (Emphasis added) Both the House Bill and the Senate Bill were signed into law. The legislation was codified as Section 408.0361, Florida Statutes (2004), which provided, in relevant part, as follows: 408.0361 Cardiology services and burn unit licensure.-- * * * In establishing rules for adult interventional cardiology services, the agency shall include provisions that allow for: Establishment of two hospital program licensure levels: a Level I program authorizing the performance of adult percutaneous cardiac intervention without onsite cardiac surgery and a Level II program authorizing the performance of percutaneous cardiac intervention with onsite cardiac surgery. Extensive evidence was offered at the hearing to support both sides of the debate regarding the appropriateness of performing elective PCI in hospitals without onsite cardiac surgery, and it is clear that the debate continues. However, the evidence establishes that the Florida Legislature specifically chose not to restrict non-emergent PCI to Florida hospitals with onsite cardiac surgery units and has determined that properly-licensed Florida hospitals may provide PCI services without regard to the availability of on-site cardiac surgery. It is reasonable to assume that had the Legislature intended to restrict provision of adult PCI in hospitals without cardiac surgery programs to emergent patients, the "notwithstanding" language contained in Senate Bill 182 would not have been adopted. There is no credible evidence that the Legislature was unaware of the continuing debate within the cardiology community at the time the legislation was adopted in 2004. The Legislature has acknowledged the distinction between emergent and elective PCI as indicated by Subsection 408.036(3)(o), Florida Statutes (2008), which provides under certain circumstances that a hospital without an approved "open heart surgery program" can obtain an exemption from CON requirements and provide emergent PCI services to "patients presenting with emergency myocardial infarctions." It is reasonable to assume that had the codification of the 2004 legislation been incorrect, the Florida Legislature would have subsequently amended the statute to reinstate the restriction. In fact, the Legislature has revised the referenced statute without substantively altering the relevant language establishing the two-level licensure designation. Section 408.0361, Florida Statutes (2008), the current statute directing AHCA to adopt the rules at issue in this proceeding, provides, in relevant part, as follows: 408.0361 Cardiovascular services and burn unit licensure.-- Each provider of diagnostic cardiac catheterization services shall comply with rules adopted by the agency that establish licensure standards governing the operation of adult inpatient diagnostic cardiac catheterization programs. The rules shall ensure that such programs: Comply with the most recent guidelines of the American College of Cardiology and American Heart Association Guidelines for Cardiac Catheterization and Cardiac Catheterization Laboratories. Perform only adult inpatient diagnostic cardiac catheterization services and will not provide therapeutic cardiac catheterization or any other cardiology services. Maintain sufficient appropriate equipment and health care personnel to ensure quality and safety. Maintain appropriate times of operation and protocols to ensure availability and appropriate referrals in the event of emergencies. Demonstrate a plan to provide services to Medicaid and charity care patients. Each provider of adult cardiovascular services or operator of a burn unit shall comply with rules adopted by the agency that establish licensure standards that govern the provision of adult cardiovascular services or the operation of a burn unit. Such rules shall consider, at a minimum, staffing, equipment, physical plant, operating protocols, the provision of services to Medicaid and charity care patients, accreditation, licensure period and fees, and enforcement of minimum standards. The certificate-of-need rules for adult cardiovascular services and burn units in effect on June 30, 2004, are authorized pursuant to this subsection and shall remain in effect and shall be enforceable by the agency until the licensure rules are adopted. Existing providers and any provider with a notice of intent to grant a certificate of need or a final order of the agency granting a certificate of need for adult cardiovascular services or burn units shall be considered grandfathered and receive a license for their programs effective on the effective date of this act. The grandfathered licensure shall be for at least 3 years or until July 1, 2008, whichever is longer, but shall be required to meet licensure standards applicable to existing programs for every subsequent licensure period. In establishing rules for adult cardiovascular services, the agency shall include provisions that allow for: Establishment of two hospital program licensure levels: a Level I program authorizing the performance of adult percutaneous cardiac intervention without onsite cardiac surgery and a Level II program authorizing the performance of percutaneous cardiac intervention with onsite cardiac surgery. For a hospital seeking a Level I program, demonstration that, for the most recent 12-month period as reported to the agency, it has provided a minimum of 300 adult inpatient and outpatient diagnostic cardiac catheterizations or, for the most recent 12-month period, has discharged or transferred at least 300 inpatients with the principal diagnosis of ischemic heart disease and that it has a formalized, written transfer agreement with a hospital that has a Level II program, including written transport protocols to ensure safe and efficient transfer of a patient within 60 minutes. For a hospital seeking a Level II program, demonstration that, for the most recent 12-month period as reported to the agency, it has performed a minimum of 1,100 adult inpatient and outpatient cardiac catheterizations, of which at least 400 must be therapeutic catheterizations, or, for the most recent 12-month period, has discharged at least 800 patients with the principal diagnosis of ischemic heart disease. Compliance with the most recent guidelines of the American College of Cardiology and American Heart Association guidelines for staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. Establishment of appropriate hours of operation and protocols to ensure availability and timely referral in the event of emergencies. Demonstration of a plan to provide services to Medicaid and charity care patients. In order to ensure continuity of available services, the holder of a certificate of need for a newly licensed hospital that meets the requirements of this subsection may apply for and shall be granted Level I program status regardless of whether rules relating to Level I programs have been adopted. To qualify for a Level I program under this subsection, a hospital seeking a Level I program must be a newly licensed hospital established pursuant to a certificate of need in a physical location previously licensed and operated as a hospital, the former hospital must have provided a minimum of 300 adult inpatient and outpatient diagnostic cardiac catheterizations for the most recent 12- month period as reported to the agency, and the newly licensed hospital must have a formalized, written transfer agreement with a hospital that has a Level II program, including written transport protocols to ensure safe and efficient transfer of a patient within 60 minutes. A hospital meeting the requirements of this subsection may apply for certification of Level I program status before taking possession of the physical location of the former hospital, and the effective date of Level I program status shall be concurrent with the effective date of the newly issued hospital license. (5)(a) The agency shall establish a technical advisory panel to develop procedures and standards for measuring outcomes of adult cardiovascular services. Members of the panel shall include representatives of the Florida Hospital Association, the Florida Society of Thoracic and Cardiovascular Surgeons, the Florida Chapter of the American College of Cardiology, and the Florida Chapter of the American Heart Association and others with experience in statistics and outcome measurement. Based on recommendations from the panel, the agency shall develop and adopt rules for the adult cardiovascular services that include at least the following: A risk adjustment procedure that accounts for the variations in severity and case mix found in hospitals in this state. Outcome standards specifying expected levels of performance in Level I and Level II adult cardiovascular services. Such standards may include, but shall not be limited to, in-hospital mortality, infection rates, nonfatal myocardial infarctions, length of stay, postoperative bleeds, and returns to surgery. Specific steps to be taken by the agency and licensed hospitals that do not meet the outcome standards within specified time periods, including time periods for detailed case reviews and development and implementation of corrective action plans. Hospitals licensed for Level I or Level II adult cardiovascular services shall participate in clinical outcome reporting systems operated by the American College of Cardiology and the Society for Thoracic Surgeons. As required by Subsection 408.0361(5), Florida Statutes (2004), AHCA created the TAP, which convened and met over the course of two years at a series of public hearings. The TAP also received written materials and comments from interested parties. Thereafter, AHCA convened rule development workshops to formulate the proposed rules at issue in this proceeding. The proposed rules were initially noticed in the September 28, 2007, Florida Administrative Weekly (Vol. 33, No. 39). Subsequent Notices of Changes to the proposed rules were published in the Florida Administrative Weeklies of November 16, 2007 (Vol. 33, No. 46); March 28, 2008 (Vol. 34, No. 13); and May 9, 2008 (Vol. 34, No. 19). There is no evidence that AHCA failed to comply with statutory requirements related to the rule adoption process. As required by Subsection 408.0361(3)(a), Florida Statutes (2008), the proposed rules set forth the procedures by which a hospital may apply for licensure as a Level I or Level II provider of adult cardiovascular services without differentiation based on the availability of on-site cardiac surgery. The proposed rules applicable to a hospital seeking licensure as a Level I provider of adult cardiovascular services are set forth at Proposed Rule 59A-3.2085(16). The proposed rules applicable to a hospital seeking licensure as a Level II provider of adult cardiovascular services are set forth at Proposed Rule 59A-3.2085(17). Subsection 408.0361(3)(b), Florida Statutes (2008), establishes minimum volume reporting requirements for licensure as a Level I program. Accordingly, Proposed Rule 59A- 3.2085(16)(a) provides, in relevant part, as follows: 1. A hospital seeking a license for a Level I adult cardiovascular services program shall submit an application on a form provided by the Agency (See Form 1: Level I Adult Cardiovascular Services License Application Attestation; AHCA Form, Section 18(a) of this rule ), signed by the chief executive officer of the hospital, attesting that, for the most recent 12-month period, the hospital has provided a minimum of 300 adult inpatient and outpatient diagnostic cardiac catheterizations or, for the most recent 12-month period, has discharged or transferred at least 300 inpatients with the principal diagnosis of ischemic heart disease (defined by ICD-9-CM codes 410.0 through 414.9). Reportable cardiac catheterization procedures are defined as single sessions with a patient in the hospital’s cardiac catheterization procedure room(s), irrespective of the number of specific procedures performed during the session. Reportable cardiac catheterization procedures shall be limited to those provided and billed for by the Level I licensure applicant and shall not include procedures performed at the hospital by physicians who have entered into block leases or joint venture agreements with the applicant. (Emphasis supplied) Subsection 408.0361(3)(c), Florida Statutes (2008), establishes minimum volume reporting requirements for licensure as a Level II program. Accordingly, Proposed Rule 59A- 3.2085(17)(a) provides in relevant part as follows: 1. A hospital seeking a license for a Level II adult cardiovascular services program shall submit an application on a form provided by the Agency (See Form 2: Level II Adult Cardiovascular Services License Application Attestation; AHCA Form , Section 18(b) of this rule ) to the Agency, signed by the chief executive officer of the hospital, attesting that, for the most recent 12-month period, the hospital has provided a minimum of a minimum of 1,100 adult inpatient and outpatient cardiac catheterizations, of which at least 400 must be therapeutic cardiac catheterizations, or, for the most recent 12-month period, has discharged at least 800 patients with the principal diagnosis of ischemic heart disease (defined by ICD-9-CM codes 410.0 through 414.9). a. Reportable cardiac catheterization procedures shall be limited to those provided and billed for by the Level II licensure applicant and shall not include procedures performed at the hospital by physicians who have entered into block leases or joint venture agreements with the applicant. (Emphasis supplied) St. Anthony's asserts that the proposed rule is invalid on the grounds that it fails to provide a clear and reasonable methodology for assessing and verifying the number of diagnostic catheterization procedures performed. St. Anthony's asserts that the exclusion of cardiac catheterization procedures performed within the hospital's cardiac cath lab but not billed by the hospital is arbitrary and capricious, modifies, enlarges, or contravenes the specific provisions of the statute implemented, fails to establish adequate standards for agency decision making, and vests unbridled discretion in the agency. The evidence fails to support these assertions. Although the phrase "block lease" is undefined by statute or rule, the evidence establishes that insofar as relevant to this proceeding, the term refers to a practice by which a group of cardiologists lease blocks of time from a hospital for exclusive use of a hospital's cardiac cath lab. St. Anthony's has a leasing arrangement with a group of cardiologists identified as the "Heart and Vascular Institute South" ("HAVI South") whereby St. Anthony's leases blocks of time in a cardiac cath lab to HAVI South cardiologists. The facility is located in a privately-owned medical office building physically attached to St. Anthony's hospital building. St. Anthony's leases the medical office building from a developer. HAVI South cardiologists perform cardiac catheterization procedures at the St. Anthony's facility during both leased and non-leased time. St. Anthony's provides personnel to staff the cardiac cath lab regardless of whether the procedure is performed during leased or non-leased time. The HAVI South cardiology group develops the schedule of cardiac catheterization procedures to be performed during the leased time and notifies St. Anthony's of the schedule. The HAVI South cardiology group bills for both their professional fees and the facility charges (referred to as the "technical component") for the cardiac catheterization procedures performed during leased time. St. Anthony's does not bill for cardiac catheterization procedures performed during the leased time. For the cardiac catheterization procedures performed during non-leased time, the HAVI South cardiology group bills for professional fees, and St. Anthony's bills for the technical component. Patricia Sizemore, vice-president for patient services at St. Anthony's, acknowledged that other hospitals could have block-leasing arrangements different from those existing between St. Anthony's and the HAVI South group. The proposed rules would preclude St. Anthony's from including the outpatient cardiac catheterization procedures done by HAVI South during the block-leased time within those procedures available to meet the numeric threshold requirements identified in the statute. The evidence fails to establish that the proposed rule fails to provide a clear and reasonable methodology for assessing and verifying the number of diagnostic catheterization procedures performed. The relevant language of Subsection 408.0361(3), Florida Statutes (2008), identifies the hospital as the applicant and requires that the applicant "provide" the procedures or discharges being reported to meet the specified volume thresholds. The applicable definition of hospital is set forth at Subsection 408.032(11), Florida Statutes (2008), which defines a hospital as a health care facility licensed under Chapter 395, Florida Statutes. Subsection 395.002(12), Florida Statutes (2008), sets forth the following definition: (12) "Hospital" means any establishment that: Offers services more intensive than those required for room, board, personal services, and general nursing care, and offers facilities and beds for use beyond 24 hours by individuals requiring diagnosis, treatment, or care for illness, injury, deformity, infirmity, abnormality, disease, or pregnancy; and Regularly makes available at least clinical laboratory services, diagnostic X- ray services, and treatment facilities for surgery or obstetrical care, or other definitive medical treatment of similar extent, except that a critical access hospital, as defined in s. 408.07, shall not be required to make available treatment facilities for surgery, obstetrical care, or similar services as long as it maintains its critical access hospital designation and shall be required to make such facilities available only if it ceases to be designated as a critical access hospital. Physicians are not "hospitals" and are not licensed or regulated by Chapter 395, Florida Statutes. Physicians are not authorized to apply for licensure under the provisions of the statute and proposed rules at issue in this proceeding. Nothing in the statute suggests that entities other than hospitals may apply for licensure of a Level I or Level II adult cardiovascular services program. The rationale underlying the restriction of reportable procedures to those for which the applicant hospital issues bills for payment is based upon AHCA's reasonable intention to validate the procedure volume data submitted by applicant hospitals. Jeffrey Gregg, chief of AHCA's Bureau of Health Facility Regulation and CON Unit, testified that "the only practical, realistic way" for AHCA to routinely verify the accuracy of the procedure volume identified by a hospital's licensure application is through AHCA's ambulatory patient database. The reporting requirements for the ambulatory patient database are set forth at Florida Administrative Code Chapter 59B-9 and include elements such as demographic information, diagnosis codes, and charges. The database provides AHCA with access to patient record documentation and directly allows AHCA to verify the procedure volume identified in the licensure application. Because St. Anthony's has no charges related to the procedures performed by HAVI South cardiologists during the leased time, St. Anthony's has not reported procedures performed during leased time to the ambulatory patient database. St. Anthony's reports far more cardiac catheterization procedures to the local Suncoast Health Council than it does to AHCA's ambulatory patient database and asserts that AHCA could rely on health council data. AHCA has no organizational relationship with the local health council, and the evidence fails to establish that such data is as reliable as that collected by the ambulatory patient database. AHCA asserts that an additional basis to exclude procedures performed by entities other than the applicant hospital is that AHCA has no direct regulatory authority over the non-hospital entity. St. Anthony's asserts that AHCA would have its customary authority over the hospital and, by extension, over the third-party leasing the cardiac cath lab from the hospital. At best, AHCA's authority to obtain records from the non-hospital operator of the hospital's cardiac cath lab is unclear. St. Anthony's position effectively would permit a third-party operator to lease all of the time in a hospital's cardiac cath lab, yet allow the hospital to apply for and receive an adult cardiovascular service license. Nothing in Section 408.0361, Florida Statutes (2008), suggests that the Legislature intended to provide such an option. The proposed rule designating the reportable cardiac catheterization procedures is logical and rational, is not arbitrary or capricious, and does not modify, enlarge or contravene the specific provisions of the statute implemented. The evidence fails to establish that the designation of appropriately reportable cardiac catheterization procedures constitutes a failure to establish adequate standards for agency decision making or vests unbridled discretion in the agency. Subsection 408.0361(3)(d), Florida Statutes (2008), requires that the proposed rules include provisions "that allow for" compliance with the most recent guidelines of the American College of Cardiology and AHA guidelines for "staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety." Subsection 408.0361(5), Florida Statutes (2008), requires that the TAP "develop procedures and standards for measuring outcomes" and that, based thereon, AHCA adopt rules that include a risk adjustment procedure that accounts for variations in severity and case mix, outcome standards specifying expected levels of performance, and "specific steps to be taken by the agency and the licensed hospitals" that fail to meet outcome standards. The statute also requires that licensed hospitals participate in clinical outcome reporting systems operated by the American College of Cardiology and the Society of Thoracic Surgeons. The TAP determined that the appropriate method of measuring outcome was to utilize the data available through the clinical outcome reporting systems referenced in the statute. Accordingly, Proposed Rule 59A-3.2085(16)(a) identifies the guidelines applicable to Level I adult cardiovascular services; identifies the specific provisions of the guidelines with which a Level I hospital must comply; requires that the Level I hospital participate in the statutorily-identified data reporting system; and requires that Level I hospitals document a quality improvement plan to meet performance measures set forth by the data reporting system. The proposed rule provides, in relevant part, as follows: All providers of Level I adult cardiovascular services programs shall operate in compliance with subsection 59A- 3.2085(13), F.A.C., the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214 and the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention) guidelines regarding the operation of adult diagnostic cardiac catheterization laboratories and the provision of percutaneous coronary intervention. The applicable guidelines, herein incorporated by reference, are the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214; and the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention). Aspects of the guideline related to pediatric services or outpatient cardiac catheterization in freestanding non-hospital settings are not applicable to this rule. Aspects of the guideline related to the provision of elective percutaneous coronary intervention only in hospitals authorized to provide open heart surgery are not applicable to this rule. Hospitals are considered to be in compliance with the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214 and the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention) guidelines when they adhere to standards regarding staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. Hospitals must also document an ongoing quality improvement plan to ensure that the cardiac catheterization program and the percutaneous coronary intervention program meet or exceed national quality and outcome benchmarks reported by the American College of Cardiology-National Cardiovascular Data Registry. Level I adult cardiovascular service providers shall report to the American College of Cardiology-National Cardiovascular Data Registry in accordance with the timetables and procedures established by the Registry. All data shall be reported using the specific data elements, definitions and transmission format as set forth by the American College of Cardiology-National Cardiovascular Data Registry. Proposed Rule 59A-3.2085(17)(a) identifies the guidelines applicable to Level II adult cardiovascular services; identifies the specific provisions of the guidelines with which a Level II hospital must comply; requires that the Level II hospital participate in the statutorily-identified data reporting system; and requires that Level II hospitals document a quality improvement plan to meet performance measures set forth by the data reporting system. The proposed rule provides in relevant part as follows: All providers of Level II adult cardiovascular services programs shall operate in compliance with subsections 59A-3.2085(13) and 59A-3.2085(16), F.A.C. and the applicable guidelines of the American College of Cardiology/American Heart Association regarding the operation of diagnostic cardiac catheterization laboratories, the provision of percutaneous coronary intervention and the provision of coronary artery bypass graft surgery. The applicable guidelines, herein incorporated by reference, are the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214; and ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention; and ACC/AHA 2004 Guideline Update for Coronary Artery Bypass Graft Surgery: A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (Committee to Update the 1999 Guidelines for Coronary Artery Bypass Graft Surgery) Developed in Collaboration With the American Association for Thoracic Surgery and the Society of Thoracic Surgeons. Aspects of the guidelines related to pediatric services or outpatient cardiac catheterization in freestanding non-hospital settings are not applicable to this rule. Hospitals are considered to be in compliance with the guidelines in the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214; in the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention; and in the ACC/AHA 2004 Guideline Update for Coronary Artery Bypass Graft Surgery: A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (Committee to Update the 1999 Guidelines for Coronary Artery Bypass Graft Surgery) Developed in Collaboration With the American Association for Thoracic Surgery and the Society of Thoracic Surgeons when they adhere to standards regarding staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. Hospitals must also document an ongoing quality improvement plan to ensure that the cardiac catheterization program, the percutaneous coronary intervention program and the cardiac surgical program meet or exceed national quality and outcome benchmarks reported by the American College of Cardiology-National Cardiovascular Data Registry and the Society of Thoracic Surgeons. In addition to the requirements set forth in subparagraph (16)(a)7. of this rule, each hospital licensed to provide Level II adult cardiovascular services programs shall participate in the Society of Thoracic Surgeons National Database. The Petitioners generally assert that the proposed rules insufficiently identify or establish the minimum standards identified as "guidelines" and "benchmarks" in the rule. The evidence fails to support the assertion. The guidelines are specifically identified and incorporated by reference within the rule. There is no evidence that the documents identified do not constitute the "most recent guidelines of the American College of Cardiology and the American Heart Association" as required by the statute. Hospitals are not obligated to meet all of the requirements set forth in the guidelines. A licensed hospital is deemed to be in compliance when, as specified in the statute, the hospital adheres to the standards related to staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. The Petitioners generally assert that such distinctions between the various compliance elements are unclear. The evidence fails to support the assertion. There is no credible evidence that the guidelines, albeit technical and complex, are not commonly understood by appropriate medical practitioners and hospital administrators. Martin Memorial asserts that the Proposed Rule 59A-3.2085(16)(a)5. is vague on grounds that it requires Level I hospitals to operate in compliance with the referenced guidelines while Proposed Rule 59A-3.2085(16)(a)9. authorizes provision of elective PCI at Level I hospitals. Martin Memorial further asserts that because the proposed rules provide for elective PCI in hospitals without onsite cardiac surgical programs, the proposed rules enlarge, modify or contravene the enacting statute. Subsection 408.0361(3)(d), Florida Statutes (2008), requires that AHCA include "provisions that allow for" the following: Compliance with the most recent guidelines of the American College of Cardiology and American Heart Association guidelines for staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. (Emphasis supplied) Proposed Rule 59A-3.2085(16)(a)9. provides as follows: Notwithstanding guidelines to the contrary in the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214 and the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention), all providers of Level I adult cardiovascular services programs may provide emergency and elective percutaneous coronary intervention procedures. Aspects of the guidelines related to pediatric services or outpatient cardiac catheterization in freestanding non-hospital settings are not applicable to this rule. (Emphasis supplied) Martin Memorial's disagreement with the proposed rule is premised on the following statement in the ACC/AHA/SCAI 2005 Guideline Update: Elective PCI should not be performed at institutions that do not provide onsite cardiac surgery. (Level of Evidence: C) The statement is contained within subsection 4.3 ("Role of Onsite Cardiac Surgical Backup") within Section 4 ("Institutional and Operator Competency"). The statement is defined as a "Class III" standard, meaning within the "conditions for which there is evidence and/or general agreement that a procedure/treatment is not useful/effective and in some cases may be harmful." According to the "Level of Evidence: C" identification, the statement reflects "consensus opinion of experts, case studies, or standard of care." A footnote to the statement provides as follows: Several centers have reported satisfactory results based on careful case selection with well-defined arrangements for immediate transfer to a surgical program (citation omitted). A small but real fraction of patients undergoing elective PCI will experience a life-threatening complication that could be managed with the immediate onsite availability of cardiac surgical support but cannot be managed effectively by urgent transfer. Wennberg, et al., found higher mortality in the Medicare database for patients undergoing elective PCI in institutions without onsite cardiac surgery (citation omitted). This recommendation may be subject to revision as clinical data and experience increase. The guidelines are statements of "best practices" in health care delivery. They are intended to assist practitioners and facility administrators in making appropriate decisions. The cited statement neither prohibits nor requires performance of elective PCI in hospitals without onsite cardiac surgical programs. Whether a practitioner performs elective PCI in a licensed Level I hospital remains a medical decision under the provisions of the enacting statute and proposed rules. The footnote recognizes that elective PCI is available at some hospitals without onsite cardiac surgery through "careful case selection with well-defined arrangements for immediate transfer to a surgical program." The proposed rule specifically establishes staff and transfer requirements designed to facilitate rapid transfer of a patient from a Level I to a Level II facility. There is no evidence that such staff and transfer requirements are insufficient or otherwise inappropriate. Patient selection criteria are those which expressly identify clinical presentations of patients who are appropriate for revascularization through PCI. Section 5 of the referenced ACC/AHA/SCAI 2005 Guideline Update, titled "Clinical Presentations" explicitly addresses such criteria and constitutes the patient selection criteria contained within the document. The patient selection criteria do not regulate the location where PCI procedures are performed. As stated previously, the Florida Legislature, presented with the option of limiting the availability of cardiac catheterization services available at Level I hospitals to emergent patients, rejected the limitation. The evidence fails to establish that Proposed Rule 59A-3.2085(16)(a)5. is vague or that Proposed Rule 59A-3.2085(16)(a)9. enlarges, modifies or contravenes the enacting statute. Martin Memorial and St. Anthony's assert that the proposed rule contravenes Subsection 408.0361(5)(a), Florida Statutes (2008), which provides that AHCA adopt rules that include "at least the following" elements: A risk adjustment procedure that accounts for the variations in severity and case mix found in hospitals in this state. Outcome standards specifying expected levels of performance in Level I and Level II adult cardiovascular services. Such standards may include, but shall not be limited to, in-hospital mortality, infection rates, nonfatal myocardial infarctions, length of stay, postoperative bleeds, and returns to surgery. Specific steps to be taken by the agency and licensed hospitals that do not meet the outcome standards within specified time periods, including time periods for detailed case reviews and development and implementation of corrective action plans. The TAP recommended to AHCA that existing outcome data reporting systems created by the American College of Cardiology and the Society of Thoracic Surgeons be utilized for data collection related to licensed hospital adult cardiovascular services programs. Subsection 408.0361(5)(b), Florida Statutes (2008), requires that hospitals licensed under the proposed rules participate in clinical reporting systems operated by the American College of Cardiology and the Society of Thoracic Surgeons. The requirement was adopted by the 2007 Legislature based on the TAP recommendation. Proposed Rule 51A-3.2085(16)(a)8. requires licensed Level I hospitals to participate in the American College of Cardiology-National Cardiovascular Data Registry (ACC-NCDR) and sets forth additional directives related to such participation. The ACC-NCDR system is a risk adjusted outcome reporting system that accounts for variation in severity and case mix. It collects approximately 200 data elements and is in use in approximately 2,000 hospitals. Proposed Rule 51A-3.2085(17)(a)6. directs licensed Level II hospitals to participate in the Society of Thoracic Surgeons National Database (STS database) and sets forth additional requirements related to such participation. The STS database provides information generally similar to the ACC-NCDR database. Although Proposed Rule 59A-3.2085(17)(a)5. states that the Level II hospital must meet or exceed the performance standards identified within the ACC-NCDR, there appears to be no specific requirement in the proposed rules that a Level II hospital participate in the ACC-NCDR system. Proposed Rule 59A-3.2085(17)(a)6. contains a citation to Proposed Rule 59A-3.2085 (16)(a)7. The cited paragraph consists of text that is similar to the paragraph preceding the citation. The intent of the reference is unclear. If the reference were intended to incorporate the ACC- NCDR reporting requirements with those applicable to Level II hospitals, the citation in Proposed Rule 59A-3.2085(17)(a)6. should have been to Proposed Rule 59A-3.2085(16)(a)8., where the ACC-NCDR requirements are identified. In any event, the statute requires participation by licensed hospitals in the reporting systems, and, as stated previously, Level II hospitals must document plans to ensure that the cited standards are met; so, it is logical to presume that Level II hospitals will participate in the ACC-NCDR system, in addition to the STS database. Martin Memorial and St. Anthony's assert that the proposed rule does not include the "outcome standards specifying expected levels of performance" required by Subsection 408.0361(5)(a)2., Florida Statutes (2008), and that the proposed rules fail to identify the "national quality and outcome benchmarks" referenced therein. The evidence fails to support the assertions. 93. Proposed Rules 59A-3.2085(16)(a)7. and 59A- 3.2085(17)(a)5. require that each licensed hospital must document a "quality improvement plan to ensure" that the specified cardiac services meet or exceed "national quality and outcome benchmarks" reported by the ACC-NCDR and the STS databases. The word "benchmark" is not defined by statute or rule. Merriam Webster's dictionary defines "benchmark" as "a point of reference from which measurements may be made" or "something that serves as a standard by which others may be measured or judged." The evidence establishes that the "national quality and outcome benchmarks" referenced in the proposed rules are the "expected levels of performance" identified through the ACC-NCDR system. Each hospital participating in the ACC-NCDR system receives a detailed quarterly outcome report indicating the particular hospital's performance relative to all other reporting hospitals on a variety of elements associated with cardiac catheterization and PCI provided at the hospital. Accompanying each periodic report is an "Executive Summary" that identifies the relative performance of the hospital receiving the report on ten specific "PCI and Diagnostic Catheterization Performance Measures," including six "PCI Quality Measures," two "PCI Utilization Measures," and two "Diagnostic Quality Measures." The Executive Summary information visually displays the data through a set of "box and whisker plots" that present the range of data reported by all participating hospitals on each specific measure. The summary received by each hospital identifies its specific performance through an "arrow" and numeric data printed on the plot. The plot visually displays "lagging" and "leading" performance levels. The plot identifies hospitals performing below the tenth percentile of all participating hospitals as "lagging" hospitals. The plot identifies hospitals performing above the 90th percentile as "leading" hospitals. The evidence, including review of the ACC-NCDR data reporting system, establishes that the "expected levels of performance" are rationally those levels within the broad range of hospitals which are neither "leading" nor "lagging" according to the data. It is reasonable to assume that a "leading" hospital is performing at a level higher than expected and that a "lagging" hospital is performing at a level lower than expected. By reviewing the plot for each measure, a hospital can determine its performance relative to other participating hospitals on the ten measures included in the Executive Summary. The additional numeric data contained within the quarterly report permit additional comparison between an individual hospital and all other participating hospitals. Subsection 408.0361(5)(a)2., Florida Statutes (2008), does not require that AHCA establish numeric minimal standards, but only requires that the rule identify "outcome standards specifying expected levels of performance." The ACC-NCDR reporting system required by the statute and adopted by the proposed rules sufficiently identifies expected levels of performance. By their very nature, the outcome standards are not fixed. It is reasonable to presume that as hospital practices change, measurements of relative performance will also change. The rule requires only that each licensed hospital include within a quality improvement plan, documentation to ensure that such outcome standards will be met or exceeded, essentially encouraging a pattern of continual improvement by licensed programs. Subsection 408.0361(5)(a)3., Florida Statutes (2008), requires that the rule include the "specific steps to be taken by the agency and licensed hospitals that do not meet the outcome standards within specified time periods, including time periods for detailed case reviews and development and implementation of corrective action plans." The proposed rule complies with the requirements of the statute. Enforcement of outcome standards requirements applicable to Level I programs is addressed at Proposed Rule 59A-3.2085(16)(f) which provides as follows: Enforcement of these rules shall follow procedures established in Rule 59A-3.253, F.A.C. Unless in the view of the Agency there is a threat to the health, safety or welfare of patients, Level I adult cardiovascular services programs that fail to meet provisions of this rule shall be given 15 days to develop a plan of correction that must be accepted by the Agency. Failure of the hospital with a Level I adult cardiovascular services program to make improvements specified in the plan of correction shall result in the revocation of the program license. The hospital may offer evidence of mitigation and such evidence could result in a lesser sanction. Enforcement of outcome standards requirements applicable to Level II programs is addressed at Proposed Rule 59A-3.2085(17)(e), which provides as follows: Enforcement of these rules shall follow procedures established in Rule 59A-3.253, F.A.C. Unless in the view of the Agency there is a threat to the health, safety or welfare of patients, Level II adult cardiovascular services programs that fail to meet provisions of this rule shall be given 15 days to develop a plan of correction that must be accepted by the Agency. Failure of the hospital with a Level II adult cardiovascular services program to make improvements specified in the plan of correction shall result in the revocation of the program license. The hospital may offer evidence of mitigation and such evidence could result in a lesser sanction. AHCA does not routinely conduct surveys of accredited hospitals. Such surveys are conducted by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). AHCA generally conducts hospital surveys only during the investigation, pursuant to Florida Administrative Code Rule 59A-3.253(8), of a complaint filed against a hospital. AHCA would likely review ACC-NCDR and Society of Thoracic Surgeons data reports associated with the investigation of a specific complaint related to adult cardiovascular services. Assuming that AHCA's review of the data identified a deficiency, the proposed rules provide the licensee a 15-day period to develop a plan of correction acceptable to AHCA, unless the issue poses "a threat to the health, safety or welfare of patients" in which case it is reasonable to expect that a more prompt resolution of a deficiency would be required. Pursuant to Florida Administrative Code Rule 59A- 3.253, a hospital could be sanctioned for failing to submit a plan of correction related to an identified deficiency, or for failing to implement actions to correct deficiencies specified in an approved plan of correction. There is no evidence that AHCA's enforcement authority under the proposed rules differs in any significant manner from the general enforcement authority already available to the agency. There is no evidence that the proposed rules would result in any alteration of AHCA's investigative practices. Martin Memorial notes that, while the proposed rule provides a 15-day period for development of a plan of correction, AHCA's general enforcement rules already provide a ten-day period and asserts that the proposed rule is therefore inconsistent, fails to establish adequate standards for agency decisions, and vests unbridled discretion in the agency. The specific time period set forth in the proposed rule is clearly applicable, and there is no credible evidence of legitimate confusion in this regard. AHCA has suggested that "lagging" hospitals could be specifically regarded as failing to meet the outcome benchmarks identified in the ACC-NCDR data, but the proposed rule makes no specific reference to any systematic classification of hospital performance, and the statute does not require that a minimal performance level be established. Martin Memorial asserts that the Proposed Rule 59A- 3.2085(17)(a)6. is capricious because it requires that "each hospital licensed to provide Level II adult cardiovascular services programs shall participate in the Society of Thoracic Surgeons National Database," but only physicians can participate in the database. The enacting statute requires such participation. Subsection 408.0361(5)(b), Florida Statutes (2008), directs AHCA to adopt rules that require Level I or Level II licensed hospitals to "participate in clinical outcome reporting systems operated by the American College of Cardiology and the Society for Thoracic Surgeons." The proposed rule clearly implements the directive established by the statute. There is no credible evidence that the proposed rule is irrational or that a licensed Level II hospital would be unable to meet the obligations of the rule by requiring that its thoracic surgeons participate in the STS database. Martin Memorial asserts that the requirement that an applicant hospital's chief executive officer attest to compliance with certain guidelines is vague because "it is unclear what guidelines apply and what guidelines will not." The evidence fails to support the assertion. The referenced requirement applicable to a hospital seeking licensure as a Level I facility is set forth at Proposed Rule 59A-3.2085(16)(a)2., which provides as follows: The request [for licensure] shall attest to the hospital’s intent and ability to comply with the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-214; and the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention); including guidelines for staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. The referenced requirement applicable to a hospital seeking licensure as a Level II facility is set forth at Proposed Rule 59A-3.2085(17)(a)2., which provides as follows: The request [for licensure] shall attest to the hospital’s intent and ability to comply with applicable guidelines in the American College of Cardiology/Society for Cardiac Angiography and Interventions Clinical Expert Consensus Document on Cardiac Catheterization Laboratory Standards: Bashore et al, ACC/SCA&I Clinical Expert Consensus Document on Catheterization Laboratory Standards, JACC Vol. 37, No. 8, June 2001: 2170-2; in the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention); and in the ACC/AHA 2004 Guideline Update for Coronary Artery Bypass Graft Surgery: A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (Committee to Update the 1999 Guidelines for Coronary Artery Bypass Graft Surgery) Developed in Collaboration With the American Association for Thoracic Surgery and the Society of Thoracic Surgeons, including guidelines for staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety. Proposed Rule 59A-3.2085(16)(a)6. designates the guidelines applicable to the operation of Level I hospital services. Proposed Rule 59A-3.2085(17)(a) designates the guidelines applicable to the operation of Level II hospital services. The specific elements of the referenced guidelines are identified in both the statute and the proposed rules. Martin Memorial asserts that the proposed rule is vague as to training requirements applicable for physicians performing elective PCI in Level I hospitals. In making the assertion, Martin Memorial references training requirements established at Proposed Rule 59A-3.2085(16)(b)2. and applicable to Level I physicians performing emergent PCI with less than 12 months experience. There is no credible evidence that the proposed rule is vague. Proposed Rule 59A-3.2085(16)(b), in relevant part, provides as follows: Each cardiologist shall be an experienced physician who has performed a minimum of 75 interventional cardiology procedures, exclusive of fellowship training and within the previous 12 months from the date of the Level I adult cardiovascular licensure application or renewal application. Physicians with less than 12 months experience shall fulfill applicable training requirements in the ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (ACC/AHA/SCAI Writing Committee to Update the 2001 Guidelines for Percutaneous Coronary Intervention) prior to being allowed to perform emergency percutaneous coronary interventions in a hospital that is not licensed for a Level II adult cardiovascular services program. The rule provides that a physician with less than 12 months experience working in a Level I facility can perform emergent PCI only if applicable training requirements have been met. The proposed rule does not authorize performance of elective PCI in a Level I hospital by a physician not meeting the minimum annual procedure volume requirements. Proposed Rule 59A-3.2085(17)(b) clearly identifies the requirements applicable to Level II physicians and in relevant part provides as follows: Each cardiac surgeon shall be Board certified. New surgeons shall be Board certified within 4 years after completion of their fellowship. Experienced surgeons with greater than 10 years experience shall document that their training and experience preceded the availability of Board certification. Each cardiologist shall be an experienced physician who has performed a minimum of 75 interventional cardiology procedures, exclusive of fellowship training and within the previous 12 months from the date of the Level II adult cardiovascular licensure application or renewal application. Martin Memorial asserts that the experience requirements set forth at Proposed Rule 59A-3.2085(16)(b)3. (related to Level I hospitals) and Proposed Rule 59A- 3.2085(17)(b)3. (related to Level II hospitals) are arbitrary or capricious. The evidence fails to support the assertion. The text of both proposed rules provides as follows: The nursing and technical catheterization laboratory staff shall be experienced in handling acutely ill patients requiring intervention or balloon pump. Each member of the nursing and technical catheterization laboratory staff shall have at least 500 hours of previous experience in dedicated cardiac interventional laboratories at a hospital with a Level II adult cardiovascular services program. They shall be skilled in all aspects of interventional cardiology equipment, and must participate in a 24-hour-per-day, 365 day-per-year call schedule. Martin Memorial argues that there is no evidence to suggest that 500 hours of experience indicates that appropriate competency levels has been achieved. The evidence establishes that the required experience level was developed by AHCA's hospital licensure unit staff and is the training level currently applicable for hospitals providing emergency PCI services under existing exemptions from CON requirements. The training requirements are not arbitrary or capricious. Martin Memorial asserts that the Proposed Rule 59A-3.2085(16)(c)1. is arbitrary or capricious. The cited rule requires that a Level I hospital make provisions for the transfer of an emergent patient to a Level II hospital, as follows: A hospital provider of Level I adult cardiovascular services program must ensure it has systems in place for the emergent transfer of patients with intra-aortic balloon pump support to one or more hospitals licensed to operate a Level II adult cardiovascular services program. Formalized written transfer agreements developed specifically for emergency PCI patients must be developed with a hospital that operates a Level II adult cardiovascular services program. Written transport protocols must be in place to ensure safe and efficient transfer of a patient within 60 minutes. Transfer time is defined as the number of minutes between the recognition of an emergency as noted in the hospital’s internal log and the patient’s arrival at the receiving hospital. Transfer and transport agreements must be reviewed and tested at least every 3 months, with appropriate documentation maintained. Martin Memorial asserts that the rule is arbitrary or capricious because it does not include a requirement that a Level I hospital make provisions for the transfer of an elective patient to a Level II hospital. There is no credible evidence to support the assertion. There is no evidence that a patient undergoing elective PCI at a Level I would not be regarded as an emergent patient were circumstances such that an emergent transfer to a Level II hospital warranted. There is no credible evidence to suggest a rationale for transferring a non-emergent patient from a Level I to a Level II hospital. Martin Memorial asserts that the proposed rule enlarges, modifies or contravenes the enacting statute on grounds that, although AHCA is directed to adopt rules to ensure compliance "with the most recent guidelines of the American College of Cardiology and American Heart Association Guidelines for Cardiac Catheterization and Cardiac Catheterization Laboratories," the proposed rule provides that "in case of conflicts between the provisions of this rule and the designated guidelines" the rule provisions "shall prevail." Such provisions appear in Proposed Rule 59A-3.2085(13)(j), Proposed Rule 59A-3.2085(16)(g), and Proposed Rule 59A-3.2085(17)(f). The enacting statute requires that hospitals licensed under the provisions of the proposed rules comply with guidelines "for staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety." To the extent that guidelines that relate to elements other than "staffing, physician training and experience, operating procedures, equipment, physical plant, and patient selection criteria to ensure patient quality and safety," the enacting statute does not require compliance by properly- licensed Florida hospitals. Other than as addressed elsewhere herein, the evidence fails to identify any specific conflicts between the guidelines and the proposed rules and, accordingly, fails to establish that the cited proposed rules enlarge, modify or contravene the enacting statute.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' stipulations of fact, the following relevant facts are found: The petitioner RHPC, Inc., d/b/a Riverside Hospital (Riverside) is licensed to operate a 102-bed general, acute care hospital located in New Port Richey, Pasco County. Formerly a public hospital known as West Pasco Hospital, Riverside was acquired by American Healthcare Management, Inc. (AHM) of Dallas, Texas, in December of 1983. By the prior issuance of Certificate of Need (CON) Number 2859, Riverside was authorized to construct and equip a new hospital building for patients and ancillary services at a cost of $14.8 million, including a special procedures room. The new building was approved for occupancy and use as a hospital in September of 1986. Riverside was able to complete construction and equipping of its new facility for an amount approximately $2.5 million less than the approved capital expenditure budget for CON No. 2859. Riverside now seeks to upgrade the existing equipment in its special procedures room so as to be capable of performing cardiac catheterization procedures. The room would not be a dedicated cardiac catheterization laboratory, but would serve the dual function of both cardiac catheterization and non-cardiac angiography. While the cost of creating a brand new cardiac catheterization laboratory would normally amount to approximately $1.4 million, petitioner proposes an expenditure of only $512,474. This lower figure results from the fact that Riverside's existing special procedures room was equipped during the renovation and reconstruction authorized pursuant to Certificate of Need Number 2859, and now needs only to be upgraded to achieve cardiac catheterization capacity. In 1982, prior to its acquisition by AHM, Riverside lost its accreditation through the Joint Commission on Accreditation of Hospitals (JCAH). The removal of accreditation was occasioned by code and physical plant deficiencies and documentation deficiencies related to quality assurance, infection control, medical record-keeping and staff credentialling. Riverside has attempted to eliminate all such deficiencies which led to the prior loss of accreditation. In September of 1986, Riverside submitted its application for a JCAH accreditation survey of its facility. As of the dates of the administrative hearing, the survey dates had not yet been scheduled. It generally takes JCAH approximately so days after a survey to render its accreditation decision. Riverside does not intend to offer cardiac catheterization services until JCAH accreditation is received by the hospital, and is willing to condition its proposed Certificate of Need upon receipt of such accreditation. Riverside has been certified by HRS for Medicaid/Medicare participation. While those conditions of participation are similar to JCAH accreditation standards, they are not identical. Riverside's active medical staff includes six board- certified or board-eligible cardiologists, none of whom currently perform cardiac catheterizations. There are no cardiovascular surgeons on staff, and Riverside does not immediately intend to offer open heart surgery at its facility. Approximately nine local cardiologists in Pasco County, including those on the medical staff of Riverside, have formed a corporation to promote and implement a quality assurance program for the catheterization laboratory at Riverside and to recruit and hire a board-certified cardiologist to perform the catheterizations. No specific physician has yet been recruited as catheteer. Riverside currently has on its staff certified critical care registered nurses and registered nurses with advanced cardiac life support (ACLS) training. It also has radiological support staff, staff trained-in photographic processing and staff available to handle blood samples and observe and monitor patients. It is expected that there will be cross-training at other AHM facilities having cardiac catheterization laboratories, such as St. Luke's Hospital in San Antonio, Texas. In addition to the cardiologists, Riverside intends to staff the proposed laboratory with one registered nurse, one radiology technician, a scrub technician and a technician responsible for the operation of the physiological monitoring during a procedure. The former two positions will be hired exclusively for the cardiac catheterization laboratory, and the latter two are already on the staff and will be assigned for catheterization procedures. Riverside currently offers the following noninvasive cardiac/circulatory diagnostic services: hematology studies, coagulation studies, electrocardiography (EKG), chest x-rays, blood gas studies, clinical pathology studies, blood chemistry analysis, nuclear studies pertaining to cardiology, echocardiography, pulmonary function testing and microbiology studies. Riverside proposes to upgrade its existing General Electric angiographic system with a new General Electric multi- purpose diagnostic system, and will also purchase a physiological monitor. A maintenance agreement will be purchased under which General Electric, which maintains an office in Tampa, will be responsible for maintaining the equipment. It is anticipated that a GE service technician will be on call, if not on site, during all cardiac catheterization procedures. GE also provides in-service training in the use of its equipment, and it is anticipated that GE training personnel will remain on site during the first several times the equipment is operated. Funds for the proposed cardiac catheterization laboratory are available through the prior financing arranged by AHM for the hospital reconstruction and renovation authorized by Certificate of Need No. 2859. Assuming that the proposed lab will perform 219 catheterization procedures at an average charge of $1,794 during the first year of operation, and 417 procedures at an average charge of $1,884 during the second year, Riverside projects a net income of $20,593 for year one and $117,288 for year two. The proposed charges are comparable to those of existing providers. The pro formas assume a payor mix of approximately 15 percent Medicare patients. Inasmuch as a large majority of patients requiring cardiac catheterization are elderly, the Medicare patient mix projections are probably low. Since Medicare does not generally fully reimburse a hospital for its actual charges, the net income projections are likely overstated. The pro formas do not include any expenses associated with a helicopter ambulance service. The expenses projected for employee benefits, seventeen percent of salary, appear to be a little low for the Pasco County area. Riverside anticipates that the net income generated from the proposed catheterization lab will also help offset and reduce the overall losses experienced by it in the past several years. HRS District V includes Pasco and Pinellas Counties. Although the HRS methodology for determining the numeric need for cardiac catheterization laboratories indicates, no additional need in District V, the parties have stipulated and the evidence demonstrates that there is a need for such a lab in Pasco County. The five existing catheterization laboratories in District V are all located in Pinellas County. There are currently no existing or approved labs in Pasco County, and approximately 1,200 Pasco County residents per year are being sent out of Pasco County for cardiac catheterization, mostly to Tampa General Hospital in District VI. The physicians who testified at the hearing would prefer to perform cardiac catheterization procedures and send their catheterization patients to a facility which also has open heart surgery capacity. When open heart surgery is necessary and a patient is referred or transferred to another hospital for such surgery, that facility often performs its own cardiac catheterization procedures. This results-in duplicate costs, services and potential risk to the patient who is cashed in one facility and referred to another facility for surgery. It has been the experience of local cardiologists in Pasco County that between 50% and 70% of patients upon whom a catheterization procedure is performed ultimately also have open heart surgery. Nevertheless, each of the cardiologists who testified indicated his desire and willingness to utilize Riverside's proposed laboratory for low-risk diagnostic cardiac catheterization procedures. Until Riverside is able to offer open heart surgery services at its facility (which is within Riverside's long-range plan)' it proposes to screen patients for risk, and perform only elective, diagnostic catheterization procedures. Neither pediatric, emergency nor therapeutic catheterization, such as balloon angioplasty, will be performed in Riverside's proposed cardiac cath lab. Three hospitals offering open heart surgery have entered into formal transfer agreements with Riverside. These include Morton F. Plant Hospital in Clearwater, Bayfront Medical Center in St. Petersburg, and Tampa General Hospital in Tampa. None of the three are within thirty minutes driving time from Riverside by emergency vehicle. Morton F. Plant' the closest of the three, is 27 miles from Riverside. During a "red run" or "hot run" with sirens and lights flashing, and following normal emergency driving procedures, it would take between 45 and 50 minutes for an ambulance to travel between Riverside and Morton F. Plant Hospital. There are large traffic volumes which utilize the road systems between Riverside and Morton F. Plant Hospitals, and a great number of lighted intersections. While petitioner presented testimony that an emergency vehicle traveling 10 miles per hour over the speed limit could reach Morton F. Plant from Riverside in 30 minutes, 18 seconds, such testimony is not deemed credible. The witness had not actually traveled that distance in an emergency vehicle. An actual emergency run was made from Tarpon Springs General Hospital to Morton F. Plant Hospital a distance of about 15 miles. That run, travelling a portion of the same route proposed by Riverside's witness, took about 22 minutes. Given the fact that Riverside is some 10 to 12 miles further away from Morton F. Plant Hospital than is Tarpon Springs General Hospital, it is concluded that an ambulance could not travel the 27 miles from Riverside to Morton F. Plant Hospital in 30 minutes in average travel conditions. Riverside does have a helipad at its facility, but does not own a helicopter and does not have a contract for air ambulance services. Although one of Riverside's witnesses believed that a helicopter would be at Riverside on all days upon which cardiac catheterizations are performed, no expenses for a helicopter or a contract with a helicopter ambulance service are included within Riverside's pro forma. Riverside intends to offer cardiac catheterization services 24 hours a day, seven days a week. While patients are generally directly charged for the actual costs associated with emergency transport, it is not reasonable to assume that the costs of either purchasing or maintaining an on-site helicopter could legitimately be directly charged to patients. The actual flight time from ground takeoff at Riverside to ground landing at Tampa General Hospital in average travel conditions is 15 minutes. There is a licensed air ambulance service, known as Suncoast, which operates out of Tampa International Airport and maintains two helicopters. Unless a hospital has a contract for air ambulance services, Suncoast does not dedicate a helicopter to be on standby and ready to respond to a call for an emergency flight. Even if a helicopter were available, it would take between 30 to 45 minutes to place a helicopter on the ground at Riverside after the need has been communicated to Suncoast. Given the fact that Riverside does not own or maintain a helicopter on site, it is reasonable to consider the time which could be expected to lapse between the summons for an emergency transport vehicle and its arrival, as well as the time of transport between two hospital facilities. Emergency runs, whether by ground ambulance or air transport, are tremendously stressful on a patient. This factor becomes particularly important when the patient is one who has recently undergone a cardiac catheterization procedure and is being transported for emergency open heart surgery. Even when patients are screened for risk, complications can arise during a diagnostic cardiac catheterization procedure necessitating an immediate transfer of the patient to open heart surgery or, in some events, a therapeutic catheterization procedure. Such complications include a possible artery dissection during insertion of the catheter or the occurrence of an eschemic episode as a result of the displacement of oxygenated blood with the dye injected into the coronary arteries. While these events are rare, occurring in possibly only 1% of all diagnostic procedures, they do necessitate immediate, more advanced treatment. The 1985-87 Florida State Health Plan favors co-located cardiac catheterization laboratories and open heart surgery programs in the same facility. Quoting from the Inter-Society Commission on Heart Disease Resources, the State Health Plan notes: ". . . there can be little justification for the development of these highly specialized facilities (cash labs) unless expertise in cardiology, cardiovascular radiology, and cardiovascular surgery are immediately available. Optimally therefore, catheterization laboratories should be located only in institutions with well organized and closely related programs of cardiovascular surgery. ". . . such an arrangement not only facilitates close interdisciplinary cooperation and minimizes unnecessary, repetitive, inadequate, or unsafe diagnostic studies, but it also allows prompt intervention should life threatening complications develop during catheterization studies . . . It should be emphasized . . . that separation of the diagnostic laboratory from the surgical facility is less than optimal and may present serious problems." (Riverside Exhibit 5, Volume II, pages 95-96). The State Plan recognizes that some within the medical community feel that independent, "satellite" labs can perform studies as adequately as labs associated with open heart surgery programs. However, it also recognizes the literature demonstrating that such independent labs usually have lower utilization rates. The District v Health Plan does not stress co-location, but suggests that cath labs be developed in areas which have the potential of justifying open heart surgery capability within three years. Other than considerations of timely access, there was no evidence that an additional open heart surgery facility is needed in District V or specifically, in Pasco County. The District Health Plan does stress the provision of services to the indigent. Riverside is committed to serving all patients regardless of ability to pay. Bayonet Point Hospital is a 200-bed hospital located in Hudson, also in Pasco County. In an earlier batching cycle, Bayonet Point applied for a Certificate of Need to add both a cardiac catheterization laboratory and open heart surgery at its Hudson facility. After an administrative hearing, it was recommended that the application be granted. (Division of Administrative Hearings Case No. 85-3569) The Department of Health and Rehabilitative Services rejected that recommendation by Final Order filed on August 22, 1986, and the matter is currently on appeal to the District Court of Appeal, First District. If Bayonet Point were to offer cardiac catheterization services at its facility in Hudson, a cardiac cath lab at Riverside would have an adverse impact upon Bayonet Point's program.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that Riverside's application for a Certificate of Need to equip and operate a cardiac catheterization laboratory at its hospital in New Port Richey be DENIED. Respectfully submitted and entered this 19th day of March, 1987, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1987. COPIES FURNISHED: Leonard A. Carson, Esq. and Robert P. Daniti, Esq. Carson & Linn, P.A. 1711-D Mahan Drive Tallahassee, Florida 32308 Darrell White, Esq. Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building 1, Room 407 Tallahassee, Florida 32399-0700 Thomas M. Beason, Esq. and Donna H. Stinson, Esq. Moyle, Flanagan, Katz, Fitzgerald & Sheehan 118 North Gadsden Street Tallahassee, Florida 32301 Gregory L. Coler, Secretary Department of HRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of HRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX The proposed findings of fact submitted by the petitioner, respondent and intervenor have been fully considered and have been accepted and/or incorporated in this Recommended Order, except as noted below. Petitioner 16. First sentence rejected as contrary to the evidence. 27. Last sentence rejected insofar as it contemplates the reasonableness of the pro forma with regard to the Medicare patient mix and the failure to include expenses relating to an air ambulance. 38,39. Rejected. Failure to account for a proper payor mix and air ambulance service renders the financial feasibility projections unreliable. Rejected. Only the JCAH can render such a factual finding. Last sentence rejected as unsupported by the record of this proceeding. See Order denying second motion to reopen record. Rejected as to travel time. Not supported by competent, substantial evidence. Accepted only insofar as it pertains to actual patient flight time. Rejected as not supported by competent, substantial evidence. Second sentence rejected as speculative. Last sentence rejected as unsupported by competent, substantial evidence, although it is recognized that Riverside intends to offer only diagnostic procedures. Last sentence rejected as an absolute statement of fact. Not supported by competent, substantial evidence. 64. Second sentence partially rejected as contradicted by competent, substantial evidence. See Finding of Fact 10 in this Recommended Order. Respondent HRS 20. Rejected insofar as it applies to all ambulance drivers. Not supported by competent, substantial evidence. Intervenor Bayonet Point 5. Rejected as irrelevant and immaterial. Fourth sentence is rejected as not supported by competent substantial evidence. Third sentence partially rejected. See Finding of Fact Number 11. 16. While accepted as an accurate statement of fact, it is concluded that such considerations should not be included within the 30 minute travel time rule. 17,18. Rejected as irrelevant and immaterial to the issues in dispute. First sentence accepted as factually correct but not determinative of the reasonableness of the pro formas. First sentence accepted as factually correct but not determinative of the reasonableness of the pro formas. 22,23. Partially rejected as speculative and unsupported by competent, substantial evidence. Rejected as an improper finding of fact, as opposed to a conclusion of law after considering the factual circumstances. Accepted only if the words "if approved" are added.
Findings Of Fact Based upon the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The petitioner's facility opened in January of 1976 as the Hubert Rutland Hospital. Its name was subsequently changed to Gateway Community Hospital and, after purchase by petitioner, it became Humana Hospital Northside. Dr. D. K. Mukherjee, Board-certified in internal medicine and cardiology, came to petitioner's facility in 1976 for the prime purpose of developing a cardiac catheterization laboratory, and assisted in preparing a list of equipment necessary to begin operation of such a laboratory. On December 31, 1976, petitioner's predecessor entered into a medical equipment service agreement for cardiac catheterization and monitoring equipment. That equipment, costing less than $100,000.00, was delivered to the hospital on or before June 17, 1977. Since that time, cardiac catheterization procedures, as defined in Rule 10-5.11(15), Florida Administrative Code, have been performed on a continuous and regular basis at petitioner's facility in Special Procedures Room No. 3. Over the past eight to nine years, the longest interval between the performance of such procedures has been approximately one or two weeks. Special Procedures Room No. 3, while also utilized for other purposes, has the equipment, staff and support services necessary for providing the studies and procedures associated with cardiac catheterization. The hospital itself is capable of providing the ancillary diagnostic services, such as hematology studies, electrocardiography, chest x-rays, blood-gas studies, pathology, blood chemistry analysis and nuclear studies pertaining to cardiology. Prior to July 1, 1977, Certificate of Need review was not required for the purchase of cardiac catheterization equipment by a hospital unless it involved a capital expenditure of more than $100,000.00. Commencing on July 1, 1977, Certificate of Need review was required when a health care facility sought to provide a substantial change in service, defined as a service which was not offered on a regular basis within the prior twelve-month period. Section 381.494(1)(c), Florida Statutes, and Rule 10-5.02(19), Florida Administrative Code. Because of technological and scientific advances, petitioner desired to replace and update the equipment purchased in 1976 for the performance of special procedures. Accordingly, in April of 1984, it submitted an application for a Certificate of Need to replace special procedures equipment at a project cost of $1,269,000.00. The application, in Section 3 stating the need and justification for the project, noted that: "Our existing equipment is totally inadequate to perform state-of-the-art cardiac catheter- ization and coronary angioplasty. When we began performing cardiac catheterization in 1977 this equipment was adequate, but today it is totally unacceptable. This proposed equipment will not only provide state-of-the- art equipment for these procedures, but will do so in a cost-effective manner since combined utilization of such high cost equip- ment contributes to the reduction of the cost of medical care." HRS issued petitioner Certificate of Need number 3261 for the replacement of special procedures equipment at a total project cost of $1,269,000.00, as requested. However, in a cover letter transmitting the issued Certificate of Need to the petitioner, HRS noted: "Please be advised that neither this office, the Office of Licensure and Certification nor the Local Health Council has documen- tation to support the performance of cardiac catheterization procedures at this hospital." Local Health Councils are private nonprofit corporations which contract with HRS to conduct local planning activities, including the collection of data, the publication of various utilization reports and the development of Local Health Plans. When HRS reviews proposed health care projects which require a Certificate of Need, it utilizes the data submitted to it by the various Local Health Councils, particularly in those instances where its rules contain a methodology or formula which includes as a factor an accounting of existing facilities or services. Application of the methodology contained in HRS's rule for determining the need for additional cardiac catheterization laboratories requires a knowledge of the number of procedures performed per year by existing and approved laboratories. Rule 10-5.11(15), Florida Administrative Code. The Health Council of Pasco/Pinellas, Inc. collects data from hospitals within Pasco and Pinellas Counties regarding bed utilization and service information. Hospitals in the district are requested to complete and submit certain information on a "Monthly Hospital Utilization Form." Among the items of information requested is the number of cardiac catheterization procedures performed during the reporting period. The Health Council also publishes and distributes annual and semi-annual utilization reports for the district. There is no provision in the statutes or rules which require hospitals to report utilization or service data to the various Local Health Councils, and HRS itself does not require that such information be reported to it. It is not unusual for hospitals to report inaccurate, incomplete or inconsistent data to Local Health Councils. Indeed, it is recognized in the "1984 Annual Hospital Utilization Report for District V Pasco/Pinellas Health Council, Inc." that, while all hospitals in the District submitted monthly hospital utilization information, "One limitation to this report involves those institutions who did not, for various reasons, submit data for beds by service categories and/or data pertaining to specialty services." HRS Exhibit F, p. 1. The form utilized by the Pasco/Pinellas Health Council contains no definition of cardiac catheterization procedures and no directions as to how to complete the form. While it has regularly submitted a monthly utilization form to the Local Health Council, petitioner has never reported the performance of cardiac catheterizations at its facility. The various reports published by the Local Health Council do not list petitioner as performing cardiac catheterization procedures. While a health care facility may obtain a written determination from HRS that a given service is exempt from Certificate of Need review due to its "grandfathered" status, there is no agency rule or policy which requires a facility to obtain such a written exemption. It has generally been the agency policy that equipment and services acquired by a facility prior to the date that such acquisition became reviewable under the Certificate of Need law are not reviewable on a retroactive basis.
The Issue The issue presented is whether the application of Respondent Adventist Health System/Sunbelt, Inc. d/b/a East Pasco Medical Center for a certificate of need to add 24 acute care beds to its existing facility should be approved.
Findings Of Fact The Seventh Day Adventist Church owns Respondent Advent-ist Health System/Sunbelt, Inc. That corporation, which occupies a strong financial position, operates not-for-profit hospitals in several states, including Florida. One of the Florida hospitals is East Pasco Medical Center (East Pasco), located in Zephyrhills. Zephyrhills is in eastern Pasco County, which, for health planning purposes, is known as Subdistrict 2 of District 5. East Pasco is an 85-bed acute care hospital which provides most of the common services found in a community hospital. In addition to providing general acute care and obstetrics (OB), it has an intensive care unit (ICU) and offers neurosurgery and kidney dialysis services. East Pasco also has completed but not yet opened an 11-bed skilled nursing unit (SNU) and a 10-bed observation unit. The 11 beds in the SNU and the 10 beds in the observation unit are in addition to the 85 acute care beds for which East Pasco is licensed. For licensure purposes, acute care beds are not divided into types of service. East Pasco's current configuration for its 85 acute care beds is as follows: 68 medical-surgical beds, 8 ICU beds, and 9 OB beds. East Pasco has an active emergency room which experiences up to 30,000 visits per year. East Pasco obtains approximately 55 percent of its in-patient admissions through its emergency room. East Pasco is accredited by the Joint Commission for the Accreditation of Healthcare Organizations (JCAHO). Petitioner Humana of Florida, Inc. d/b/a Humana Hospital Pasco (Humana) is an existing 120-bed acute care hospital in Dade City. It is situated approximately 10 minutes away from East Pasco. Humana provides the same services that East Pasco provides, including medical-surgical, ICU/CCU, OB, kidney dialysis, and neurosurgery. Like East Pasco, Humana is accredited by the JCAHO. However, Humana's accreditation is "with commendation", the highest rating given by the JCAHO. Like East Pasco, Humana has a large medical staff, primarily consisting of physicians who have their offices located in Zephyrhills or Dade City. The medical staff rosters of Humana and East Pasco are virtually identical. Dade City is also located in east Pasco County, and the primary service areas of Humana and East Pasco are virtually identical. Like East Pasco, Humana serves the Medicaid and indigent patient populations. In its fiscal year 1991, Humana provided 6 percent of its patient days to Medicaid patients. In fiscal year 1992, that increased to 8.8 percent, the same as East Pasco. Humana's Medicaid patient days increased substantially with the introduction of OB services at Humana since Medicaid patients receive primarily OB services. East Pasco has been designated as a disproportionate share provider under the State's program to give economic incentives to hospitals serving a certain percentage of Medicaid patients. East Pasco also serves the indigent patient population pursuant to a contract between it and Pasco County. In September, 1991, East Pasco filed its application for a certificate of need (CON) requesting approval for 24 additional medical-surgical beds (acute care beds) for the July, 1996, planning horizon. In January, 1992, the Agency notified East Pasco of its intent to approve the application and issue to East Pasco CON No. 6783. Humana filed this challenge to the Agency's intent to grant the application, and this proceeding ensued. All parties subsequently stipulated that Humana has standing to initiate and maintain this proceeding and that Humana was not obligated to present evidence of its standing. East Pasco has proposed a new unit to house the 24 additional medical- surgical beds to be located on the third floor of a new three-story tower. That third floor would consist of 13,000 gross square feet (GSF), would cost $4,087,810, and would consist of only private rooms with three nurse stations. East Pasco proposes no new services, only additional beds. Construction of the three-story tower has not yet commenced but is awaiting the outcome of this proceeding. The first floor of the new tower will be a wellness center, a project which did not require CON review. The second floor will house a new ICU. East Pasco presented conflicting evidence as to the size of that new ICU. The Agency approved East Pasco's second floor ICU as a 12-bed ICU with a cost below the threshold cost which would have required CON review. In spite of the exemption from review obtained by East Pasco, it is specifically found that East Pasco intends to place a 16-bed ICU on the second floor of the yet-to-be-constructed tower. Thus, East Pasco would achieve its 16-bed ICU by relocating its existing 8-bed ICU and converting other beds to ICU beds. Thus, if the 24 new beds sought are approved they will produce 16 additional medical-surgical beds and 8 additional ICU beds. Resolution of the number of beds proposed for the second floor of the new tower is required in this proceeding for two reasons. First, the cost of this project is impacted. If 8 of the new beds are to be used as ICU beds rather than as medical-surgical beds, they will be more expensive to construct and equip. Second, corporate approval of corporate projects is a prerequisite in Florida's CON process. East Pasco's Board of Directors met on August 14, 1991, to authorize the filing of this application. This application proposes 24 medical-surgical beds, the corporate resolution filed with the Agency authorized 24 acute care beds, but the minutes of the Board's meeting reflect that the Board itself approved 24 beds for ICU and PCU services. Although ICU, PCU, and medical-surgical beds are all acute care beds, they are constructed, equipped, and staffed differently. For the reasons described below, there is no need in District 5 or in the east Pasco County Subdistrict for East Pasco's proposed 24 additional medical-surgical beds. Rule 59C-1.038, Florida Administrative Code, includes the numeric need methodology for projecting acute care bed need. Under that Rule, applications for acute care beds will "not normally" be approved unless there is numeric need. For the September, 1991, application batching cycle, the Agency published a fixed need of zero acute care beds needed in District 5, Subdistrict 2, which is composed of only East Pasco and Humana hospitals. This fixed and published need of zero was not challenged. Per paragraph (7)(d) of the Rule, additional acute care beds will "not normally" be approved unless the subdistrict occupancy is at or exceeds 75 percent. All parties agree that calendar year 1990 is the proper period to ascertain whether this standard is met. In 1990, the acute care bed occupancy rate in the Subdistrict was 55.33 percent. The parties agree that the Rule's occupancy standard is not met. Therefore, no additional beds should normally be approved. There is ample unused capacity in District 5 and in the Subdistrict to meet acute care demand. Humana's occupancy is well below 50 percent. In years and 2 for the proposed unit, East Pasco projects 1,042 and 1,760 patient days, respectively. Humana has sufficient unused capacity to accommodate that projected demand. Utilization trends support the lack of need shown by the need methodology and the occupancy standard. Acute care utilization in the Subdistrict has decreased since 1986. In 1986, the two Subdistrict hospitals generated 42,830 patient days, a 57.2 percent occupancy. In 1991, notwithstanding population growth in the Subdistrict, the two Subdistrict hospitals generated 41,756 patient days, a 55.8 percent occupancy. Clearly, then, there is no increased demand for acute care services, but only a reshuffling of market share between the two hospitals. Contrary to East Pasco's suggestion, first quarter utilization does not show need and has, in fact, been decreasing. For example, the first quarter (January-March) of 1986 generated 13,572 patient days in the Subdistrict, a 73.6 percent occupancy; in the first quarter of 1992, there were 12,482 patient days, a 66.9 percent occupancy, the lowest first quarter utilization in the last 6 years in the Subdistrict. Additionally, the average length of stay (ALOS) in the Subdistrict continues to decline. In the first quarter of 1991, the ALOS was 5.4 days; in the first quarter of 1992, the ALOS was 5.1 days. Accordingly, although East Pasco shows an increased number of admissions over the last several years, the continued decline in the ALOS has resulted in a decreasing number of patient days. The population growth in the Subdistrict is not so substantial as to demonstrate need. Humana relied upon population projections produced by a national firm specializing in demographic analyses. Such a population data source is generally more reliable than a county's own projections, relied upon by East Pasco. The Subdistrict is growing but not at an extraordinary pace. In comparison, the West Pasco Subdistrict is growing faster. There are no geographic access problems to receiving acute care services which would support a finding of need. There are many hospitals available and accessible to residents of the Subdistrict within 30 minutes travel time or less. The entire Subdistrict is within a 30-minute travel time of Humana and of East Pasco. Most of the Subdistrict is also within 30 minutes travel time to other acute care hospitals, including University Community Hospital in Tampa, Lakeland Regional Medical Center in Lakeland, and South Florida Baptist Hospital in Plant City. The Zephyrhills area in particular is within 30 minutes travel time to those other facilities. Humana is an available alternative to the proposed project. Humana is geographically accessible to the entire Subdistrict, provides all the services that East Pasco provides, and provides good quality of care. Humana's medical staff roster includes the same physicians that practice at East Pasco. Humana already serves the same geographic service area that East Pasco serves. Indeed, several East Pasco witnesses testified that patients are transferred to Humana when East Pasco is full, thereby acknowledging Humana as an alternative for Subdistrict residents. Hospitals situated outside the Subdistrict are also available and appropriate alternatives to the proposed project. These hospitals have unused capacity to accommodate the projected demand from the Subdistrict. Notably, residents of the Subdistrict have historically greatly utilized hospitals located outside the Subdistrict. In 1990, 63.7 percent of the Subdistrict's residents went to a hospital other than Humana or East Pasco. Thus, physicians and residents regard hospitals situated outside the Subdistrict as appropriate and viable alternatives. Since East Pasco does not propose to offer any new service, and since there is accessible unused capacity at Humana and these other facilities, there are better alternatives to adding new beds at East Pasco. In addition, although approving more beds at East Pasco would improve availability of services at East Pasco, such is not a planning consideration or a review criterion. East Pasco and Humana provide similar levels of Medicaid care. In calendar year 1991, Medicaid comprised 8.8 percent of all patient days at East Pasco, less than in 1990. From September, 1991, to August, 1992, 8.8 percent of all patient days at Humana were Medicaid days. The two hospitals also provide similar amounts of indigent care. Therefore, Humana is economically accessible to all residents of the Subdistrict. Facilities located outside the Subdistrict also are economically accessible. Physician preferences are not significant in formulating conclusions of need on a District or Subdistrict basis. Physicians may well have their own reasons for doing things which may be contrary to sound health care planning principles. Further, physicians' personal preferences are not relevant to ascertaining how existing resources can be best and most efficiently used. The acute care bed Rule provides that additional beds "may" be approved at a specific facility if its occupancy exceeds 75 percent even though no beds can be authorized pursuant to the mathematical calculations established by the Rule. While East Pasco achieved an occupancy rate of 78.78 percent in calendar year 1990, that statistic merely "opens the door" for an evaluation of whether there are compelling circumstances to justify the approval of beds at a specific facility despite the absence of need demonstrated by the acute bed methodology. There are no factors or circumstances which would justify the approval of 24 additional medical-surgical beds at East Pasco pursuant to the specific facility provision. First, there are accessible and available alternatives for meeting projected demand. The majority of east Pasco County residents outmigrate even when beds are available at East Pasco. There is an excess capacity in the Subdistrict and in the District. Second, East Pasco's application discusses seasonal overcrowding due, in large part, to using in-patient beds for "observation" patients. Observation patients are those with a hospital stay of less than 24 hours. East Pasco has recently completed a new 10-bed observation unit. In 1991, East Pasco averaged observation patients per day; therefore, this new 10-bed unit will ease the strain on East Pasco's in-patient beds. Third, East Pasco's application relies on the "overflow" of patients in the winter season to justify its proposed bed addition. The actual amount of "overflow" is reflected in East Pasco's transfer log, which shows that there were not that many patients transferred in 1991. In fact, there were several months in which there were zero transfers. Fourth, the proposed beds are only intended to handle "seasonal" population demands. The proposed unit would not be open year-round. East Pasco was below 75 percent occupancy from May to October, 1991. East Pasco acknowledges that the proposed beds are only for part of the year and are intended to accommodate the demands of the seasonal population, who are not necessarily residents of the Subdistrict. East Pasco's application in reality requests approval for adding 24 beds at a cost of over $4,000,000 to accommodate, by East Pasco's own projections, an average daily census of three patients the first year and five patients the second year in a unit that would be closed at least six months out of each year. That is an excessive expenditure to provide access to relatively few people, where access to nearby facilities exists. Although East Pasco has shown that on certain days it has exceeded its OB capacity, and although East Pasco maintains that its most common capacity problem is the lack of available ICU beds, East Pasco's application itself does not suggest that it intends to increase the number of OB or ICU beds. Further, although on certain days East Pasco has experienced over 100 percent occupancy and has placed patients in the hallways, that situation can be obviated by referring patients to other hospitals, and the situation will be alleviated when East Pasco soon opens its additional 10-bed observation unit and 11-bed SNU. East Pasco has, therefore, shown that it has an occupancy rate sufficient to entitle it to review despite the lack of need under the acute care bed Rule, but it has shown no other reasons why its application should be approved. The Florida State Health Plan includes various preferences for reviewing CON applications. On balance, the East Pasco application is not consistent with that Plan. The first group of preferences relates to the addition of hospital beds. The first item in that group provides that no additional beds should generally be approved unless the subdistrict occupancy is at or exceeds 75 percent or unless the applicant-facility is at 80 percent. Since calendar year 1990 data was used to calculate the need formula and Subdistrict occupancy standard, it is appropriate to use that same data to determine East Pasco's occupancy for evaluating this preference, rather than using two different time periods as the Agency did. In 1990, the Subdistrict was below 75 percent, and East Pasco's occupancy was below 80 percent. Therefore, this preference is not met. The second item under this group provides that "in the event that acute care bed need is shown", preference shall be given to an applicant who provides a disproportionate share of Medicaid and indigent services in the Subdistrict. This preference is not met since no "acute care bed need is shown". The next group of preferences is entitled "transfer and conversion of acute care beds". Because East Pasco does not propose to transfer or convert acute care beds, East Pasco does not satisfy any of the preferences included under this grouping. The next group of preferences is entitled "indigent care". The first item provides that preference shall be given to an applicant who provides a disproportionate share of Medicaid and charity care in relation to other hospitals in the District or Subdistrict. This preference is not met. Although East Pasco has historically provided more Medicaid and indigent care than Humana, there is no showing that East Pasco will provide disproportionately more Medicaid and indigent care for medical-surgical services specifically. Most of East Pasco's Medicaid participation is for OB and newborn services, not medical- surgical services. Both Humana and East Pasco provide less than 1 percent of their gross revenues for indigent care. Given that most of the Subdistrict population is elderly, indigent care is not a major issue. Also, it was stipulated that East Pasco does not know how much indigent care it provides for medical-surgical services only. The second item under this group relates to whether CON approval would negatively affect the financial viability of a disproportionate share hospital. This preference is not relevant to East Pasco's application. The third group of preferences is entitled "emergency services". The first item relates to the applicant's record of accepting indigent patients for emergency care. East Pasco presented no information on this in its application except for its proof that it has a contractual obligation to do so. The second item relates to whether the facility/applicant is a trauma center. East Pasco is not a designated trauma center. The third item relates to whether the applicant demonstrates a full range of emergency services. East Pasco did not address this in its application. The fourth item addresses whether the facility has ever been fined by HRS for violations of emergency services statutes. East Pasco did not address this item in its application. Therefore, East Pasco does not meet the preferences in this group. The fourth group of preferences is entitled "teaching, research, and referral hospitals". The application does not address these particular preferences, and East Pasco does not hold itself out as a teaching, research or referral hospital. Therefore, East Pasco does not satisfy the items under this grouping. The fifth group of preferences is entitled "specialized services". East Pasco does not propose to provide any specialized services and, therefore, items under this grouping are not satisfied. The District 5 Local Health Plan includes recommendations for reviewing CON applications. On balance, the East Pasco application does not satisfy that plan. The first preference relates to whether the applicant provides a disproportionate share of Medicaid and charity care. For the reasons indicated above regarding the State Health Plan, this preference is not met. Further, East Pasco's application does not suggest that the 24 medical-surgical beds sought will enhance its Medicaid or indigent participation. The second recommendation provides that "if a numeric bed need exists as shown by the state bed methodology", preference is given to an applicant who has generated certain occupancy levels. Because no numeric bed need was shown per the Rule methodology, this recommendation is not met. The third recommendation relates to the transfer of existing acute care beds. Because East Pasco does not propose a transfer of beds, its application is not consistent with this recommendation. The fourth recommendation gives preference to applicants who document the cost-effectiveness and efficiency of their project. East Pasco does not satisfy this preference. East Pasco failed to show any cost efficiencies for its project. East Pasco proposes to spend over $4 million to serve, on the average, 3 to 5 patients per day in years 1 and 2. That is cost-inefficient. East Pasco did not prove that the charges or costs of providing medical-surgical services would be any less than what it currently charges. East Pasco's application includes two pro formas: a hospital-wide pro forma and an incremental pro forma for the proposed 24-bed unit. The person who prepared those pro formas did not testify, and the person who did testify did not participate in preparing the pro formas. Further, the witness only testified to the reasonableness of the incremental pro forma; he did not testify, directly or indirectly, regarding the hospital-wide pro forma. An incremental pro forma alone does not demonstrate long-term financial feasibility, even if the incremental pro forma were reasonable. An incremental pro forma alone does not reflect the project as a whole. At East Pasco, there are several projects and activities on-going or planned that must be evaluated. In addition to the existing 85 beds, East Pasco has underway: (1) opening a 10-bed observation unit; (2) opening an 11-bed SNU; (3) a planned wellness center on the first floor of the proposed 3-story tower; and (4) the planned relocation and enlargement of its ICU to the second floor of the proposed tower. Those projects add expenses, put strains on cash, and require debt. Without considering all the activity at the hospital, one cannot reasonably ascertain whether the proposed $4.1 Million third-floor project is financially feasible. For example, a small project could show an incremental profit but the hospital as a whole could lose money. East Pasco simply assumes that its 24-bed unit will be financially feasible in 1994 and 1995, years 1 and 2 of the project. The health care field is too dynamic and volatile for such assumptions. For example, East Pasco had an operating loss in 1990 but did well in 1991. By not analyzing the hospital-wide pro forma and proving its reasonableness, East Pasco did not show the required financial feasibility. It only demonstrated the results of one component of an entire operation. East Pasco has left unanswered the question of whether the facility as a whole will be able to finance this project in conjunction with all its other requirements. Further, the application lacked sufficient and clear presentation of the assumptions underlying the hospital-wide pro forma. Restated, the hospital-wide pro forma is not self-explanatory. The incremental pro forma, showing the proposed revenues and expenses for the 24-bed medical-surgical unit for years 1994 and 1995, is not reasonable. The projected revenues are overstated, and the projected expenses are understated. The assumptions underlying the financial projections are unreasonable. Further, the profit projections are unrealistic; in year two, East Pasco projects a profit of about $615,000 on an average daily census of less than 5 patients per day. On its face, that is unrealistic. In 1991, East Pasco generated 24,517 patient days, which was virtually the same as its 1990 utilization. In 1993, East Pasco projects 26,220 days. In year 1 of this project (1994), East Pasco projects 27,262 days hospital-wide, including the 1,042 incremental days associated with this project. Thus, in just a 3-year period, East Pasco projects almost 3,000 additional patient days, and even more for year 2 (1995). It is not reasonable to assume such an increase in utilization since utilization during the first quarter of 1992 declined from first quarter 1991. Therefore, patient day projections are overstated, thereby causing overstated projected gross revenue. East Pasco's projected daily charge is based on the hospital-wide average charge. It is not based on historical charges for medical-surgical services specifically. It is unreasonable to use charges for hospital services as a whole when the proposed project is for medical-surgical services only. Because the underlying assumption is invalid, projected revenues lack credibility. In calculating deductions from gross revenues, East Pasco assumed the hospital-wide payor mix and did not specifically ascertain the payor mix (and, therefore, the deductions) for medical-surgical services specifically. Again, this is an unreasonable assumption. Deductions from gross revenue should have been analyzed for medical-surgical services specifically. Due to the invalid assumption, the deductions from revenue figures lack credibility. East Pasco projects 5.8 FTEs for year 1 and 6.0 FTEs for year 2. East Pasco proposes to operate the 24-bed unit as an independent unit. These staffing levels are insufficient. East Pasco's proposed utilization equates to a 4.8 average daily census, which requires two nurses at all times. By East Pasco's admission, to staff a unit with two persons at all times throughout the year requires 9.2 paid nursing FTEs in addition to ward clerks and other support personnel. If the volume fluctuated and the census exceeded 7 or 8, more than two nurses would be needed. Thus, the 5.8 and the 6.0 FTE numbers are too low. The proposed staffing does not allow one RN to be on the floor at all times. To maintain one RN on the floor at all times throughout the year requires 4.2 FTEs; East Pasco budgeted for one. East Pasco does not have excess RNs available from its existing staff to cover the proposed addition. The supplies expense shown on the incremental pro forma was based on a hospital-wide average. The proposed project is for a specific service, and one cannot reasonably use a hospital-wide average instead. Accordingly, the calculation of expense for supplies is not reasonable. The pro forma includes an expense item entitled "other". East Pasco offered no explanation for that expense. Also, the pro forma did not include a line-item for the HCCCB indigent care tax, which is 1.5 percent of net revenue. East Pasco's proposed 24-bed medical-surgical unit will cover 13,000 GSF and will cost more than $4.1 million. All rooms will be private. The unit will have three nurse stations. According to East Pasco, the unit is to be a basic medical-surgical floor and is not intended to be a progressive care unit (PCU). This proposed design is not reasonable and is excessively large by at least 30 percent. This design is inefficient and, in reality, is not the design of a basic medical-surgical unit, but is instead the design of a PCU. There are three main reasons why the design is excessive. First, it is not necessary or reasonable to have all private rooms. A regular medical- surgical unit should have about an equal split of semi-private rooms. Notably, East Pasco's new 11-bed SNU has 5 private and 3 semi-private rooms for patients who will require hospitalization for up to 90 days. Second, these private rooms are almost twice the minimum size required by state licensure regulations. Third, three nurse stations are unnecessary; only one nurse station is needed for a basic 24-bed medial-surgical unit. East Pasco currently has 68 medical- surgical beds on 2 units, and each such unit has only 1 nurse station. The existing 68 medical-surgical beds at East Pasco average about 360 GSF per bed. The proposed 24 beds will average 542 GSF per bed. All private rooms and 3 nurse stations are, clearly, the design for a PCU. A PCU is a step- down unit from an ICU, which has high staff-to-patient ratios thereby requiring more nurse stations. East Pasco's projected construction cost for the 24-bed medical- surgical unit is $142.91 per GSF. This is unreasonably understated. It is uncontroverted that an SNU is less costly to construct than a medical-surgical unit. According to its projections, East Pasco's 11-bed SNU cost $171 per GSF in 1992. Clearly, that SNU cost is substantially greater than East Pasco's projected construction cost at issue. This inconsistency was never explained by competent evidence. In evaluating East Pasco's estimates, the Agency's architect relied upon 1991 Means construction cost data. He averaged the Means' medium figure ($123 per GSF) with the high figure ($172 per GSF) to derive a 1991 estimate of $147.50 per GSF. To that, one must add a 10 percent contingency factor, inflation, and an architectural fee. That totals $187.69 per GSF. The $187.69 projected figure is consistent with the 1992 SNU cost figure of $171. Thus, for construction costs alone, East Pasco underestimated by $44.77 per square foot, which is about $582,000. East Pasco proposed to construct a three-story tower; the third floor will house the proposed 24 medical-surgical beds. The second floor will house a 16-bed ICU, comprised of relocating the existing 8 ICU beds and converting 8 other acute care beds. East Pasco's application project costs only cover the third floor; East Pasco maintains the second floor is exempt from CON review and thus its cost is not relevant. As described below, East Pasco unreasonably failed to include costs of the second floor in its application. A hospital project costing $1,000,000 or more (other than an out- patient project) requires CON review. In its letter for exemption East Pasco states that the second floor would contain 12 ICU beds and cost $975,000 (calculated by multiplying 6,500 GSF by $150/foot). That letter is erroneous for several reasons: (1) the $150/foot is in 1992 dollars and does not include inflation; (2) the $150/foot does not include a 10 percent construction contingency fee, which is necessary and reasonable; (3) the $150/foot does not include an 8.4 percent architectural/engineering fee, which is necessary and reasonable; and (4) the $150/foot does not include any debt or financing fee. Including these necessary amounts alone shows that the second floor, in truth, exceeds the $1,000,000 threshold. Also, the cost for equipping an ICU bed is $45,000 per bed; for 16 beds, that is $720,000 for equipment. Surely the size and cost of a 16-bed ICU is different from and greater than a 12-bed ICU. East Pasco stated in its exemption request letter that the second floor would have 12 beds even though East Pasco intends 16 beds. East Pasco and the Agency correctly argue that the exemption given to East Pasco by the Agency for its second-floor ICU project is not part of the instant application and cannot be considered in this proceeding. However, the accuracy and reasonableness of the costs projected by East Pasco attendant to the 24 additional beds it seeks are an integral part of this proceeding, as is the scope of the project being reviewed and challenged. The second and third floor projects are, in truth, one project. It is East Pasco's intention to add 16 medical-surgical beds and 8 ICU beds to its facility. To establish the 16-bed ICU unit, East Pasco needs additional acute care beds; East Pasco does not have 8 available beds among its existing bed complement to convert to ICU purposes. The OB beds often run at 100 percent occupancy and, during the peak season, the medical-surgical beds run high occupancy. Thus, East Pasco cannot fully implement the second floor without approval of the proposed 24 new beds. There will be no community benefits in terms of charges if this application is approved. "Net revenues" must be the basis for comparing charges between facilities. Net revenues refers to what third party payors (such as Medicare, Medicaid, HMO/PPOs and most insurors) actually pay for hospital services as opposed to what hospitals charge. Few patients ever pay gross charges, particularly in the elderly East Pasco Subdistrict. In 1991, Humana's average net revenue per day was lower than East Pasco's. Humana's actual net revenue per admission in its fiscal year 1992 was $4,180. East Pasco's projected 1992 net revenue per admission is $5,301. Thus, for 1992, third party payors paid, on behalf of their patients, less per admission at Humana than at East Pasco. In its application, East Pasco projects an 8 percent per year increase in charges. An annual increase of 8 percent is not promoting charge-efficiency. East Pasco's application did not demonstrate cost-efficiencies resulting from approval, but rather, cost-inefficiencies. First, Humana would lose patient volume should East Pasco be approved. Humana currently receives transfers and direct admissions when East Pasco is full. Loss of patient volume would increase operating costs per patient day at Humana. Second, there is no need for additional beds in the Subdistrict. There is already excess capacity in the Subdistrict. Exacerbating excess capacity promotes cost-inefficiency. East Pasco admits the unit will not even be open six months out of the year because there is no need for it then. Third, East Pasco projects very low census in years 1 and 2, about 3 patients per day in year 1 and less than 5 patients per day in year 2. Spending over $4,000,000 to accommodate such low utilization is inefficient and unreasonable. Approval of East Pasco's application would not promote positive competition. There is competition now in the Subdistrict between Humana and East Pasco. East Pasco already captures a larger market share of the Subdistrict than Humana. Approving this application would only tip the scales more in favor of East Pasco and would adversely impact Humana's already poor financial condition. The quality of care delivered at Humana is very good. The JCAHO rates all acute care hospitals, and its rating is widely recognized in the hospital industry. The JCAHO evaluates many factors and components of a hospital. Humana is accredited "with commendation", the highest rating given. Only 5-6 percent of all acute care hospital in the country receive that highest ranking. Humana maintains a good utilization management program. Humana implements an excellent quality improvement plan, including soliciting and reviewing patient satisfaction comments. Mortality statistics cannot, by themselves, meaningfully measure the quality of care delivered at a hospital. Although the Health Care Finance Administration (HCFA) produces such a report for Medicare patients, the report itself represents that it is not intended to measure quality of care, and the American Hospital Association does not view HCFA mortality statistics as a measure of quality of care. There are many factors which influence mortality statistics at a hospital and, even more importantly, mortality is only one clinical outcome resulting from a hospital admission. When East Pasco is full, there is no medical problem or complication resulting from transferring patients to Humana or from directly admitting patients at Humana. There is no diminution of care or loss of continuity of care in transferring to or directly admitting to Humana. Emergency medical services are available in the Subdistrict, and, therefore, transfer is not a problem. Also, driving to Humana or to a hospital outside the Subdistrict is neither a problem nor an unusual circumstance. The large seasonal population drive to Florida in the winter, and, therefore, it is a mobile patient population. Most of its residents seeking hospital services receive them outside the Subdistrict. Subdistrict residents currently leave the Subdistrict to receive a variety of hospital services, including: in-patient cardiac cath, open heart surgery, Level II NICU, psychiatric services, substance abuse services, and comprehensive rehabilitation services. Thus, there is no merit to the suggestion that transferring patients from East Pasco to Humana or elsewhere is problematic. There would not be community benefits regarding Medicaid/indigent care by approving this application. As indicated, for all hospital services, Humana and East Pasco provide similar amounts of Medicaid and indigent care, although indigent care at both facilities is relatively insignificant. Therefore, access to Medicaid and indigent care does not provide a basis for approving East Pasco's application. Also, East Pasco's payor mix in its application was based on hospital-wide averages. East Pasco has not shown the amount of Medicaid or indigent care which would be specifically provided to, or which is needed for, medical-surgical patients. Finally, East Pasco's Policy and Procedure Manual includes several provisions requiring deposits upon in-patient admission absent verification of third party payor coverage. Such provisions are inconsistent with the proposition that East Pasco accepts all patients regardless of ability to pay. In Florida, an application for a CON must include a certified copy of an authorizing resolution of the applicant's Board of Directors. East Pasco included its corporate resolution in its CON application, that resolution being adopted at an August 14, 1991, meeting. That resolution clearly states, among other things, authorization to file an application for up to 24 additional acute care beds. The minutes of that meeting clearly reflect the Board's approval for 24 beds for ICU and PCU. The application itself requests approval of 24 medical-surgical beds. PCU, ICU, and medical-surgical beds are all types of acute care beds. Accordingly, East Pasco did file a proper corporate resolution consistent with the minutes and consistent with the application. The minutes and the application, however, are inconsistent. Although the corporation resolution is technically correct and fulfills the requirements for a CON application, the inconsistency among the corporate resolution, the minutes, and the application raised questions about the actual intent of East Pasco. The intent became more questionable during the final hearing when East Pasco's witnesses contradicted each other as to the number of beds to be placed in the to-be-constructed ICU on the second floor of the to-be-constructed 3-story tower. It is clear that the Agency only approved the construction of a 12-bed ICU on the second floor. It is also clear that East Pasco in fact intends to construct a 16-bed ICU on that second floor. It is also clear that East Pasco intends to construct a "medical-surgical" unit on the third floor in accordance with a design for a PCU. While the corporate resolution technically complies with the requirements for a CON application, the questionable nature of its accuracy, when considered in conjunction with the conflicting evidence of the scope of this project, raises concern as to East Pasco's projections regarding revenue, expenses, staffing, and the actual services to be made available in the Subdistrict. The lack of clarity as to East Pasco's proposal is a compelling reason to deny East Pasco's application. East Pasco's occupancy rate is quite high. It is higher even during the "peak season," i.e., November through April. The projections contained in East Pasco's application are based upon the historic high occupancy rate experienced at East Pasco. Those projections, however, do not take into account, nor did the Agency consider in reviewing East Pasco's application, the fact that East Pasco now has more than the 85 beds which formed the basis for its historic occupancy rate and its projections related to this project. Construction has been completed on the 10-bed observation unit and the 11-bed SNU. East Pasco already has an expanded capacity in place which should alleviate some of its occupancy problems. For example, East Pasco has experienced an increased number of out-patient observation days. With its new observation unit, the beds previously used for observation days are now available for in-patients which, in turn, will likely alleviate East Pasco's most common capacity problem-the lack of available ICU beds. Similarly, the SNU beds will also be available for in-patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered denying East Pasco's application for Certificate of Need No. 6783. DONE and ENTERED this 9th day of February, 1993, at Tallahassee, Florida. LINDA M. RIGOT 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 9th day of February, 1993. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 92-1497 Petitioner's proposed findings of fact numbered 1-32, 34-82, and 84-96 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed finding of fact numbered 83 has been rejected as being unnecessary for determination of the issues herein. Petitioner's proposed findings of fact numbered 33 and 97 have been rejected as not constituting findings of fact but rather as constituting recitation of the testimony, argument of counsel, or conclusions of law. The Agency's proposed findings of fact numbered 2-6, 8, 13, 14, 27, 28, 31-33, 37, 40, 41, 43, 44, 47, 49, 51, and 90 have been adopted either verbatim or in substance in this Recommended Order. The Agency's proposed findings of fact numbered 20, 21, 34, 45, 52, 54, 56-58, 68, 71, 73, 82, and 89 have been rejected as being unnecessary for determination of the issues herein. The Agency's proposed finding of fact numbered 1 has been rejected as not constituting a finding of fact but rather as constituting recitation of the testimony, argument of counsel, or a conclusion of law. The Agency's proposed findings of fact numbered 7, 9, 19, 26, 48, 59, 61, 62, and 64 have been rejected as being irrelevant to the issues under consideration herein. The Agency's proposed finding of fact numbered 46 has been rejected as being subordinate to the issues involved in this proceeding. The Agency's proposed findings of fact numbered 10-12, 15-18, 22-25, 29, 30, 35, 36, 38, 39, 42, 50, 53, 55, 60, 63, 65-67, 69, 70, 72, 74-81, 83-88, and 91-93 have been rejected as not being supported by the weight of the credible, competent evidence in this cause. East Pasco's proposed findings of fact numbered 1-3, 5-7, 10, 13, 16- 18, 20, 22-24, 37, 38, 40, 45, 46, 48, 62, 63, 66-69, 73, 78, 79, 81, 82, 85, 89, 118, 119, 131, 135, 140, 174, 178-180, and 192 have been adopted either verbatim or in substance in this Recommended Order. East Pasco's proposed findings of fact numbered 15, 25, 26, 55, 56, 70, 83, 90, 92, 94, 95, 100, 121, 127-129, 145, 146, 163, 164, 171-173, 176, 177, 184-189, 191, and 194 have been rejected as being unnecessary for determination of the issues herein. East Pasco's proposed findings of fact numbered 19, 87, and 88 have been rejected as not constituting findings of fact but rather as constituting recitation of the testimony, argument of counsel, or conclusions of law. East Pasco's proposed findings of fact numbered 4, 8, 9, 11, 12, 14, 21, 30, 31, 33-36, 39, 41, 51, 61, 86, 96-98, 102, 103, 105, and 154 have been rejected as being irrelevant to the issues under consideration herein. East Pasco's proposed finding of fact numbered 84 has been rejected as being subordinate to the issues involved in this proceeding. East Pasco's proposed findings of fact numbered 27-29, 32, 42-44, 47, 49, 50, 52-54, 57-60, 64, 65, 71, 72, 74-77, 80, 91, 93, 99, 101, 104, 106-117, 120, 122-126, 130, 132-134, 136-139, 141-144, 147-153, 155-162, 165-170, 175, 181-183, 190, and 193 have been rejected as not being supported by the weight of the credible, competent evidence in this cause. COPIES FURNISHED: Edward G. Labrador, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 103 Tallahassee, Florida 32308 James C. Hauser, Esquire Messer, Vickers, Caparello, Madsen, Lewis, Goldman & Metz Post Office Box 1876 Tallahassee, Florida 32302-1876 Darrell White, Esquire William Wiley, Esquire McFarlain, Wiley, Cassedy & Jones 215 South Monroe Street Suite 600 Tallahassee, Florida 32301 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
