The Issue BAMI and VENICE filed competing applications for a certificate of need to construct a 100-bed acute care hospital in Englewood, Florida. The sole issue is which application should be granted, and which should be denied.
Findings Of Fact DHRS is the state agency empowered to review, issue, deny, and revoke certificates of need for health care projects. 381.494(8), Fla. Stat. (1981). In January, 1982, VENICE and BAMI separately applied to DHRS for a certificate of need to construct a 100-bed acute care hospital in Englewood, Florida. When the applications were filed, Florida law required the appropriate health systems agency to initially review applications for certificates of need. On March 10, 1982, the Project Review Committee of the South Central Florida Health Systems Council, Inc.--the appropriate health systems agency--considered the competing applications, then voted to approve the proposal submitted by VENICE, and deny the proposals submitted by BAMI and a third applicant (not involved in this proceeding). On March 27, 1982, the Board of Directors of the South Central Florida Health Systems Council, Inc. disagreed with the Project Review Committee's recommendation and voted to recommend (to DHRS) approval of the BAMI proposal and disapproval of the VENICE proposal. DHRS then independently reviewed the two competing applications. On April 30, 1982, it issued a (free-form) certificate of need to BAMI to construct a 75,000 square foot, 100-bed acute care hospital in Englewood. Conversely, it denied VENICE's application, asserting: (1) that the interest and depreciation expense per projected patient day for the first two years of operation of the BAMI proposal was less than that projected for the VENICE proposal; (2) that the estimated labor and materials cost per square foot for the BAMI proposal was lower than the amount estimated for the VENICE proposal; (3) and that the provision for 30 semiprivate rooms in the BAMI proposal offered patients an alternative unavailable in the all-private room hospital proposed by VENICE. VENICE thereafter requested a formal hearing to contest DHRS's action, which request resulted in this proceeding. Bami BAMI seeks a certificate of need to construct a new 100-bed acute care hospital in Englewood, Florida, to be known as Englewood Community Hospital. BAMI proposes to relocate and merge its existing Englewood Emergency Clinic and Primary Care Center into the proposed Englewood Community Hospital. The service area for the BAMI proposal includes the following communities in Sarasota, Charlotte, and Lee counties: Englewood, North Port, Warm Mineral Springs, El Jobean, Grove City, Rotunda West, Placida, Cape Haze, and Boca Grande. The proposed hospital contains 92 medical/surgical beds and 8 intensive care unit (ICU) beds. The 92 medical/surgical beds contain a mix of 32 private be and 60 semiprivate beds. The hospital will provide ambulatory surgical services, diagnostic and special procedures, radiology services, nuclear medicine, ultrasonography, cardio-pulmonary, emergency room, and clinical laboratory services. The following services would be shared with its affiliate, Fawcett memorial Hospital in Port St. Charlotte, Florida: business office, medical records, data processing, materials management, personnel, education, public relations, administration, dietary, bio-medical engineering, laboratory, sterile processing, vascular laboratory, and occupational therapy. The proposed hospital will be a wholly-owned subsidiary of BAMI, and will have its own board of directors, board of trustees, and medical staff. BAMI is an experienced health care provider. Its principals have been in the health care business since 1964, and have built and operated 25 health care facilities in the mid-western United States. BAMI owns and operates several health care facilities in Florida: the 400-bed Fort Myers Community Hospital in Fort Myers, Florida; the 254-bed Fawcett Memorial Hospital in Port Charlotte, Florida; the 120-bed Kissimmee Memorial Hospital in Kissimmee, Florida; the Englewood Emergency Clinic and Primary Care Center in Englewood, Florida; the Ambulatory Surgical Center in Tampa, Florida; and the Emergency Clinic and Primary Care Center in Bonita Springs, Florida. BAMI also owns two smaller hospitals, one in Georgia and the other in Alabama. It is experienced in building and opening new hospitals, having built both the Fort Myers Community Hospital and the Kissimmee Memorial Hospital. It also expanded Fawcett Memorial Hospital from 96 beds to 254 beds. BAMI has financial assets of approximately $63,842,400 and a net worth exceeding $13.5 million. Venice VENICE seeks a certificate of need to construct a 100-bed satellite acute care hospital in Englewood, to be known as the Englewood-North Port Hospital. The service area for this proposed hospital consists of Englewood, North Port, Rotunda West, Placida, Warm Mineral Springs, Boca Grande, and Cape Haze. VENICE's proposed hospital contains 96 medical/surgical beds and four ICU beds. No semiprivate rooms will be available. All of the 96 medical/surgical beds will be placed in private rooms. The proposed satellite hospital will share the following services with VENICE's existing 300-bed "mother" hospital in Venice, Florida: specialized laboratory services, physical therapy, nuclear medicine, pulmonary functions, and specialized radiology services. For specialized and more sophisticated services, patients will be transported from the Englewood hospital to the larger hospital in Venice. The following support services will also be shared with the "mother" hospital: purchasing, bulk storage, laundry, dietary management, data processing, financial management, personnel recruitment, and educational services. In order to share these services, the existing Venice Hospital will be required to operate a transportation system. For many years, VENICE has owned and operated Venice Hospital, a fully licensed and accredited 300-bed general acute care hospital at 540 The Rialto, Venice, Florida. Venice neither owns nor operates any other hospital, although it has applied for a certificate of need to construct a 50-bed psychiatric hospital. The present management of Venice Hospital is inexperienced in the construction and opening of new hospitals. II. COSTS AND METHODS OF CONSTRUCTION Construction costs for the competing BAMI and VENICE proposals are broken down into categories and depicted in the following table: COMPARATIVE CONSTRUCTION COSTS CATEGORY BAMI VENICE Total Project Cost $13,355,000 $18,170,000 Total Project Per Bed Cost 135,500 181,700 Total Direct Construction Equipment Cost for and Fixed 11,670,190 13,874,516 Gross Square Feet 75,327 75,000 Construction Costs 155 173 Per Square Foot Number of Stories One Two Expansion Potential 100 additional 200 additional EQUIPMENT Movable 3,500,000 2,272,444 Bami Construction of the BAMI hospital can begin by September 1, 1983, and be completed by December 31, 1984. The new hospital can be opened by January 1, 1985. The BAMI hospital will be a one-story building, a design which is efficient for a hospital of this size. It will consist of a steel structure with curtain walls. The building is functional and economical, and can be expanded horizontally to 200 beds with minimum disruption to existing services and staff. The design of this hospital is similar to the 120-bed Kissimmee Memorial Hospital built by BAMI in 1979. BAMI's cost estimates are based on the actual costs of constructing the Kissimmee Memorial Hospital. BAMI proposes to construct the hospital by using an affiliate, F & E Community Developers of Florida, Inc. The use of an in-house contractor will allow BAMI to build the hospital in a short time period, at less cost and with higher quality. BAMI's proposal contains both active and passive energy conservation elements. The passive elements include overhangs, shaded glass, and movable windows. Active elements include the selection of quality equipment and a computerized control system for the electric reheat heating/ventilation/air conditioning ("HVAC") system. The architectural and construction plans for BAMI's proposed hospital are virtually complete. Schematic drawings were submitted and approved by DHRS in August, 1981. Preliminary plans have also been approved by DHRS. DHRS approval entailed a review of architectural, electrical, and mechanical preliminary drawings. Venice If the VENICE proposal is approved, construction could begin between April and July, 1984. The hospital could open for occupancy on January 1, 1986, a year later than BAMI's proposal. VENICE's architectural and construction plans are at an early stage, consisting only of a program summary and block design. Architectural, electrical, and mechanical preliminary drawings have not yet been submitted to DHRS and approved. The construction cost estimates submitted by VENICE are less reliable than those submitted by BAMI, since they were derived from less developed plans and were based on assumptions presented by persons who did not testify at hearing. VENICE's proposed hospital consists of a reinforced concrete structure with a modular precast concrete exterior. Although it will consist of two stories, the building will be stressed for the subsequent addition of two stories. When and if it is expanded to four stories, it would be a 300-bed hospital. The planned vertical expansion increases the initial cost of the building by approximately ten percent. Because of the extensive sharing of medical and support services between the proposed satellite hospital and the "mother" hospital in Venice, the ancillary medical and support facilities of the satellite have been down-sized. The VENICE proposal will also require horizontal expansion in the future. Areas such as radiology, laboratory, and emergency rooms will require immediate expansion as beds are added to the facility. It has not been shown at what point, in the planned expansion, VENICE's proposed hospital would become a free-standing hospital--when it would no longer be required to rely on its "mother" hospital in Venice. VENICE proposes an energy efficient facility. The multiple-story design minimizes site use and roof coverage. The relatively narrow wings provide for optimum use of daylight. VENICE contends that its HVAC system is more cost effective than the system proposed by BAMI. This contention is not substantiated by convincing evidence. The VENICE witness who testified on this question was an architect, not a mechanical engineer. He was unfamiliar with the computerized energy control system proposed by BAMI and used assumptions made by others who did not testify at the hearing. Bami III. HOSPITAL EQUIPMENT BAMI's proposed movable hospital equipment will cost approximately $3,500,000. Included are three radiology rooms: one general radiographic room, one standard R and F room, and one R and F room with angiographic capability. Also included are 8 ICU beds, four operating "rooms--two major and two minor-- nuclear medicine, and ultrasound capability. Venice The equipment cost for the VENICE proposal is $2,272,444. Included are 3 operating rooms, one with cystographic capability; four ICU beds and two radiology rooms--one R and F, and one general radiographic. More sophisticated diagnostic procedures, such as nuclear medicine and specialized radiology, will be provided at the "mother" hospital in Venice, not at the proposed Englewood satellite. To utilize these procedures, patients will be transported from Englewood to Venice. VENICE acknowledges that its proposed hospital will utilize less sophisticated diagnostic equipment than BAMI's. VENICE's equipment cost would have to be increased approximately $700,000 if it were to provide eight ICU beds and specialized radiology and nuclear-medicine to match BAMI's proposal. The equipment cost differential indicates the different levels of care proposed by the two hospitals. The VENICE proposal requires the development of a transportation "shuttle" system between the "mother" hospital in Venice and the satellite in Englewood. The system would consist of two trucks in addition to vans or ambulances. The plans for this essential transportation system are, however, not fully developed. The need for van or ambulance transportation between the two facilities has not been fully considered. Further, the transportation plan estimates a 25-minute one-way driving time between Englewood and Venice year- round. During the busy winter months, it is likely that the driving time will increase. Although VENICE proposes to lease the necessary trucks, neither the leasing costs nor associated costs have been fully taken into account. IV. FUNDS FOR OPERATING AND CAPITAL EXPENDITURES Bami BAMI will finance the $13,555,000 required to open its proposed hospital with bond proceeds, an equipment lease, and an equity contribution. It will obtain $7,905,000 from taxable bonds with a maturity of 25 years, and an interest rate of 12.5 percent. There will be a 2-year holiday on principal payments. BAMI will finance the $3,500,000 equipment cost pursuant to a lease agreement with Financial and Insurance Services, Inc., with an eight-year term and an interest rate of 15 percent. BAMI will make an equity contribution of $2,150,000. This will be in the nature of a contribution of capital from a parent corporation to a subsidiary corporation. As of September 30, 1982, BAMI had a net worth exceeding $13,500,000. BAMI will provide up to $1,000,000 in operating capital to cover initial start-up costs of the proposed hospital. In addition, BAMI has obtained a $5,000,000 line of credit which will be available to cover any potential cash shortages occurring during the start-up phase of the hospital. Venice VENICE will obtain the $18,170,000 required for its proposal from tax- free bond financing and an equity contribution. The bonds, which will have a maturity of 30 years and an interest rate of 10.52 percent, will be an obligation of the Venice Hospital. A debt service reserve fund of $1,900,750 will be required in order for the bonds to obtain an "A" rating. In unrelated applications, VENICE has proposed a major renovation of its existing hospital and the construction of a new free-standing 50-bed psychiatric hospital. These projects, if undertaken, will require additional equity contributions of $1,221,000 and additional bond financing in the amount of $10,370,000. To obtain the bond financing, VENICE will be required to maintain a one-to-one historical debt coverage ratio. VENICE has not convincingly established that it will be able to carry out all three projects and still maintain the required one-to-one debt coverage ratio. VENICE proposes to locate its proposed hospital on 15 acres of land costing $135,000. But the land sales contract provides only for the sale of 250 acres at a cost of $2,250,000. (The present owners wish to sell the entire 250- acre parcel and not lesser amounts.) The source of the $2,250,000 needed to acquire the property has not been identified. The bond proceeds could not be used. To purchase the 250 acres and fund the equity for its three proposed health care projects, VENICE will require $4,311,000. The source of these funds has not been identified. VENICE contends that one possible source would be Board Designated Funds. However, VENICE's audited financial statements for the period ending September 30, 1982, suggest otherwise. PROPOSED SITES Bami BAMI, through a subsidiary, has contracted to purchase approximately 12 acres as a site for its proposed Englewood hospital. The 12-acre site is part of a 60-acre parcel of land that is zoned OPI, a zoning classification which will permit the construction of a hospital. The 12-acre site is located on Morningside Drive, an access road to Pine Street. Although Morningside Drive is a dirt road, it will be paved. Under the contract, the current owner will pay all paving costs in excess of $65,000. The initial $65,000 in paving costs will be borne by BAMI and has been included in BAMI's estimated construction costs. Pine Street, a major north- south transportation artery in the Englewood area, is currently being resurfaced in both Sarasota and Charlotte counties. A second access to Pine Street has been acquired by the current owner. A watermain is available at the BAMI site. The current owner of the property will construct a sewage treatment plant and provide sewer service to the proposed hospital at prevailing rates. The sewage treatment plant will be located on a 7.5-acre portion of the 48 contiguous acres retained by the current owner. The BAMI site is located in an A-11 flood zone with an elevation of ten feet. Fill dirt will be used to raise it to an acceptable elevation of twelve feet. A current owner of the BAMI site envisions the entire 60 acres as an Englewood medical center. If necessary he will allow BAMI to purchase an additional 12 acres contiguous to the site. BAMI has not yet, however, obtained a legally enforceable right to purchase additional property adjoining its 12- acre site. Although the 12-ace site will permit the planned 100-bed future expansion, the site would be crowded with little space remaining for future improvements. Venice The VENICE site is an undesignated 15-acre portion of a 250-acre parcel of land located off State Road 777, also known as South River Road. It is uncertain whether the hospital will have one or two access roads to State Road 777. A watermain is available at the VENICE site. Sewage treatment will be provided by a nearby privately owned sewage treatment plant until the hospital, eventually, constructs its own. The zoning classification of the VENICE site will not permit construction of a hospital. Before the hospital could be built, Sarasota County would be required to rezone the property to OPI. Use of the property for a hospital is also inconsistent with Sarasota County's comprehensive land use plan, adopted October 31, 1981. Such a rezoning process would take a minimum of three or four months, and perhaps longer. Approximately 100 individual steps are involved. Hearings would be held by the Sarasota Planning Commission and the Sarasota County Commission. VENICE has not yet filed an application to rezone either the 15 acres or the entire 250-acre parcel. Neither has it shown that it is likely to succeed in having the property rezoned to a classification permitting hospital use. Bami VI. EFFICIENT AND ALTERNATIVE USES OF HEALTH CARE RESOURCES As part of its application, BAMI proposes to merge its existing Englewood Emergency Clinic and Primary Care Center into its proposed Englewood hospital. If the BAMI application is denied and VENICE's granted, BAMI will continue to operate the Emergency Clinic and Primary Care Center. As a result, the Emergency Clinic and VENICE's Englewood hospital would be providing duplicative emergency services. The costs resulting from this duplication would be approximately $894,800 in 1985; $975,300 in 1986; and $1,063,100 in 1987. For cost effectiveness, BAMI's proposed hospital will share some ancillary and support services with Fawcett Memorial Hospital in nearby Port Charlotte. Fawcett Memorial will also provide tertiary level services, such as renal dialysis and CAT scans to patients of the proposed Englewood hospital. BAMI operates a multi-hospital system, with subsidiaries which provide ancillary and specialized support services. These services include physical therapy, inhalation therapy, cardiopulmonary function, speech therapy, data processing, and collection services. Corporate level expertise in accounting, property management, pharmacy management, personnel, and marketing, is also available. The multi-hospital system allows BAMI to obtain favorable purchasing contracts and capital for future expansion. Venice Venice Hospital, the only hospital in south Sarasota County, has a high rate of occupancy. Although presently a 300-bed facility, it has an ultimate capacity of 400 beds. It recently applied for a certificate of need to add 24 ICU/PCU beds and additional beds, beyond that, are needed. It has a shelled-in fourth floor that will accommodate an additional 45-bed nursing unit. Completing the fourth floor at Venice Hospital would be a more cost-effective alternative way to add beds than constructing a new hospital in Englewood. As already mentioned, the "mother" hospital in Venice will share numerous ancillary and support services with the proposed satellite hospital in Englewood. VENICE proposes to share, among other things, its present laboratory with the proposed Englewood satellite. As a result, the laboratory in the satellite hospital has been reduced to a minimal size. It has not been convincingly established that the Venice Hospital laboratory, even if expanded as proposed, can process the additional laboratory work-load arising from an Englewood satellite. The laboratory at the existing Venice Hospital presently operates 24-hours per day, seven days a week. Even if its application to expand its laboratory is granted, the total area of the laboratory would be less than the accepted space guidelines required for a 324-bed hospital. VII. AVAILABILITY, APPROPRIATENESS, AND ACCESSIBILITY OF PROPOSED HEALTH CARE SERVICES Scope of Services Although both proposed hospitals would share services with affiliated hospitals, BAMI proposes more of an autonomous, full-service and free-standing hospital than that proposed by VENICE. BAMI will equip its hospital with a more complete and sophisticated range of diagnostic services and, unlike VENICE, has not down-sized its ancillary and support services. For the VENICE proposal to become a free-standing facility comparable to BAMI's, the space devoted to ancillary medical services and support services would have to be expanded by 30 percent and 50 percent, respectively. The costs of such an expansion have not been determined. Economic Access Both parties will enter Medicaid contracts covering their proposed hospitals. BAMI projects that .1 percent of its patients will be Medicaid; VENICE projects .2 percent. BAMI hospitals treat all emergency patients, regardless of ability to pay. Third party payment is accepted. On elective admissions, self-pay patients are requested to make reasonable deposits and sign promissory notes. In specific instances, patients can be admitted without making financial arrangements in advance. Patients are not referred to other hospitals because of inability to pay. If an indigent is defined as "one who cannot pay," Fawcett Memorial Hospital provided between $600,000 and $700,000 in indigent care during 1982. This figure represents approximately 3.9 percent of gross revenue. Similarly, Venice Hospital treats emergency patients regardless of their ability to pay. Promissory notes are obtained from self-pay patients if necessary. The credit policies of Venice Hospital are similar to BAMI's. Venice Hospital had a bad debt or charity to gross receipts ratio of between 2.5 percent and 3.0 percent in 1982. Venice Hospital also has a Hill-Burton requirement to provide indigent care in the amount of approximately $125,000 per year. This requirement stems from a federal grant awarded in 1970. Access to Osteopathic Physicians BAMI's proposed hospital will have an open medical staff, including licensed medical doctors and osteopathic physicians. BAMI has a practice of allowing osteopathic physicians on its medical staff. For several years, osteopathic physicians have been included on the staff of all BAMI hospitals. Fort Myers Community Hospital, a BAMI hospital, is one of two hospitals in the Fort Myers area with osteopathic physicians on its staff. Kissimmee Memorial Hospital, also owned by BAMI, has the only two osteopathic physicians in Kissimmee on its staff. Fawcett Memorial Hospital has the only osteopathic physician in Port Charlotte on its staff. In contrast, VENICE has not added osteopathic physicians to its staff with similar enthusiasm. It granted staff privileges to its first osteopathic physician six to nine months prior to hearing. Two months before the hearing, staff privileges were granted to a second. Venice Hospital has, however, changed its bylaws to comply with the law prohibiting discrimination against osteopathic physicians. Geographic Access The geographic locations of the sites for the two proposed hospitals, as described above, provide equal access to the service area. The BAMI site is closest to the existing population concentrations of the Englewood area, while the VENICE site is closer to Interstate 75. Both sites will require the paving of an access road to major traffic arteries. No significant advantage in access is afforded to either. VIII. COMPETITION The existing Venice Hospital currently serves the hospital needs of approximately 64 percent of the people in the greater Englewood area. These patients comprise approximately 26.8 percent of Venice Hospital's total patient days. BAMI's existing Fawcett Memorial Hospital in Port Charlotte currently serves between ten and twelve percent of the hospital needs of the people in the greater Englewood area. These patients account for approximately 11.3 percent of Fawcett Memorial's total patient load. In addition, BAMI's Englewood Emergency Clinic and Primary Care Center has treated over 20,000 patients since it opened in February, 1980. The existing Venice Hospital holds a dominant market share in the greater Englewood area. It is only twelve miles north of Englewood and is the only hospital in south Sarasota County. The closest competitor in Sarasota County is Sarasota Memorial Hospital, approximately 20 miles north of the Venice Hospital. Venice Hospital has been in operation for approximately 30 years. In contrast, Fawcett Memorial Hospital is approximately 21 miles east of Englewood. In the mid-1970s, it was converted from a nursing home to a 96-bed hospital, and in 1976, it was expanded to 254 beds. Approval of BAMI's proposal will enhance competition among hospitals serving the greater Englewood area. The competition will not, however, adversely affect Venice Hospital's long-term viability. The construction of either hospital in the Englewood area will change existing hospital utilization and physician referral patterns. New referral patterns will form and an increasingly autonomous group of physicians will develop. Local physicians will utilize the Englewood hospital, whether it is owned by BAMI or VENICE. Bami IX. PROJECTED COSTS OF PROVIDING HEALTH CARE SERVICES BAMI forecasts an occupancy rate of 60 percent at its proposed Englewood hospital in 1985; 75 percent in 1986; and 80 percent in 1987, with an average length of stay of 8.5 days. These figures are credible in view of the population growth in the Englewood area, the undisputed need for a new hospital, and the elderly population. To project total cost and gross revenue per patient day, various calculations are made. BAMI's employee salary expenses are based on its experience at nearby Fawcett Memorial Hospital, adjusted by an inflation factor. Non-salary expenses are derived from its experience at Kissimmee Memorial Hospital, a hospital of similar size with a utilization rate similar to that projected for the Englewood hospital. Depreciation of plant and equipment is calculated using the straight-line method. Revenue projections are derived using the American Hospital Association's Monitrend median inpatient revenue, inflated at 9 percent per year. An indigent/bad debt deduction of four percent of total patient revenue is used. These assumptions provide a credible basis from which total cost and gross revenue per patient day can be calculated. Using these assumptions, total costs per patient day is forecast to be $482.00 in 1975; $479.60 in 1986, and $510.32 in 1987. Gross revenue per patient day is forecast to be $552.00 in 1985; $601.68 in 1986; and $655.83 in 1987. These forecasts are credible and accepted as reasonably reliable. Venice VENICE's primary contention is that its proposed hospital, although costing more to build, will--in the long run--result in lower costs to patients and increased savings to the community. This contention was not substantiated by convincing evidence. In forecasting its costs and revenues, VENICE projected an occupancy rate of 65 percent in 1986; 80 percent in 1987; and 80 percent in 1988. The 1986 projection is unreasonably high; it envisions a 70.4 percent utilization rate during the opening month. VENICE's projected salary expenses are derived from its current experience at Venice Hospital, adjusted for inflation. Although this figure is reliable, the projected non-salary expense per patient day is not. The nonsalary expense is not based on Venice Hospital's most recent 1982 expenses, and is not adjusted by the requisite inflation factor. The depreciation schedule and assumptions used by VENICE in forecasting its revenues and costs are also questionable. Discrepancies went unexplained. The testimony of Deborah Kolb, Ph.D., an expert in health care financial and need analysis, is considered more credible. She concluded that VENICE understated 1986 depreciation expense for its proposed hospital by approximately $300,000, an error which would have increased its projected patient costs per day by $13.70. VENICE also projects room charges at its proposed hospital which are significantly lower than those projected for its "mother" hospital in Venice. This difference in room charges was not adequately explained or justified. Although VENICE's controller attributed the difference to cost savings resulting from the satellite hospital concept, these savings were not meaningfully itemized or identified in VENICE's revenue and cost projections. VENICE also failed to identify, and reflect in its projections, increased costs resulting from use of its satellite concept. For example, in 1986, 532 Englewood patient are projected as requiring sophisticated nuclear medicine tests at the "mother" hospital in Venice; 141 Englewood patient are projected as requiring special radiology tests at Venice Hospital. When asked who would absorb the costs of transporting patients between the satellite hospital in Englewood and the "mother" hospital in Venice, VENICE's controller responded that Venice Hospital would. However, those costs have not been quantified. Moreover Venice Hospital does not currently pay for ambulance transportation of its patients and does not have vans which transport patients on 24-mile round trips. This amounts to a significant and additional cost of operation, which has not been fully considered in the financial forecasts. Moreover, VENICE utilized cost per patient day based on Venice Hospital's 1981 costs rather than the higher 1982 costs. (Revenue per patient day increased 23.8 percent, in 1982.) In addition, projected revenues at VENICE's proposed Englewood satellite were not adjusted downward to take into account the less-sophisticated medical services which would be provided. As a result, VENICE's projected revenues per patient day are questionable and lack credibility. Venice Hospital received funds from three philanthropic organizations: Venice Hospital Blood Bank, Venice Hospital Auxiliary Volunteers, and Venice Health Facilities Foundation. Without the infusion of these funds, charges to Venice Hospital's patients would be higher. Venice Hospital's own fund raising literature states that patient charges, alone, do not cover the full costs of providing medical services. These community-raised funds, then, pay part of the costs of providing medical care. But in calculating cost savings to the community from its proposed Englewood hospital, VENICE has not identified or taken into account these additional funds raised from the community. VENICE's comparison of its projected patient charges with those of BAMI's is, accorded little weight. The two proposed hospitals are significantly different, one providing more extensive and sophisticated medical care than the other. This difference was not adequately taken into account in the financial comparison. Additional costs to Venice Hospital resulting from the Englewood satellite hospital were not fully considered. Comparisons based on historical charges by Venice Hospital and Fawcett Memorial Hospital are also misleading since these hospitals are different in size and occupancy rate--and the proposed Englewood hospital will duplicate neither. Moreover, Venice Hospital historical room rates used for the comparison were selectively chosen. VENICE also relies on projected HVAC life cycle savings, which, as already mentioned, were not convincingly established. Finally, the costs of acquiring VENICE's site-- necessitating a 250-acre purchase--were not fully reflected in the comparison. X QUALITY OF CARE The parties stipulated that both proposals will provide high quality medical care. The only question is whether bed-configuration will affect the quality of care provided. BAMI proposes a mix of 32 private and 60 semiprivate medical/surgical beds, with an additional 8 ICU beds. In contrast, VENICE proposes 96 private medical/surgical beds and 4 ICU beds. BAMI's mix of private and semiprivate rooms will allow consumers a choice and is preferable to VENICE's all private-room proposal. Private and semiprivate rooms confer various benefits. BAMI's proposed 32 private rooms will be adequate to serve those patients requiring private rooms while, at the same time, affording patients a choice between private and semiprivate. The VENICE proposal will not allow such a choice. It has not been shown, however, that bed configuration will affect the quality of medical care rendered patients. XI. COMPARISON: BAMI'S PROPOSED HOSPITAL IS PREFERABLE TO VENICE'S Both proposed hospitals would provide necessary and quality medical care to people in the Englewood area. On balance, however, BAMI's proposal is preferable. BAMI's free-standing hospital will provide more complete and sophisticated medical care, with less need to transport patients between "mother" and satellite hospitals. VENICE's satellite hospital will require extensive transporting of patients, food, linens, equipment, lab samples, and medications between the "mother" hospital in Venice and the satellite hospital in Englewood. BAMI, a multi-hospital system, is more experienced in constructing and operating new hospitals. The BAMI proposal will cost approximately $2,000,000 less to build, yet be of comparable quality and equipped with more sophisticated diagnostic equipment. While VENICE's construction plans are preliminary, BAMI's are detailed and virtually complete. VENICE's site requires rezoning, BAMI's does not. If BAMI's application is approved, its hospital could be opened by January 1, 1985,a year earlier than VENICE's. BAMI is financially able to begin construction immediately while VENICE--because of other projects simultaneously undertaken--may not be. Apart from zoning, both hospital sites are equally acceptable, although BAMI's 12-acre site is minimally sufficient for the anticipated future expansion to 200 beds. BAMI's financial ability to purchase is assured, while VENICE's is not. BAMI's proposal would avoid a duplication of emergency medical services in Englewood, while VENICE's would cause it. For patients preferring osteopathic physicians, BAMI's hospital would, most likely, be preferable. For patients preferring semiprivate rooms, BAMI's proposal would be preferable. Competition between hospitals serving the Englewood area would be enhanced with the BAMI proposal and decreased with VENICE's. Although VENICE argued that the costs to its patients would, over the long run, be less than BAMI's, this proposition was not convincingly proved.
The Issue The issues involved in this case, as stipulated to by the parties, are as follows: Issues Remaining to Be Litigated Again, because of their inability to separate the purely factual issues from those which also involve legal determinations, the parties have combined below all issues which remain to be litigated. 1A. Was it proper for DHRS to compute the formula for need contained in FACs 10- 5.11(25)(a)1-3 on a subdistrict basis? 1B. Even if the answer is "yes", did DHRS properly use the result of such a computation as a reason for denying Charter- Ocala's application in this case? 2A. Was it proper for DHRS to take into account both existing and approved beds in computing the occupancy standard formula contained in FACs 10-5.11(25)(d) 5? 2B. Even if the answer is "yes," did DHRS properly use the results of such a computation as a reason for denying Charter- Ocala's application in this case? Does the level of Charter-Ocala's indigent care commitment cause its application not to fully meet the requirement in subsection 8 of Fla. Stat. s 381.494(6)(c) that the proposed services "be accessible to all residents of the service district"? Is the proposed project financially feasible in the long term? Will the proposed project result in an increase in health care costs? In light of all factors, should Charter-Ocala's application be granted?
Findings Of Fact GENERAL Procedural. On or about October 15, 1985, the Petitioner filed an application for a certificate of need with the Respondent. On or about December 26, 1985, the Petitioner filed amendments to its application. On or about February 27, 1986, the Respondent issued a State Agency Action Report proposing to deny the Petitioner's application. On March 27, 1986, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent. The Petition was forwarded to the Division of Administrative Hearings and was assigned case number 86-1466. On November 12, 1986, the parties filed a Prehearing Stipulation in which they agreed to certain facts and conclusions of law. The facts agreed upon by the parties are hereby adopted as findings of fact. The Parties. The Petitioner is a free-standing 68-bed short-term psychiatric and substance abuse specialty hospital located in Ocala, Florida. The 68 beds consist of 48 short-term psychiatric beds and 20 substance abuse beds. The Petitioner began operating on October 17, 1985. The Respondent is the agency responsible for determining whether the Petitioner's proposal should be approved. The Petitioner's Proposal. In its application, the Petitioner has proposed an expansion of its existing 48 short-term psychiatric beds by 24 beds. The Petitioner proposed that the 24 additional beds consist of 10 beds in a geriatric psychiatric unit and 14 beds in an adult psychiatric unit. The total proposed cost of the additional beds was $1,491,850.00. The Petitioner amended the total proposed cost to $1,213,880.00 on December 26, 1985. At the final hearing, the Petitioner represented that it will operate an adult eating disorder program in the new 14-bed psychiatric unit. NEED FOR ADDITIONAL SHORT-TERM PSYCHIATRIC BEDS. A. General. The Petitioner's existing facility for which additional beds are sought is located in Ocala, Marion County, Florida. Marion County is located in the Respondent's planning district 3. District 3 consists of Alachua, Bradford, Citrus, Columbia, Dixie, Gilchrist, Hamilton, Hernando, Lafayette, Lake, Levy, Marion, Putnam, Sumter, Suwannee and Union Counties. The existing providers of short-term psychiatric services in district 3 in addition to the Petitioner consist of Alachua General Hospital, Shands Teaching Hospital, Lake City Medical Center, Munroe Regional Medical Center and Lake Sumter County Mental Health Clinic. The District III Health Plan divides the district into 2 subdistricts: southern and northern. The southern subdistrict includes Citrus, Hernando, Lake, Marion and Sumter Counties. The northern subdistrict consists of Alachua, Bradford, Columbia, Dixie, Gilchrist, Hamilton, Lafayette, Levy, Putnam, Suwannee and Union Counties. Marion County is located in the northern portion of the southern subdistrict. Ocala, which is located in the northern portion of Marion County is approximately 20 miles from the border of the subdistricts. B. Rule 10- 5.011(1)(o), Florida Administrative Code. The projected population of district 3 in 1990 is 972,450. Based upon the projected population of district 3 in 1990, there is a gross need for 340 short-term psychiatric beds for district 3 in the relevant planning horizon year 1990. There are 316 licensed and approved short-term psychiatric beds for district 3. There is a net need for 24 short-term psychiatric beds for district 3 in 1990. Of the 316 licensed and approved short-term psychiatric beds located or to be located in district 3, 149 are located in hospitals holding a general license and 167 are located in specialty hospitals. Multiplying the projected 1990 district 3 population by a ratio of .15 beds per 1,000 population indicates a gross need for 146 short-term psychiatric beds in hospitals holding a general license. There will be a net surplus of three beds located in hospitals holding a general license in 1990 (146 beds needed less 149 licensed and approved beds). Multiplying the projected 1990 district 3 population by a ratio of .20 beds per 1,000 population indicates a gross need for 194 short-term psychiatric beds which may be located in specialty hospitals. There will be a net need of 27 beds which may be located in specialty hospitals (194 beds needed less 167 licensed and approved beds). The approval of the Petitioner's proposal will not create an imbalance between specialty beds and general beds in district 3 for 1990. There is sufficient need for additional beds in district 3 for approval of the Petitioner's proposal. Occupancy. Objective 1.2 of the State Health Plan provides: dditional short-term inpatient hospital psychiatric beds should not normally be approved unless the average annual occupancy rate for all existing and approved adult short-term inpatient psychiatric beds in the service district is at least 75 percent ... [Emphasis added]. The occupancy rates in 1985 for the existing short-term psychiatric beds in district 3 were as follows: Facility Beds Occupancy Alachua General Hospital 30 77.5 percent Shands Teaching Hospital 42 77.8 percent Lake City Medical Center 9 69.2 percent Munroe Regional Medical Center 18 56.4 percent Lake/Sumter County Mental Health 18 88.0 percent. The average occupancy rate for the existing facilities listed in finding of fact 27 is 75.5 percent. There are 151 short-term psychiatric beds approved for district 3 which are not yet operational. The occupancy rate of the existing and approved beds of district 3 is less than 75 percent. The approved beds should be assumed to have a 0 percent occupancy since they are not in use. Planning Guideline 2 of the District III Health Plan provides: Additional inpatient psychiatric services should not be developed until existing or approved services reach the occupancy standards Specified in the State Inpatient Psychiatric ... Rule. The occupancy standard Specified in the State Inpatient Psychiatric Rule is 75 percent. It is reasonable to expect that approved beds will affect existing occupancy rates when the beds become operational. Consumer demand for short-term psychiatric beds cannot expand indefinitely to meet supply. Since 48 percent of the licensed and approved beds for district 3 are approved beds, it does not make sense to ignore approved beds. Applying the occupancy standard on a subdistrict basis, licensed beds in the southern subdistrict had an average occupancy rate of 72.2 percent for 1985 (excluding the Petitioner's existing beds). If the 51 approved beds at Community Care of Citrus, 35 approved beds in Hernando County and the 15 approved beds at Lake/Sumter Mental Health are taken into account, the occupancy rate is Substantially lower. The Petitioner's proposal does not meet the occupancy standards of the state health plan or the district health plan (on a district or subdistrict basis). Subdistrict Allocation of Bed Need. Planning Guideline 4 of the District III Health Plan provides: Needed inpatient psychiatric ... beds will be allocated within the District based on the proportion of need generated in each planning area using the State methodology. The northern and southern subdistricts are the appropriate planning areas under the district health plan. The projected population for the southern subdistrict for 1990 is 549,536. Applying the state methodology to the southern subdistrict, there will be a gross need for 192 short-term psychiatric beds in 1990. Subtracting the 84 licensed and 101 approved beds yields a net need for 7 short-term psychiatric beds for the southern subdistrict for 1990. Of the 192 gross beds needed for the southern subdistrict in 1990, 82 should be located in hospitals holding a general license and 110 may be located in specialty hospitals. There are 66 licensed and 101 approved beds located or to be located in specialty hospitals in the southern subdistrict. Therefore, under the district health plan, there will be a surplus of 57 short-term psychiatric beds located in specialty hospitals in the southern subdistrict in 1990. All existing and approved short-term psychiatric specialty hospitals for district 3 are or will be located in the southern subdistrict; there are no specialty hospitals located or approved for the northern subdistrict. The Petitioner is the closest specialty hospital to the northern district. There is insufficient need for the Petitioner's proposal in the southern subdistrict of district 3 under the district health plan. Until December, 1985, or early 1986, the Respondent's policy and practice was to apply the need formula of Rule 10-5.11(25)(d), Florida Administrative Code, on a district-wide basis, not on a subdistrict basis. In approximately December, 1985, or early 1986, the Respondent implemented a new policy of reviewing the need for proposed short-term psychiatric services on a subdistrict basis in the applicable district health plan recognized subdistricts. This new policy was based upon a new interpretation of existing statutes and rules. Specifically, the Respondent relied upon Rule 10-5.011(1), Florida Administrative Code, and Section 381.494(6)(c)1, Florida Statutes, which direct an evaluation of the relationship between proposed services and the applicable district health plan in reviewing certificate of need applications. The evidence failed to prove: (a,) when the policy was formulated; (b) who was responsible for the formulation and implementation of the policy; and (c) whether any sort of investigation, study or analysis was performed or relied upon in connection with the policy. The effect of this policy can be outcome-determinative in that it can cause an application for a certificate of need to be denied. Prior to the adoption of the policy, the Respondent Promulgated Rule 10-17, Florida Administrative Code, which Provided for sudistricting of district This rule was repealed. Geographic Access. A small portion of the population of district 3 is within a maximum travel time of 45 minutes from the Petitioner's facility. Only 36 percent of the district 3 population is within 45 minutes driving time from the Petitioner's facility. The Petitioner's facility is located near the center of district 3. Approximately 60 percent of the population of district 3 is located within 60 minutes travel time from Ocala. There are excellent transportation routes from parts of the northern subdistrict to Ocala, including Interstate Highway 75 and U.S Highways 27, 301 and 441. Approximately 73 percent of the Petitioner's Patients during its first year of operation came from the southern subdistrict. Of those Patients, approximately 58 percent were from Marion County and 15 percent were from other southern subdistrict counties, including 10.5 percent from Citrus County and none from Hernando County. Approximately 15 percent of the Petitioner's patients during its first year of operation came from the northern subdistrict: 8 percent from Alachua County, 1.7 percent from Putnam, 1.2 percent from Bradford, .2 percent from Union, Suwannee and Gilchrist, .7 percent from Columbia and none from Hamilton, Lafayette, and Dixie. Approximately 12 percent of the Petitioner's patients during its first year of operation came from outside of district 3. Other Factors Approximately 16 percent to 17 percent of Marion County's population was 65 years of age or older in 1980. By 1990, the 65 and older population is projected to increase to approximately 22 percent. Approximately 28 percent of the population of the southern subdistrict is projected to be 65 or older in 1990. Top of the World, a retirement community, is being developed 10 to 15 miles from the Petitioner's present location. There is a large population of females aged 18 to 30 attending the University of Florida. The University is located in Gainesville which is within a 40 to 50 minute drive time from the Petitioner's present location. There are over 83,000 females aged 15-44 residing in Alachua and Marion Counties. Young adult females have the highest incidence of eating disorders such as bulimia and anorexia. From a clinical and programmatic perspective, to provide optimal therapy for geriatric and eating disorder patients: (1) the patients should be separated from the general psychiatric population; (2) the staff should be specially trained to deal with the unique problems posed by the two types of patients; and (3) the program and physical surroundings should be specially designed to accommodate the needs of the patients and to facilitate the rendition of services to patients. The Petitioner represented in its application that the Petitioner has a 16-bed geriatric program. Munroe Regional and Marion-Citrus Mental Health Center and Lake/Sumter Mental Health Supported the Petitioner's original application for its present facility based in part on the Petitioner's representation that 16 beds would be designated as geriatric beds. A facility for Citrus County with 51 beds has been approved which will have a gerontology program. In Hernando County 35 beds have been approved which includes a gerontology program. Seven letters of Support were submitted with the Petitioner's application. Only one of those letters mentions geriatric beds. No mention of an alleged need to provide an eating disorder program was mentioned by the Petitioner in its application. Eating disorder patients are treated at Shands in Gainesville, Alachua County, Florida. There are no existing or approved Specialized geriatric or eating disorder programs in district 3. The Petitioner Should be able to recruit physicians and other medical professionals to staff its proposed programs. ECONOMIC ACCESS. The Petitioner's admissions criteria include the ability to pay. The Petitioner has projected that 1.5 percent of patient revenues from the operation of the 24 additional beds will be attributable to indigent care. This amount is low. Applicants generally propose 3 to 7 percent indigent care. Generally, Short-term psychiatric Services are accessible to all residents of district 3. The evidence failed to prove, however, that short-term psychiatric Services in specialty hospitals are readily accessible to indigent residents. Munroe Regional Medical Center and Lake/Sumter County Mental Health provide psychiatric services to indigents. Lake/Sumter was recently granted a certificate of need authorizing it to move to Leesburg and to expand its hospital to include 33 short-term psychiatric beds which will be devoted almost exclusively to the treatment of indigents. These facilities are not specialty hospitals, however. The Petitioner's projected care of indigents does not include free evaluations and assessments provided at the Petitioner's counseling centers. In light of the fact that the Petitioner takes into account the ability to pay, however, this service will not significantly increase the care provided to indigent patients or accessibility of services to indigents. During the Petitioner's first year of operation it provided indigent care of approximately 4 percent of total revenues. It is therefore likely that the Petitioner will exceed its projected 1.5 percent indigent care. The Petitioner did not prove how much of an increase can be expected, however. The Petitioner has a corporate policy never to deny admission to a patient in need of emergency treatment because of inability to pay. The Petitioner's proposal will not significantly enhance services available to indigents. FINANCIAL FEASIBILITY AND IMPACT ON COSTS. 8O. If the Petitioner's proposal is considered based upon the need for additional beds in the district, it will be financially feasible. Its projected patient day projections are reasonable based upon district-wide need. If need is determined only on a district-wide basis, the opening of approved beds will not negatively affect the Petitioner's referral patterns or patient base. If need is determined only on a district-wide basis, the cost of psychiatric services in district 3 will not be negatively impacted by the Petitioner's proposal. If need is determined on a subdistrict basis, the Petitioner's proposal will not be financially feasible. There is insufficient need in the southern subdistrict for the Petitioner to achieve its patient day projections on a subdistrict basis. Planning Guideline 6 of the District III Health Plan provides: Providers proposing to expand or establish new psychiatric facilities should document that these services will not duplicate or negatively affect existing programs in the region. In light of the existence of an excess of 57 short-term psychiatric beds for the southern subdistrict based upon a subdistrict allocation of bed need, the Petitioner's proposed new beds will duplicate beds in existence or approved beds. If need is determined on a subdistrict basis, the cost of psychiatric services in the southern subdistrict will be negatively impacted.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner's application for the addition of 24 short- term psychiatric beds be approved. DONE and ORDERED this 13th day of March, 1987, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1987. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Paragraph numbers in the Recommended Order are referred to as "RO ". Petitioner's Proposed Findings of Fact: Proposed Finding RO Number of Acceptance or of Fact Number Reason for Rejection 1 RO 7, 9-10 and 12. 2 RO 13-14. 3 RO 13 and 16. 4 RO 17. 5 RO 51. 6 RO 54 and 61. 7 RO 54. 8-10 Irrelevant. 11 RO 58-59. 12 RO 59. 13 The first sentence is accepted in RO 60. The second sentence is irrelevant. 14 RO 61-63. 15 Irrelevant. 16 RO 20 and 22. 17 RO 43. 18 RO 19. 19 RO 19-21. 20 RO 23. 21 RO 24. 22 RO 28. The last sentence is irrelevant. 23 RO 1, 9-10 and 12. 24 Irrelevant. It has been stipulated that the quality of care criterion has been met. 25 RO 64. 26 RO 71. The first sentence is accepted in RO 70. The second sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. 29-30 Irrelevant. 31 RO 55-56. 32 RO 74. RO 75. The last sentence is not supported by the weight of the evidence. RO 73 and 76. The Petitioner did not commit to provide 1.5 percent of total revenues it committed to provide 1.5 percent of revenues from the 24 beds. The last sentence is irrelevant. 35 RO 77. 36 RO 78. 37 Not supported by the weight of the evidence. 38-39 and 41 If need is determined on a district- wide basis these proposed findings of fact are true. If, however, need is determined on a subdistrict basis these proposed findings of fact are not supported by the weight of the evidence. See RO 80 and 83. 40 Irrelevant. 42-44 Cumulative. See RO 80 and 83. 45 and 46 Not supported by the weight of the evidence. 47-48 Irrelevant. If need is determined on a district-wide basis these proposed findings of fact are true. If, however, need is determined on a subdistrict basis these proposed findings of fact are not supported by the weight of the evidence. See RO 82 and 85. Irrelevant. The first sentence is statement of the law. The last sentence is irrelevant. This is a de novo proceeding. How the Respondent reached its initial decision is irrelevant. The rest of the proposed finding of fact is accepted in RO 50. Statement of law. 52 RO 45. 53 RO 46. 54 RO 47. 55 Irrelevant. 56 RO 48. 57 RO 49. Irrelevant. Conclusion of law. Irrelevant. 61-62 Prehearing Stipulation. Irrelevant. The parties have stipulated that the portion of the rule mentioned in the first sentence is met. The proposed finding of fact is also a discussion of law. It is therefore rejected. 65-67 Consideration of the state health plan is statutorily required. The Respondent does not apply the occupancy standard of the state health plan as a matter of policy, therefore. These proposed findings of fact are therefore irrelevant to the extent that they apply to the determination concerning the state health plan. To the extent that they pertain to the occupancy standard of the district health plan, they are hereby adopted. Conclusion of law. Irrelevant. The first sentence is irrelevant. The second sentence is contained in the Prehearing Stipulation as a stipulated fact. 71 RO 30. 72 Irrelevant and conclusion of law. 73-82 Irrelevant. Respondent's Proposed Findings of Fact 1 RO 1, 3-4, 9 and 11 2 RO 7 and 13. 3 RO 19. 4-6 Prehearing Stipulation. 7 8 and 9 RO 26. RO 27-28. The last sentence is 10 contrary to the facts stipulated to by the parties. The parties have stipulated that existing beds meet the occupancy standard. This proposed finding of fact is therefore unnecessary. RO 29. 11 RO 30 and 32-33. 12 RO 31. 13 RO 16 and 36. 14 RO 34. 15 RO 37-41. There are 84 licensed beds not 81. 16-17 Irrelevant. 18 RO 55-56. The evidence established that "at least" 73 percent of the Petitioner's patients originate from the southern subdistrict not that more than 73 percent. 19 RO 43. 20 Hereby accepted. 21 RO 51. RO 10 and 64. The first sentence is accepted in RO 65. The rest of the proposed finding of fact is uncorroborated hearsay. 24 RO 67. RO 12 and 68. Irrelevant or based upon uncorroborated hearsay. Not a finding of fact. Not supported by the weight of the evidence. 29 RO 84-85. 30 Statement of law. 31 RO 72-73. 32 RO 85. 33 RO 83. COPIES FURNISHED: Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sandra Stockwell, Esquire Culpepper, Pelham, Turner & Mannheimer 300 East Park Avenue Post Office Drawer 11300 Tallahassee, Florida 32302-3300 J. Kevin Buster, Esquire Ross O. Silverman, Esquire King & Spalding 2500 Trust Company Tower Atlanta, Georgia 30303
The Issue Whether Certificate of Need Application Number 6785 should be approved for the conversion of 10 acute care medical/surgical beds to a 10 bed Level II neonatal intensive care unit at University Community Hospital.
Findings Of Fact On August 9, 1991, HRS published a fixed need pool for Level II and III Neonatal Intensive Care Services in the Florida Administrative Weekly, Volume 17, Number 32. For District 6, HRS published a "Preliminary Estimate of Bed Need" for an additional 10 Level II Neonatal Intensive Care Unit (NICU) beds, with an explanatory footnote which was as follows: "Due to pending litigation regarding the inventory of neonatal intensive care unit beds, no fixed need projection is made." The pending litigation was a challenge to the inclusion of 11 beds at Winter Haven Hospital ("Winter Haven") on the inventory of existing Level II NICUs. Following an amendment of the "grandfathering" rules, Winter Haven's dispute with AHCA was settled. Winter Haven's 11 bed NICU is included on the Level II inventory and its petition in this proceeding, which a Winter Haven witness described as their "fall back position", has been voluntarily dismissed. Humana of Florida, Inc., d/b/a Humana Women's Hospital Tampa ("Humana") intervened in these proceedings. Subsequent to the hearing and filing of proposed recommended orders, Humana entered its notice of voluntary withdrawal of its petition on March 17, 1993. AHCA is the state agency which administers CON laws, following transfer of that responsibility from HRS. See, Chapter 92-33, Laws of Florida. University Community Hospital ("UCH") is a 424 bed hospital in Tampa, Hillsborough County, Florida, AHCA District 6, with services which include open heart surgery, pediatric intensive care, and obstetrics. UCH began obstetrics services on September 2, 1991. In its first full year of operation, there were 1299 deliveries in its 31 bed obstetrics unit. UCH projected that there would be 1500 to 1800 deliveries in its second year of obstetrics services. Numeric Need and Occupancy Levels UCH filed its application to convert 10 acute care beds to establish a 10 bed Level II NICU on September 26, 1991, in response to HRS' August 9, 1991 publication of need. Total project cost was estimated at $765,000. Although HRS described the District 6 publication as a "preliminary estimate," there is no statutory or rule authority for the publication of any numeric need number other than the fixed need. By letter dated December 16, 1991, Tampa General Hospital ("Tampa General") notified HRS that the utilization data for Tampa General, which was used to calculate numeric need was incorrect. Tampa General reported 11,112 Level II NICU patient days for 1987, 11,387 for 1988, and, initially, 10,770 for 1990. Tampa General also reported a 20 percent increase in births from 1988 to 1990, and a 117 percent utilization increase in Level III NICU patient days. Tampa General's revised figures distinguished between services provided in its special care nursery and those provided in Level II NICU beds. The revised report divided the total 10,770 into 4,600 patient days in special care nursery beds and 6,170 in Level II NICU beds, but does not specifically take into account the intensity of nursing care or the severity of infants' conditions. Using 6,170 patient days, rather than 10,770, AHCA recalculated numeric need, determined that the numeric need was zero, and used zero need in reviewing the District 6, Level II NICU applications filed in this batch. AHCA did not publish the revised calculation of zero need. AHCA's policy is to not recalculate a fixed need pool, unless there is time to republish before applications are due. Nevertheless, AHCA takes the position that the need publication in this case may be revised because it was preliminary. Using the August bed need projection published by HRS, Level II NICU beds were reporting 86.5 percent occupancy in the twelve month period ending six months prior to the publication. If Tampa General's utilization rates are decreased from 114.28 percent to 70.43 percent, revised district utilization rates would decrease from 86.5 percent to 72.83 percent. Staffing ratios and costs indicate that some neonates in the Tampa General special care nursery received care consistent with Level II NICU services. There is more credible evidence to support the data used by the agency in its publication of need than there is to support its revised determination of zero need. Minimum 1,000 Births Rule 10-5.042(6), Florida Administrative Code, is, in relevant part, as follows: Hospitals applying for Level II neonatal intensive care services shall not normally be approved unless the hospital had a minimum service volume of 1,000 live births for the most recent 12-month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed need pool. There is no dispute that UCH initiated obstetrics services in September 1991, the same month in which it filed the CON application at issue in this case. Because the August 9, 1991 publication was the time for determination of need, then UCH does not meet the requirements of the rule. Standards For Review The publication of numeric need, minimum district occupancy levels, and minimum birth volumes are factors which determine the standard for review of CON applications. Due to the lack of any statutory or rule authority for the publication of preliminary estimates of numeric need, the nature and only possible effect of the pending litigation, AHCA's untimely revision of the numeric need number, and its failure to publish the revised number to allow a point-of-entry for challenges to the revised numeric need number and occupancy level, UCH is not required to demonstrate not normal circumstances. The failure to meet the minimum birth volume rule does, however, necessitate a showing of not normal circumstances for the approval of the UCH application. UCH assesses that its birth volume, and the number of neonates at UCH in need of Level II NICU care, the absence of available, accessible alternative hospitals, and the standard of care in the district are not normal circumstances which outweigh the minimum birth volume requirement. Available Alternatives Subsection 408.035(1)(b), Florida Statutes, also requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of other Level II NICUs in the district. AHCA asserts that its corrected data showing zero need is a major indicator of available alternatives. As noted, however, UCH demonstrated the unreliability of the corrected data. In addition, geographic, economic, and other practical concerns may also affect accessibility. The total District 6 inventory of Level II NICU beds with 1990 occupancy and patient days as published on August 9, 1991, is as follows: Hospital Occupancy Patient Days Humana - Brandon 108.82 1,986 Humana Woman's 72.35 3,961 Tampa General 114.28 10,011 Manatee Memorial 90.23 1,976 Lakeland Regional 75.50 4,409 Winter Haven 49.02 1,968 The inventory is accepted as valid for the same reasons that the original publication of need is accepted as more reliable than the revised estimates. See, Finding of Fact 13. Tampa General's Level II and III nurseries are not available alternatives, because they exceed 90 percent occupancy. See, Findings of Fact 10 and 13. Humana Brandon is not an alternative with its Level II and III NICU beds exceeding capacity. Expert testimony on traffic practice and referral patterns support UCH's assertion that facilities in Winter Haven or Lakeland are not viable alternatives, although within the two hour travel time established by the rule on geographic access. Normal referral patterns are from more rural to more urban areas. Humana Women's, which is seven miles from UCH and has a transfer agreement with UCH, is the most geographically accessible, available alternative. The parties disagree over whether Humana Women's is economically accessible and has the capacity to serve most of the Level II neonates born at UCH. Humana Women's increased its service to 10-11 percent Medicaid obstetrics patients in 1991-1992, in contrast to UCH's level of 7 percent Medicaid obstetrics patients, and therefore, is no longer economically inaccessible to Medicaid patients. Humana Women's has 15 Level II NICU beds, which reported 72 percent occupancy in 1990. The demographic characteristics of the UCH service area include 7.1 percent Medicaid eligible population, and overlaps with the service area of Humana Women's. In addition, UCH and Humana Women's have overlapping medical staffs. For these reasons, Humana Women's experiences provide the most reliable indication of the accuracy of UCH's projections. At Humana Women's 7 percent of neonates require Level II and III care. By contrast, Lakeland Regional Medical Center experiences 12.7 percent neonates requiring NICU care, close to that projected by UCH, however, 30 percent of Lakeland Regional's patients are in the Medicaid payor category. The link between Medicaid and the greater need for NICU care was established by expert testimony. On this basis, the expert projections that 7 percent, not 10-15 percent, of UCH newborns will need Level II NICU care is accepted as reasonable. Average lengths of stay in Humana Women's Level II NICU beds were 6 to 7 days, not 10 days as projected by UCH. That data also supports AHCA's expert's conclusion that the average length of stay in UCH's stabilization unit, 2.3 days, is not indicative of UCH's having provided Level II care to 160 to 170 neonates. According to AHCA's expert planner, total capacity at Humana Brandon, Humana Women's and Tampa General is 14,000 patient days. Using the inventory published by the agency, those hospitals reported a total of 15,958 patient days in 1990. Even assuming that UCH overestimated the number of neonates needing NICU care, the capacity at accessible facilities within the district cannot accommodate the additional patients, and constitutes a not normal circumstance outweighing the minimum birth volume requirement. The fact that UCH is the only obstetrics facility in Hillsborough County without Level II and III NICU beds indicates that, if otherwise in compliance with review criteria, UCH's application should be approved to meet the need for additional Level II NICU beds. UCH's expert also testified that the number of Level II NICU beds in the Tampa area were disproportionately low compared to the population. Tampa has 3.2 Level II beds per thousand births in contrast to 7.6 in Lakeland, and 7.7 in Winter Haven. Given the demographic differences among the hospitals' service areas, the bed to population ratio was not shown to be meaningful as an indication of Level II NICU need. State and Local Health Plans Subsection 408.035(1)(a), Florida Statutes requires an evaluation of need in relation to applicable state and district health plans. The 1989 Florida State Health Plan lists the following general categories of preferences, most of which are applicable to any proposal to transfer or convert acute care beds regardless of the proposed new service: for conversion of acute care beds, for providing indigent care, for providing emergency services, for teaching, research and referral hospitals, and for providing specialized services. The District 6 plan issued in June 1990 by the Health Council of West Central Florida includes only one applicable CON allocation factor, which is related to the state health plan indigent care preferences and is as follows: Preference shall be given to an applicant who provides the department with documentation that they provide, or propose to provide, a disproportionate share of Medicaid and charity care patient days in relation to other hospitals in the subdistrict. The charity care definition shall be consistent with the definition used by the Health Care Cost Containment Board as defined in Chapter 89-275, Laws of Florida. The first group of preferences in the State Health Plan includes the following: Preference shall be given to a bed transfer and conversion application in which the applicant proposes a sizable reduction of excess beds in the existing facility. AHCA argues that the preference is not met. Because UCH has 404 licensed beds with an average occupancy of about 50 percent, or 200 empty beds, AHCA states that the conversion of only 10 medical-surgical beds to 10 Level II NICU beds is not a sizable reduction of excess acute care beds. However, AHCA only projected a need for an additional 10 NICU beds, which is the minimum size allowed by AHCA rules. AHCA's position that no additional Level II beds are needed is inconsistent with penalizing UCH for not proposing to convert more beds in this application. Therefore, this preference must be deemed inapplicable to this case. Similarly, given the size of the published need, the objective of reaching 75 percent occupancy in five years is also inapplicable to this application. The second relevant group of preferences relates to whether the conversion of beds will adversely impact disproportionate share providers. That same issue is also addressed in the group of preferences related to indigent care. AHCA argues that this preference is not met, because Tampa General, the only disproportionate share provider in the District, would be adversely affected. The evidence presented at hearing supports a conclusion to the contrary, that Tampa General will not be affected adversely. UCH and Tampa General have an agreement to cooperate in providing NICU services. UCH proposes to assist Tampa General in the delivery of Level III NICU services, by transfers of Level II neonates back to UCH as soon as possible. The fact that Tampa General's Level III utilization has increased substantially, more than 100 percent since 1988, was not disputted. Tampa General's medical director's testimony on the benefits to Tampa General of the agreement with UCH is persuasive. The next group of relevant preferences is entitled "Indigent care." The only local health plan factor also favors applicants which will provide a disproportionate share of Medicaid and charity care. UCH will not provide a disproportionate share of its services to Medicaid and charity care patients. The Level II NICU providers in District 6 average 40 percent Medicaid participation, and UCH proposes 6 percent. UCH does not meet the disproportionate share preferences in the state or local health plans. The "emergency services" group of preferences apply to applicants who (1)accept indigents for emergency care, (2)have a trauma center, (3) provide a full range of emergency services, and (4) have not been fined for violating emergency service statutes. UCH has an active emergency room, accommodating 45,000 visits in fiscal year 1991, and under expansion to increase its capacity to 60,000 visits a year. UCH, in general, meets the preference for providers of emergency room services. UCH is not a teaching, research, or referral center, nor is its proposed service unavailable within its service area. In response to this group of preferences, UCH has also not demonstrated that patients are leaving the state for this service, that any new physician specialities would be attracted to the area, or that its proposal will expand medical research in Florida. For the group of preferences for specialized services, UCH meets two of three applicable preferences. One for proposing a conversion of medical/surgical beds to NICU beds, another for proposing a commitment to serve 6 percent Medicaid and 5 percent charity care. In 1990, 41 percent of District 6 Level II NICU discharges were Medicaid patients. In 1990, Medicaid services ranged from a high of 61.6 percent of total Medicaid provided by Tampa General to a low of 2 percent by Humana Women's. UCH has shown its 6 percent Medicaid commitment to be reasonable and attainable by demonstrating that 7.1 percent of the population in its service area is Medicaid eligible. The actual Medicaid percentage in the first year for obstetrics services was 7 percent, which coincides with the percentage of Medicaid eligible persons living within the UCH service area. UCH has not emphasized specialized services to substance abusers, other than to have a referral network to community service agencies. The review of UCH's application in relation to state and local health plans results in the conclusion that the proposal is generally supported by preferences for the conversion of excess acute care beds, for not adversely impacting and potentially assisting Tampa General, for having emergency room services, and for providing specialized services with an attainable relatively low, Medicaid commitment. On the negative side are the preferences for applicants serving a disproportionate share Medicaid and charity patients, for teaching, research or referral centers, for services unique to the area, or for specialized service to substance abusing pregnant or postpartum women. On balance, the application of the state and local health plans does not suggest strongly that the UCH application either should or should not be approved, particularly in this case, where comparative review is impossible because UCH is the sole remaining applicant. Other Statutory Criteria Subsection 408.035(1)(c), Florida Statutes, criteria are met by UCH. UCH can provide good quality care in Level II NICU services. It is accredited by the Joint Commission on Accreditation of Health Organizations and has the ability to comply with rule requirements for equipment, staff and physical facilities. UCH already has a board-certified neonatologist on staff. Subsection 408.035(1)(e), favoring joint, cooperative or shared operation of health care services is not a criterion met by the UCH proposal. Although UCH suggests that its transfer agreement with Tampa General complies with the statute and the evidence showed that the two hospitals will cooperate in providing the separate services they each provide, but the transfer agreement does not constitute cooperative operation of the service. Subsection 408.035(1)(f), arguably is a basis for approval of the UCH application, because Level II NICU equipment and services do not exist in the adjoining area of east Pasco County. For District 5, which includes Pasco County, zero need was published for the same batching cycle. Subsection 408.035(1)(g) criterion, related to research and training programs, is not met by the UCH application. UCH meets the criteria in Subsection 408.035(1)(h), by having shown that it has the manpower, personnel and funds to establish and operate a 10-bed Level II NICU. UCH is able to renovate existing space and to acquire the equipment required for the 10-bed NICU for approximately $765,000. AHCA does not dispute UCH's assertion that it has adequate funds to finance this project and that project costs are reasonable. Having already hired a neonatologist, and 6 to 7 of the 11 1/2 to 12 1/2 full time equivalent or FTE's required, UCH has, or can recruit and hire, the necessary staff. Financial Feasibility Under Subsection 408.035(1)(i), the financial feasibility of a project must be considered. UCH estimated that a Level II NICU will generate $290,000 in year one, and $336,000 in year two revenues. The projections were based on providing Level II NICU services to 11 to 12 percent of newborns, or 2290 patient and 2670 patient days in years one and two, respectively. This underlying assumption is rejected. See, Finding of Fact 26. UCH's projection of a 10 day average length of stay in Level II NICU beds is not supported by Humana Women's experience of 6 to 7 days. See, finding of Fact 27. From the testimony and assumptions, attached to UCH's projected revenues and expenses, it is possible to determine that reduced total patient revenues will result from lower than projected numbers of patients and days. It is also apparent that deductions from revenue and some operating expenses will also decrease. There is, however, no testimony from which the relative proportions of adjustments to each item and the effect on charges for NICU services be calculated. Nor is there testimony regarding any minimum utilization necessary for the project to be financially feasible. Therefore, UCH has failed to meet the burden of showing that the proposed Level II NICU at UCH will be financially feasible. On balance, but not excluding all the applicable criteria, the most positive factors of the UCH proposal, the published need and potential benefits to Tampa General, do not outweigh the most negative ones, the failure to demonstrate financial feasibility and to make a more significant commitment compared to the district demand for Medicaid in Level II NICU beds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of University Community Hospital for Certificate of Need 6785 to convert 10 acute care beds to 10 Level II neonatal intensive care beds be DENIED. DONE AND ENTERED this 8th day of October, 1993, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1490 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: UNIVERSITY COMMUNITY HOSPITAL Accepted in Findings of Fact 5 and 36. Accepted in Finding of Fact 6. Accepted in Finding of Fact 7. Accepted in Finding of Fact 2. Accepted in Finding of Fact 2. Accepted in Finding of Fact 3. Accepted in Findings of Fact 1 and 2. Accepted in Finding of Fact 2. Accepted in Finding of Fact 8. Accepted in Findings of Fact 9 and 10. Accepted in Finding of Fact 11. Accepted in Finding of Fact 11. Issue not reached. Issue not reached. Issue not reached. Accepted in Findings of Fact 10 and 11. Accepted in Finding of Fact 13. Subordinate to Finding of Fact 13. Accepted in Finding of Fact 10. Subordinate to Finding of Fact 13. Accepted in Findings of Facts 5 to 13. Subordinate to Finding of Fact 13. Subordinate to Finding of Fact 13. Accepted in Finding of Fact 13. Accepted in Findings of Fact 10 and 13. Accepted in Finding of Fact 47. First two sentences, Subordinate to Finding of Fact 6, Last two sentences, Rejected in Finding of Fact 26. Accepted in Finding of Fact 28. Rejected in Findings of Fact 50 and 51. Accepted in Finding of Fact 27. Rejected. Accepted in Finding of Fact 29. Accepted in Finding of Fact 36. Accepted in relevant part in Finding of Fact 34. Subordinate to Finding of Fact 26. Subordinate to Finding of Fact 26. Conclusion rejected in Finding of Fact 30. Rejected in Finding of Fact 41. Rejected in Findings of Fact 50 and 51. Accepted in relevant part in Finding of Fact 41. Accepted in Finding of Fact 34. Accepted in relevant part in Finding of Fact 38. Accepted in Findings of Fact 20, 22, and 28. Accepted in Finding of Fact 23. Accepted in Finding of Fact 25. Subordinate to Finding of Fact 25. Accepted in Finding of Fact 24. Accepted in Finding of Fact 29. Accepted in Finding of Fact 34. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Rejected in Finding of Fact 48. Rejected in Findings of Fact 50. Rejected in Findings of Fact 48. Subordinate to Finding of Fact 50. Subordinate to Finding of Fact 50. Unable to determine. Unable to determine. Accepted. Unable to determine. Rejected in Finding of Fact 45. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 47. Accepted in Finding of Fact 28. Issues not reached due to Humana's Voluntary Dismissal. Issues not reached due to Humana's Voluntary Dismissal.
The Issue Whether the Agency for Health Care Administration (AHCA or the Agency) should approve the application for certificate of need (CON) 7700 filed by Miami Beach Healthcare Group, LTD. d/b/a Miami Heart Institute (Miami Heart or MH).
Findings Of Fact The Agency is the state agency charged with the responsibility of reviewing and taking action on CON applications pursuant to Chapter 408, Florida Statutes. The applicant, Miami Heart, operates a hospital facility known as Miami Heart Institute which, at the time of hearing, was comprised of a north campus (consisting of 273 licensed beds) and a south campus (consisting of 258 beds) in Miami, Florida. The two campuses operate under a single license which consolidated the operation of the two facilities. The consolidation of the license was approved by CON 7399 which was issued by the Agency prior to the hearing of this case. The Petitioner, Mount Sinai, is an existing health care facility doing business in the same service district. On February 4, 1994, AHCA published a fixed need pool of zero adult inpatient psychiatric beds for the planning horizon applicable to this batching cycle. The fixed need pool was not challenged. On February 18, 1994, Miami Heart submitted its letter of intent for the first hospital batching cycle of 1994, and sought to add twenty adult general inpatient psychiatric beds at the Miami Heart Institute south campus. Such facility is located in the Agency's district 11 and is approximately two (2) miles from the north campus. Notice of that letter was published in the March 11, 1994, Florida Administrative Weekly. Miami Heart's letter of intent provided, in pertinent part: By this letter, Miami Beach Healthcare Group, Ltd., d/b/a Miami Heart Institute announces its intent to file a Certificate of Need Application on or before March 23, 1994 for approval to establish 20 hospital inpatient general psychiatric beds for adults at Miami Heart Institute. Thus, the applicant seeks approval for this project pursuant to Sections 408.036(1)(h), Florida Statutes. The proposed capital expenditure for this project shall not exceed $1,000,000 and will include new construction and the renovation of existing space. Miami Heart Institute is located in Local Health Council District 11. There are no subsdistricts for Hospital Inpatient General Psychiatric Beds for Adults in District 11. The applicable need formula for Hospital General Psychiatric Beds for Adults is contained within Rule 59C-1.040(4)(c), F.A.C. The Agency published a fixed need of "0" for Hospital General Psychiatric Beds for Adults in District 11 for this batching cycle. However, "not normal" circumstances exist within District which justify approval of this project. These circumstances are that Miami Beach Community Hospital, which is also owned by Miami Beach Healthcare Group, Ltd., and which has an approved Certificate of Need Application to consol- idate its license with that of the Miami Heart Institute, has pending a Certificate of Need Application to delicense up to 20 hospital inpatient general psychiatric beds for adults. The effect of the application, which is the subject of this Letter of Intent, will be to relocate 20 of the delicensed adult psychiatric beds to the Miami Heart Institute. Because of the "not normal" circumstances alleged in the Miami Heart letter of intent, the Agency extended a grace period to allow competing letters of intent to be filed. No additional letters of intent were submitted during the grace period. On March 23, 1994, Miami Heart timely submitted its CON application for the project at issue, CON no. 7700. Notice of the application was published in the April 8, 1994, Florida Administrative Weekly. Such application was deemed complete by the Agency and was considered to be a companion to the delicensure of the north campus beds. On July 22, 1994, the Agency published in the Florida Administrative Weekly its preliminary decision to approve CON no. 7700. In the same batch as the instant case, Cedars Healthcare Group (Cedars), also in district 11, applied to add adult psychiatric beds to Cedars Medical Center through the delicensure of an equal number of adult psychiatric beds at Victoria Pavilion. Cedars holds a single license for the operation of both Cedars Medical Center and Victoria Pavilion. As in this case, the Agency gave notice of its intent to grant the CON application. Although this "transfer" was initially challenged, it was subsequently dismissed. Although filed at the same time (and, therefore, theoretically within the same batch), the Cedars CON application and the Miami Heart CON application were not comparatively reviewed by the Agency. The Agency determined the applicants were merely seeking to relocate their own licensed beds. Based upon that determination, MH's application was evaluated in the context of the statutory criteria, the adult psychiatric beds and services rule (Rule 59C-1.040, Florida Administrative Code), the district 11 local health plan, and the 1993 state health plan. Ms. Dudek also considered the utilization data for district 11 facilities. Mount Sinai timely filed a petition challenging the proposed approval of CON 7700 and, for purposes of this proceeding only, the parties stipulated that MS has standing to raise the issues remaining in this cause. Mount Sinai's existing psychiatric unit utilization is presently at or near full capacity, and MS' existing unit would not provide an adequate, available, or accessible alternative to Miami Heart's proposal, unless additional bed capacity were available to MS in the future through approval of additional beds or changes in existing utilization. Miami Heart's proposal to establish twenty adult general inpatient psychiatric beds at its Miami Heart Institute south campus was made in connection with its application to delicense twenty adult general inpatient psychiatric beds at its north campus. The Agency advised MH to submit two CON applications: one for the delicensure (CON no. 7474) and one for the establishment of the twenty beds at the south campus (CON no. 7700). The application to delicense the north campus beds was expeditiously approved and has not been challenged. As to the application to establish the twenty beds at the south campus, the following statutory criteria are not at issue: Section 408.035(1)(c), (e), (f), (g), (h), (i), (j), (k), (m), (n), (o) and (2)(b) and (e), Florida Statutes. The parties have stipulated that Miami Heart meets, at least minimally, those criteria. During 1993, Miami Heart made the business decision to cease operations at its north campus and to seek the Agency's approval to relocate beds and services from that facility to other facilities owned by MH, including the south campus. Miami Heart does not intend to delicense the twenty beds at the north campus until the twenty beds are licensed at the south campus. The goal is merely to transfer the existing program with its services to the south campus. Miami Heart did not seek beds from a fixed need pool. Since approximately April, 1993, the Miami Heart north campus has operated with the twenty bed adult psychiatric unit and with a limited number of obstetrical beds. The approval of CON no. 7700 will not change the overall total number of adult general inpatient psychiatric beds within the district. The adult psychiatric program at MH experiences the highest utilization of any program in district 11, with an average length of stay that is consistent with other adult programs around the state. Miami Heart's existing psychiatric program was instituted in 1978. Since 1984, there has been little change in nursing and other staff. The program provides a full continuum of care, with outpatient programs, aftercare, and support programs. Nearly ninety-nine percent of the program's inpatient patient days are attributable to patients diagnosed with serious mental disorders. The Miami Heart program specializes in a biological approach to psychiatric cases in the diagnosis and treatment of affective disorders, including a variety of mood disorders and related conditions. The Miami Heart program is distinctive from other psychiatric programs in the district. If the MH program were discontinued, the patients would have limited alternatives for access to the same diagnostic and treatment services in the district. There are no statutes or rules promulgated which specifically address the transfer of psychiatric beds or services from one facility owned by a health care entity to another facility also owned by the same entity. In reviewing the instant CON application, the Agency determined it has the discretion to evaluate each transfer case based upon the review criteria and to consider the appropriate weight factors should be given. Factors which may affect the review include the change of location, the utilization of the existing services, the quality of the existing programs and services, the financial feasibility, architectural issues, and any other factor critical to the review process. In this case, the weight given to the numeric need criteria was not significant. The Agency determined that because the transfer would not result in a change to the overall bed inventory, the calculated fixed need pool did not apply to the instant application. In effect, because the calculation of numeric need was inapplicable, this case must be considered "not normal" pursuant to Rule 59C-1.040(4)(a), Florida Administrative Code. The Agency determined that other criteria were to be given greater consideration. Such factors were the reasonableness of the proposal, the ability to afford access, the applicant's ability to provide a quality program, and the project's financial feasibility. The Agency determined that, on balance, this application should be approved as the statutory and other review criteria were met. Although put on notice of the other CON applications, Mount Sinai did not file an application for psychiatric beds at the same time as Miami Heart or Cedars. Mount Sinai did not claim that the proposed delicensures and transfers made beds available for competitive review. The Agency has interpreted Rule 59C-1.040, Florida Administrative Code, to mean that it will not normally approve an application for beds or services unless the statutory and rule criteria are met, including the need determination criteria. There is no list of circumstances which are routinely considered "not normal" by the Agency. In this case, the proposed transfer of beds was, in itself, considered "not normal." The approval of Miami Heart's application would allow an existing program to continue. As a result, the overhead to maintain two campuses would be reduced. Further, the relocation would allow the program to continue to provide access, both geographically and financially, to the same patient service area. And, since the program has the highest utilization rate of any adult program in the district, its continuation would be beneficial to the area. The program has an established referral base for admissions to the facility. The transfer is reasonable for providing access to the medically under-served. The quality of care, while not in issue, would be expected to continue at its existing level or improve. The transfer would allow better access to ancillary hospital departments and consulting specialists who may be needed even though the primary diagnosis is psychiatric. The cost of the transfer when compared to the costs to be incurred if the transfer is not approved make the approval a benefit to the service area. If the program is not relocated, Medicaid access could change if the hospital is reclassified from a general facility to a specialty facility. The proposed cost for the project does not exceed one million dollars. If the north campus must be renovated, a greater capital expenditure would be expected. The expected impact on competition for other providers is limited due to the high utilization for all programs in the vicinity. The subject proposal is consistent with the district and state health care plans and the need for health care facilities and services. The services being transferred is an existing program which is highly utilized and which is not creating "new beds." As such, the proposal complies with Section 408.035(1)(a), Florida Statutes. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing services in the district will not be adversely affected by the approval of the subject application. The proposed transfer is consistent with, and appropriate, in light of these criteria. Therefore, the proposal complies with Section 408.035(1)(b), Florida Statutes. The subject application demonstrates a full continuum of care with safeguards to assure that alternatives to inpatient care are fully utilized when appropriate. Therefore, the availability and adequacy of other services, such as outpatient care, has been demonstrated and would deter unnecessary utilization. Thus, Miami Heart has shown its application complies with Section 408.035(1)(d), Florida Statutes. Miami Heart has also demonstrated that the probable impact of its proposal is in compliance with Section 408.035(1)(l), Florida Statutes. The proposed transfer will not adversely impact the costs of providing services, the competition on the supply of services, or the improvements or innovations in the financing and delivery of services which foster competition, promote quality assurance, and cost-effectiveness. Miami Heart has taken an innovative approach to promote quality assurance and cost effectiveness. Its purpose, to close a facility and relocate beds (removing unnecessary acute care beds in the process), represents a departure from the traditional approach to providing health care services. By approving Miami Heart's application, overhead costs associated with the unnecessary facility will be eliminated. There is no less costly, more efficient alternative which would allow the continuation of the services and program Miami Heart has established at the north campus than the approval of transfer to the south campus. The MH proposal is most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. The renovation of the medical surgical space at the south campus to afford a location for the psychiatric unit is the most practical and readily available solution which will allow the north campus to close and the beds and services to remain available and accessible. In totality, the circumstances of this case make the approval of Miami Heart's application for CON no. 7700 the most reasonable and practical solution given the "not normal" conditions of this application.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Agency for Health Care Administration enter a final order approving CON 7700 as recommended in the SAAR. DONE AND RECOMMENDED this 5th day of April, 1995, in Tallahassee, Leon County, Florida. JOYOUS D. 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 5th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4755 Note: Proposed findings of fact are to contain one essential fact per numbered paragraph. Proposed findings of fact paragraphs containing multiple sentences with more than one statement of fact are difficult to review. In reviewing for this case, where all sentences were accurate and supported by the recorded cited, the paragraph has been accepted. If the paragraph contained mixed statements where one sentence was an accurate statement of fact but the others were not, the paragraph has been rejected. Similarly, if one sentence was editorial comment, argument, or an unsupported statement to a statement of fact, the paragraph has been rejected. Proposed findings of fact should not include argument, editorial comments, or statements of fact mixed with such comments. Rulings on the proposed findings of fact submitted by Petitioner, Mount Sinai: Paragraphs 1 through 13 were cited as stipulated facts. Paragraph 14 is rejected as irrelevant. With regard to paragraph 15 it is accepted that Miami Heart made the business decision to move the psychiatric beds beds from the north campus to the south campus. Any inference created by the remainder of the paragraph is rejected as irrelevant. Paragraph 16 is rejected as irrelevant. Paragraph 17 is rejected as irrelevant. Paragraph 18 is accepted. Paragraph 19 is rejected as irrelevant. Paragraph 20 is rejected as contrary to the weight of the credible evidence. Paragraph 21 is rejected as contrary to the weight of the credible evidence. Paragraph 22 is accepted. Paragraph 23 is rejected as irrelevant. Paragraph 24 is accepted. Paragraph 25 is rejected as repetitive, or immaterial, unnecessary to the resolution of the issues. Paragraph 26 is rejected as irrelevant or contrary to the weight of the credible evidence. Paragraph 27 is rejected as comment or conclusion of law, not fact. Paragraph 28 is accepted but not relevant. Paragraphs 29 and 30 are accepted. Paragraphs 31 through 33 are rejected as argument, comment or irrelevant. Paragraph 34 is rejected as comment or conclusion of law, not fact. Paragraph 35 is rejected as comment or conclusion of law, not fact, or irrelevant as the FNP was not in dispute. Paragraph 36 is rejected as irrelevant. Paragraph 37 is rejected as repetitive, or comment. Paragraph 38 is rejected as repetitive, comment or conclusion of law, not fact, or irrelevant. Paragraph 39 is rejected as argument or contrary to the weight of credible evidence. Paragraph 40 is accepted. Paragraph 41, 42, and 43 are rejected as contrary to the weight of the credible evidence and/or argument. Paragraph 44 is rejected as argument and comment on the testimony. Paragraph 45 is rejected as argument, irrelevant, and/or not supported by the weight of the credible evidence. Paragraph 46 is rejected as argument. Paragraph 47 is rejected as comment or conclusion of law, not fact. Paragraph 48 is rejected as comment, argument or irrelevant. Paragraph 49 is rejected as comment on testimony. It is accepted that the proposed relocation or transfer of beds is a "not normal" circumstance. Paragraph 50 is rejected as argument or irrelevant. Paragraph 51 is rejected as argument or contrary to the weight of credible evidence. Paragraph 52 is rejected as argument or contrary to the weight of credible evidence. Paragraph 53 is rejected as argument, comment or recitation of testimony, or contrary to the weight of credible evidence. Paragraph 54 is rejected as irrelevant or contrary to the weight of credible evidence. Paragraph 55 is rejected as irrelevant, comment, or contrary to the weight of credible evidence. Paragraph 56 is rejected as irrelevant or argument. Paragraph 57 is rejected as irrelevant or argument. Paragraph 58 is rejected as contrary to the weight of credible evidence. Paragraph 59 is rejected as irrelevant. Paragraph 60 is rejected as contrary to the weight of credible evidence. Paragraph 61 is rejected as argument or contrary to the weight of credible evidence. Paragraph 62 is rejected as argument or contrary to the weight of credible evidence. Paragraph 63 is accepted. Paragraph 64 is rejected as irrelevant. Mount Sinai could have filed in this batch given the not normal circumstances disclosed in the Miami Heart notice. Paragraph 65 is rejected as irrelevant. Paragraph 66 is rejected as comment or irrelevant. Paragraph 67 is rejected as argument or contrary to the weight of credible evidence. Paragraph 68 is rejected as argument or irrelevant. Paragraph 69 is rejected as argument, comment or irrelevant. Paragraph 70 is rejected as argument or contrary to the weight of credible evidence. Rulings on the proposed findings of fact submitted by the Respondent, Agency: Paragraphs 1 through 6 are accepted. With the deletion of the words "cardiac catheterization" and the inclusion of the word "psychiatric beds" in place, paragraph 7 is accepted. Cardiac catheterization is rejected as irrelevant. Paragraph 8 is accepted. The second sentence of paragraph 9 is rejected as contrary to the weight of credible evidence or an error of law, otherwise, the paragraph is accepted. Paragraph 10 is accepted. Paragraphs 11 through 17 are accepted. Paragraph 18 is rejected as conclusion of law, not fact. Paragraphs 19 and 20 are accepted. The first two sentences of paragraph 21 are accepted; the remainder rejected as conclusion of law, not fact. Paragraph 22 is rejected as comment or argument. Paragraph 23 is accepted. Paragraph 24 is rejected as argument, speculation, or irrelevant. Paragraph 25 is accepted. Rulings on the proposed findings of fact submitted by the Respondent, Miami Heart: Paragraphs 1 through 13 are accepted. The first sentence of paragraph 14 is accepted; the remainder is rejected as contrary to law or irrelevant since MS did not file in the batch when it could have. Paragraph 15 is accepted. Paragraph 16 is accepted as the Agency's statement of its authority or policy in this case, not fact. Paragraphs 17 through 20 are accepted. Paragraph 21 is rejected as irrelevant. Paragraph 22 is rejected as irrelevant. Paragraphs 23 through 35 are accepted. Paragraph 36 is rejected as repetitive. Paragraphs 37 through 40 are accepted. Paragraph 41 is rejected as contrary to the weight of the credible evidence to the extent that it concludes the distance to be one mile; evidence deemed credible placed the distance at two miles. Paragraphs 42 through 47 are accepted. Paragraph 48 is rejected as comment. Paragraphs 49 through 57 are accepted. COPIES FURNISHED: Tom Wallace, Assistant Director Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 R. Terry Rigsby Geoffrey D. Smith Wendy Delvecchio Blank, Rigsby & Meenan, P.A. 204 S. Monroe Street Tallahassee, Florida 32302 Lesley Mendelson Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Stephen Ecenia Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. 215 South Monroe Street Suite 420 Tallahassee, Florida 32302-0551
