The Issue The issues are whether Respondent withdrew controlled substances from the narcotics dispensing system and failed to document the administration or wastage of those substances; if yes, whether this conduct fails to conform to minimum acceptable standards of prevailing nursing practice; and, if yes, what penalty should be imposed on Respondent's license as a registered nurse.
Findings Of Fact The Department is the state agency charged with regulating the practice of nursing in the State of Florida. Respondent Marla Gunderson ("Respondent") is, and has been at all times material hereto, a licensed registered nurse in the State of Florida, having been issued license number 2832622 by the Florida Board of Nursing in 1994. Respondent was employed by Lee Memorial Health Care System Rehabilitation Hospital ("Lee Memorial") as a registered nurse from about January 29, 2001, until about March 22, 2001. During the first three or four weeks of Respondent's employment, she participated in a full-time training program through Lee Memorial's education department. A part of this training included training in the administration of medications to patients. After completing the three or four-week training program, Respondent began working directly with patients. From about mid-February 2001 through early-March 2001, Respondent had no problems with documenting the administration of medications to patients. Some time in or near the middle of March 2001, Melanie Simmons, R.N. ("Simmons"), Lee Memorial's Nursing Supervisor, received a complaint from the night nurse following Respondent's shift. The complaint alleged that a patient's wife reported that the pain medication her husband was given by Respondent was not the Codeine that had been ordered by the physician. Pursuant to Lee Memorial's policies and procedures, Simmons conducted an investigation into the allegations of the above-referenced complaint regarding the Respondent. Lee Memorial's policies and procedures set out a specific method for conducting investigations regarding the administration of medications to patients. First, the physician's orders are checked to see what medications have been ordered for the patient. Next, the Pyxis records are pulled to determine if and when medications were withdrawn for administration to patients. The Pyxis system is a computerized medication delivery system. Each nurse has an assigned user code and a password, which must be entered before medication can be withdrawn from the Pyxis system. Then, medication administration records (MARs), the documents used by nurses to record the administration of medications to patients, are checked to verify whether the nurse documented the administration of the medications to the patients for whom they were withdrawn. Finally, the Patient Focus Notes, the forms used by nurses to document non-routinely administered medications, are also checked to determine if, when, and why a medication was given to a patient. If after comparing the physician's orders, Pyxis records, MARs, and Patient Focus Notes, it is determined that medications were not properly administered or documented, the nurse making the errors is advised of the discrepancy and given an opportunity to review the documentation and explain any inconsistencies. Simmons' investigation, which included comparing the physician's orders, Pyxis records, MARs and Patient Focus Notes, revealed discrepancies in medications withdrawn by Respondent and the MARs of the three patients under her care. The time period covered by the investigation was March 12 through March 17, 2001. Of the six days included in the investigation period, Simmons determined that all the discrepancies had occurred on one day, March 13, 2001. Nurses are required to record the kind and amount of medication that they administer to patients. This information should be recorded at or near the time the medication is administered. It is the policy of Lee Memorial that should a nurse not administer the medication or the entire amount of the medication dispensed under his or her password, that nurse should have another nurse witness the disposal of the medication. The nurse who serves as a witness to the disposal of medication would then enter his or her identification number in the Pyxis. As a result of that entry, the nurse who observed the disposal of the medication would be listed on the Pyxis report as a witness to the disposal of the medication not administered to patients. Such excess medication is termed waste or wastage. The physician's order for Patient F.R. indicated that the patient could have 1 to 2 Percocet tablets, to be administered by mouth, as needed every 3 to 4 hours. On March 13, 2001, at 14:06 Respondent withdrew 2 Percocet tablets for Patient F.R. However, there was no documentation in the patient's MAR, focus notes, and other records which indicated that Respondent administered the Percocet tablets to Patient F.R. The physician's order for Patient G.D. indicated that 1 to 2 Percocet tablets could be administered to the patient by mouth as needed every 4 to 6 hours. On March 13, 2001, at 11:18 Respondent withdrew 2 Percocet tablets and on that same day at 17:16, Respondent withdrew another 2 Percocet tablets for Patient G.D. However, there was no documentation in the patient's MAR, focus notes, or any other records which indicated that Respondent administered the Percocet tablets to Patient G.D. The physician's order for Patient T.G. indicated that 1 to 1.5 Lortab/Vicodin tablets could be administered to the patient by mouth as needed every 4 to 6 hours. On March 13, 2001, Respondent withdrew 2 Lortab/Vicodin tablets for Patient T.G. However, Respondent failed to document on the patient's MAR, focus notes, or other records that the medication had been administered to Patient T.G. With regard to the above-referenced medications withdrawn by Respondent on March 13, 2001, there is no documentation that any of the medications were wasted. All the medications listed in paragraphs 13, 14, and 15 are narcotics or controlled substances. Because Respondent did not document the patients' MARs or focus notes after she withdrew the medications, there was no way to determine whether the medications were actually administered to the patients. Proper documentation is very important because the notations made on patient records inform nurses on subsequent shifts if and when medications have been administered to the patients as well as the kind and amount of medications that have been administered. Without such documentation, the nurses taking over the subsequent shifts have no way of knowing whether medication has been administered, making it possible for affected patients to be overmedicated. Respondent has been a registered nurse since 1994 and knows or should have known the importance of documenting the administration of medications to patients. Respondent does not dispute that she did not document the administration and/or wastage of the narcotics or controlled substance she withdrew from the Pyxis system on March 13, 2001, for the patients identified in paragraphs 13, 14, and 15. Moreover, Respondent provided no definitive explanation as to why she did not properly document the records. According to Respondent, she "could have been busy, called away, [or] got distracted." Following Simmons' investigation of Respondent relating to the withdrawal and/or administration of medications, Respondent agreed to submit to a drug test. The results of the drug test were negative. Prior to being employed by Lee Memorial, all of Respondent's previous experience as an R.N. had been in long- term care. Except for the complaint which is the subject of this proceeding, there have been no complaints against Respondent's registered nurse's license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health enter a Final Order (1) imposing an administrative fine of $250; (2) requiring Respondent to remit the Agency's costs in prosecuting this case; (3) requiring Respondent to complete a continuing education course, approved by the Board of Nursing, in the area administration and documentation of medications; and (4) suspending Respondent's nursing license for two years. DONE AND ENTERED this 1st day of April, 2002, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 2002. COPIES FURNISHED: Reginald D. Dixon, Esquire Agency for Health Care Administration General Counsel's Office-Practitioner Regulation Post Office Box 14229 2727 Mahan Drive Tallahassee, Florida 32317-4229 Marla Gunderson 1807 Northeast 26 Terrace Cape Coral, Florida 33909 Ruth R. Stiehl, Ph.D., R.N. Executive Director Board of Nursing Department of Health 4080 Woodcock Drive, Suite 202 Jacksonville, Florida 32207-2714 Mr. R. S. Power, Agency Clerk Department of Health 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701 William W. Large, General Counsel Department of Health 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701
Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration, (“the Agency”) regarding certificate of need ("CON") application number 10157 filed by Tallahassee Medical Center, Inc. d/b/a Capital Regional Medical Center (“CRMC”) and CON application number 10156 filed by Bay Hospital, Inc. d/b/a Gulf Coast Medical Center (*GCMC”). 1. CRMC filed a CON application which sought the establishment of a 12-bed comprehensive medical rehabilitation unit within its hospital located in Leon County, Florida, Service District 2. The Agency denied CRMC’s CON application 10157. 2. GCMC filed a CON application which sought the establishment of a 20-bed comprehensive medical rehabilitation unit within its hospital located in Bay County. Florida, Service District 2. The Agency denied GCMC’s CON application 10156. 3. Both parties filed a petition for formal hearing challenging the Agency’s denials of their respective CON applications. 4. Both parties have since voluntarily dismissed their petitions for formal hearing. 5. Based upon these voluntary dismissals, the Division of Administrative Hearings entered an Order Closing Files in the above styled matter. IT IS THEREFORE ORDERED: 6. The denial of CRMC’s CON application 10157 is UPHELD. 7. The denial of GCMC’s CON application 10156 is UPHELD. ORDERED in Tallahassee, Florida on thie 2 day of Crfebe_ . 2013. hob Py eclets Elizabeth Dudk, Secretary Agency for Health Care Administration
Other Judicial Opinions A party who is adversely affected by this final order is entitled to judicial review, which shall be instituted by filing the original notice of appeal with the agency clerk of AHCA, and a copy along with the filing fee prescribed by law with the district court of appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida appellate rules. The notice of appeal must be filed within 30 days of the rendition of the order to be reviewed. CERTIFICATE OF SERVICE 1 HEREBY CERTIFY that a true and correct copy of the foregoing Final Order has been furnished by U.S. Mail or electronic mail to the persons named below on this f 3S day of /Voye—he/ . 2013. Richard J. Shoop, Agency Cler Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 Janice Mills Facilities Intake Unit Agency for Health Care Administration (Electronic Mail) James McLemore, Supervisor Certificate of Need Unit Agency for Health Care Administration (Electronic Mail) James H. Peterson, IE] Administrative Law Judge Division of Administrative Hearings | (Electronic Mail) Lorraine M. Novak, Esquire Assistant General Counsel Agency for Health Care Administration (Electronic Mail) Stephen A. Ecenia, Esquire R. David Prescott, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32302 Counsel for CRMC and GCMC (U.S. Mail) R. Terry Rigsby, Esquire Pennington, Moore, Wilkinson, Bell & Dunbar, P.A. 215 South Monroe Street, 2"! Floor Tallahassee, Florida 32301 Counsel for HealthSouth { (US. Mail)
Findings Of Fact In March 1975, Respondent was employed as a registered nurse at the Sarasota Memorial Hospital, Sarasota, Florida. On March 26, 1975, he was performing duties as "charge" nurse on the 3 P.M. to 11 P.M. shift in the Orthopedic Clinic. At approximately 4 P.M., Muriel Johnson, R.N., Clinical Supervisor, while making her initial rounds for the shift, talked to two of the patients who indicated they felt no need for medication and had not received any. She then observed that the patients' medication and treatment sheets indicated that Respondent had given them Percodan, a narcotic drug, that afternoon. She then checked Respondent's nurses notes and the federal narcotic control sheet used to keep track of narcotics on the floor, and found no entries for the patients in question on either document. Both of these documents should have reflected the administration of medication to the patients at the time it was given. She proceeded to report the apparent discrepancy to her supervisor. (Testimony of Johnson) The Sarasota police was notified and two police officers arrived at the hospital about 11:15 P.M.. They were informed by a nurse that Respondent was suspected of checking out narcotics, but not issuing them to patients. Based on the foregoing information, they followed Respondent's automobile as he left the hospital that evening and stopped it about a quarter of a mile south of the hospital on US highway 41. Respondent's wife was driving the automobile at the time. Respondent was placed under arrest and, upon a search of his person, various drugs in hospital containers or packages were discovered, including seven Percodan tablets, six Synalgos DC capsules, and two Empirin with Codeine tablets. Percodan is a controlled Schedule 1 drug used to relieve pain and Synalgos DC is a Schedule 3 drug. Respondent was cooperative at the time of his arrest. He was charged with three counts of illegal possession of drugs and, on September 12, 1975, in the Sarasota County Circuit Court, Case No. 75-229-CF-A- 01, upon a plea of Nolo Contendere, adjudication of guilt was withheld and Respondent was placed on probation for two years, fined $1,000.00, and ordered to undergo psychiatric counselling. (Testimony of Hogle, Peterson, Perry, Petitioner's Exhibit 1,2, Composite Exhibit 3). On March 12, 1975, at the Sarasota Memorial Hospital, Respondent signed for 1 capsule of Chloral Hydrate, 300 mg. for a patient named Lena J. Herman. He indicated on the narcotic and barbituate administration record number 126951 that the medication was refused and destroyed. Hospital policy as set forth in written procedures provides that destruction of narcotics or barbituates must be witnessed and countersigned on the narcotics and barbituate administration record by another nurse. No such witnessing signature was shown on number 126951. (Testimony of Kuebler, Petitioner's Composite Exhibit 5). On March 13, 1975, at 8:00 P.M., at the Sarasota Memorial Hospital, Respondent signed out 1 tab of Demerol, 50 mg. for a patient named Herman on narcotic and barbituate administration record number 128232, and on the same date and the same hour for the same patient signed out for another tab of Demerol, 50 mg. on narcotic and barbituate administration record number 128097. The medication record and nursing notes for that patient on the date in question show that only one of the tablets was administered by Respondent to the patient subsequent to signing it out. (Testimony of Kuebler, Petitioner's Composite Exhibits 4 & 5). Respondent was an excellent nurse who had been employed at the Sarasota Memorial Hospital for over one year. He was dependable and took good care of his patients. (Testimony of Johnson, Kuebler, Bowden, Respondent's Composite Exhibit 1). Respondent has received comprehensive alcoholism counseling and treatment in state facilities and at the First Step of Sarasota, a counseling and treatment center. He recognizes his problem with alcohol and has managed to keep it under control while living at First Step with the assistance of the drug Antabuse. He has helped at First Step with other patients and the Executive Director there would like to hire him as a nurse when an opening occurs. He has been a cooperative and cheerful probationer in the opinion of his probation officer. (Testimony of Bowden, Ves'sells, Clark).
Recommendation That the license of Faris E. Moyer to practice as a registered professional nurse be revoked for unprofessional conduct, in violation of Section 464.21(1)(b), Florida Statutes. DONE and ENTERED this 12th day of August, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Julius Finegold, Esquire 1330 American Heritage Building Jacksonville, Florida 32202 Robert J. Elkins, Esquire 2187 Siesta Drive Post Office Box 15425 Sarasota, Florida 33579
The Issue The issue for consideration at this hearing was whether Petitioner, HCA Health Services of Florida, Inc., d/b/a HCA L. W. Blake Hospital has standing to oppose the Department's issuance of CON #6258, for a medical office building, to Manatee Hospitals and Health Systems, Inc., d/b/a Manatee Memorial Hospital.
Conclusions By Petition For Formal Hearing, filed with the Department of Health and Rehabilitative Services, (Department), on October 5, 1990, L. W. Blake Hospital (Blake), opposes the Department's approval of a Certificate of Need (CON) number 6258 to Respondent, Manatee Memorial Hospital (Manatee) to acquire a medical office building via a long-term ground lease on the basis that the proposed facility will adversely impact Blake's medical office building currently operating on its campus. Thereafter, the matter was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer. Respondents thereafter filed a Joint Motion to Dismiss Blake's Petition and a hearing was set on the motion for December 19, 1990. On that date, at the hearing, at which counsel for all parties were present, Blake filed a Motion For Leave to Amend its Petition, which was granted. The Amended Petition was filed on December 21, 1990, and the Respondents' Joint Motion to Dismiss the Amended Petition was filed on December 27, 1990. The instant hearing was held on that Joint Motion. In its Amended Petition, Blake seeks standing on it's assertion that "it appears" Manatee intends to provide new inpatient services in the new facility without Blake having the opportunity to investigate what the "new services" are and without the safeguard of a CON review. Blake claims that it is most likely that its established programs will be substantially affected by the inclusion of these "new inpatient services." In addition, Blake claims that its medical office building will be adversely impacted by Manatee's acquisition of a competing medical office building because Manatee will use its new building to attract physicians to its hospital, possibly away from Blake's campus. In ruling on a motion such as here, the Hearing Officer is bound to accept as true allegations of fact contained in the pleadings. However, here, no facts were alleged by Blake to indicate that Manatee's application calls for the providing of any new inpatient services. While Manatee's application does indicate a "direct linkage between the acute inpatient facility with the physician's [sic]" will be provided which will "enhanc[e] patient access to a range of diagnostic and treatment services" there is no indication that any new inpatient services will be provided in the new facility. Further, Blake's claim that that portion of the lease agreement, which provides Manatee the ". . . opportunity to locate certain present or anticipated hospital services and facilities in [the] new structure . . .," means new inpatient services, does not necessarily infer or imply that these "anticipated" services will be "inpatient." Here, Manatee applied for a CON for the building only - not for any new services. Any new regulated inpatient service going beyond the parameters of existing CON authorization may be implemented only upon approval after CON review at which Petitioner, or any other substantially affected provider, may have standing to contest the approval of the certificate. Initiation of such a proscribed service, without benefit of that review, would subject Manatee to the possibility of both sanctions and injunctive action. Blake's reliance on what it describes as the "ambiguity" of Manatee's application, and Manatee's use of the term, "anticipated" in its lease is not justified. Taken together, review of the pleadings herein demonstrates, at best, a substantially speculative approach by Blake which is not supported by any specifics. Alone, it is insufficient to support standing. St. Joseph Hospital of Port Charlotte, Florida, Inc., v. Department of Health and Rehabilitative Services, 559 So.2d 595 (Fla. 1st DCA 1989). Based on the foregoing Findings of Fact and Conclusions of law, it is, therefore: RECOMMENDED THAT: the Amended Petition For Formal Administrative Hearings in opposition to the Department's award of CON 6258 to Manatee Memorial Hospital, filed by HCA Health Services of Florida. Inc., d/b/a HCA L. W. Blake Hospital, be dismissed. RECOMMENDED in Tallahassee, Florida this 4th day of January, 1991. ARNOLD H. POLLOCK, 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 4th day of January, 1991. COPIES FURNISHED: Robert A. Weiss, Esquire John M. Knight, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House 118 N. Gadsden Street Tallahassee, Florida 32301 Edward G. Labrador, Esquire DHRS 2727 Mahan Drive Tallahassee, Florida 32308 John Radey, Esquire Jeffrey L. Frehn, Esquire Elizabeth McArthur, Esquire Aurell, Radey. Hinkle & Thomas Suite 1000, 101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302 Linda K. Harris General Counsel HRS 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue Whether the application of Manatee Memorial Hospital, Inc. (CON 9170) to establish a 120-bed satellite hospital in eastern Manatee County should be granted?
Findings Of Fact The Parties Manatee Memorial Hospital, L.P. Manatee Memorial Hospital, L.P. ("Manatee Memorial") the applicant for Certificate of Need Number 9170, owns and operates Manatee Memorial Hospital. It acquired the hospital in 1995. Located at 206 Second Street East, Bradenton, Florida, Manatee Memorial is licensed at the site to operate 512 beds, 403 of which are for acute care. Of the remaining 109 beds, 24 are classified as adult psychiatric, 11 as adult substance abuse, 31 as child psychiatric, while 10 are in a skilled nursing unit, and 6 are NICU level 2 beds. Manatee Memorial is a wholly owned subsidiary of Universal Health Services, Inc. ("UHS"). UHS is a publicly traded company which currently owns 77 health care facilities, among them 28 acute care hospitals in various states, including Wellington Regional Medical Center, a 120-bed hospital in Palm Beach County, Florida. L. W. Blake Medical Center, Inc. Blake Medical Center is a 383-bed acute care hospital. With the exception of psychiatric care, Blake provides full care across the range of hospital services from obstetrics to open heart surgery. Opened in 1972, it is also located in Manatee County. Blake has provided acute care hospital services in Manatee County since 1972. Over the past 28 years, it has served the people of the county in other ways, too. The organization and its employees, for example, are actively engaged in community activities. Among many community activities, Blake supports the American Cancer Society, sports screening for local students, Legs for Life (a diabetes detection program), cardiac profiles, and Just for Girls, a mentoring program. The Agency for Health Care Administration The Agency for Health Care Administration is designated by statute as "the single state agency to issue . . . or deny certificates of need . . . in accordance with the district plans and present and future federal and state statutes." Section 408.034(1), Florida Statutes. Stipulated Facts Manatee Memorial and Blake entered a prehearing stipulation that contained "stipulated facts and law" stated below in findings 7 through 36. Manatee Memorial filed a timely and legally sufficient Letter of Intent for CON No. 9170 and subsequent Initial Application and Omissions response that were deemed complete by AHCA. Manatee Memorial filed a timely and legally sufficient Petition for Formal Hearing to challenge the initial denial of its application for CON No. 9170. Blake filed a timely and legally sufficient Petition to Intervene. Manatee Memorial is a disproportionate share Medicaid Provider. Manatee Memorial has demonstrated a history of providing quality of care and the ability to operate an acute care hospital. Manatee Memorial has the health care and administrative expertise to provide acceptable quality care. Manatee Memorial adequately demonstrated its history of serving persons who are HIV/AIDS infected. Manatee Memorial adequately demonstrated its intent to serve HIV/AIDS infected persons at the proposed Lakewood Ranch facility. Manatee Memorial and Blake are the only existing providers of acute care inpatient hospital services in Manatee County. Manatee Memorial is JCAHO accredited, with commendation, for all services, including home health care services. Manatee Memorial and Blake are currently Medicare and Medicaid certified. Manatee Memorial has demonstrated a history of providing quality of care. Manatee Memorial has the health care and administrative expertise to provide quality of care. The documents provided with the application indicate the ability to provide funding for the proposed Lakewood Ranch facility at the time of the application's filing. The proposed Lakewood Ranch project, at the schematic stage, conforms to Chapter 59A-3, Florida Administrative Code, and other applicable codes, including the Americans with Disabilities Act. The proposed construction cost of $133.74 per gross square foot compares favorably with the average cost of $138.45 for five new Florida hospitals completed since 1995. Construction time of twenty-four months is approximate although optimistic for the proposed facility. The approval of the proposed facility will reduce the bed count at Manatee Memorial's main campus. The reduction in bed count will allow the hospital to better organize its physical plant and free area to be demolished. The documents provided with the application indicate the ability to provide funding for the proposed Lakewood Ranch facility. During FY 1997, Manatee Memorial provided 12 percent of its total patient days to Medicaid patients and 3.5 percent of its total patient days to charity care and exceeded the district average for both Medicaid and charity care. Manatee Memorial is party to an agreement with the County of Manatee that requires it to provide a certain level of indigent care and provides some compensation for providing that care. Except for financing cost projections, the estimated project costs appearing on Schedule 1 are reasonable. The costs of equipping the proposed Lakewood Ranch facility are reasonable. Except for financing cost projections, the total project cost for the proposed Lakewood Ranch facility is reasonable. The letters of support contained in the application are authentic and accurate duplicate copies of letters. Manatee Memorial Hospital's past and proposed provision of services promotes a continuum of care in a multilevel health care system. Prior to filing its Petition in this case, Blake had not developed specific patient origin studies and demographic, financial, marketing, program feasibility and service feasibility studies or projects that discuss, analyze, or document a need for additional or relocated acute care beds in Manatee County. The Agency for Health Care Administration initially denied CON 9170. In the course of this litigation it filed a Notice of Change of Position. Blake Medical Center has a demonstrated history of providing quality of care. In 1995, 1997, 1998, and 1999, Blake Medical Center was named one of America's Top 100 Hospitals by AHCA. Blake Medical Center is Accredited with Commendation by the JCAHO. Manatee Memorial has satisfied the requirements of Section 408.039(2) and (3), Florida Statutes. The following statutory criteria are not at issue in this case: Sections 408.035(1)(c), 408.035(1)(f), 408.035(1)(g), 408.035(1)(j), and 408.035(1)(k), Florida Statutes (1997). The Subdistrict and Manatee Memorial's Primary Service Area Acute care health planning subdistrict 6-3 is comprised solely of Manatee County. Rule 59C-2.100, Florida Administrative Code. No zip codes in Manatee Memorial's existing primary service area are outside Manatee County. Accreditation and Quality of Care Manatee Memorial's JCAHO accreditation with commendation means it is rated in the top 15 percent or 16 percent of all JCAHO accredited hospitals. Manatee Memorial is also accredited and affiliated with the American College of Surgeons Commission on Cancer. Its Breast Cancer Center is accredited under the Mammography Quality Standards Act and by the American College of Radiology. Its laboratory is accredited by the Commission on Laboratory Accreditation of the College of American Pathologists. It has been designated by HCIA as one of the top 100 orthopedic hospitals in the country. Manatee Memorial has received the Bradenton Herald's Reader's Poll Best Hospital award for five consecutive years. Manatee Memorial is in partnership with Manatee County to deliver immunization, breast cancer screening and cancer screening in the workplace. As a result, the hospital and the county have been recognized by the National Association of Counties. Manatee Memorial is the only hospital that belongs to the West Coast Health Care Coalition. The Coalition is a group of employers in Southwest Florida whose mission is to evaluate hospital charges, assess outcomes and provide education to employers and employees on healthy lifestyles. Consistent with UHS' philosophical belief that hospitals are fundamentally community and local organizations, Manatee Memorial uses a citizen advisory board that directly participates in oversight of the medical staff organization, quality assurance and performance improvement plans. Manatee Memorial provides and has documented its ability to provide continuing education to its staff and physicians. The Proposed Project Manatee Memorial proposes to relocate 120 beds from downtown Bradenton to a new site within the planning subdistrict. Known as Lakewood Ranch, the site is approximately 17 miles southeast of Manatee Memorial, along the I-75 corridor in Manatee County. The proposal does more than relocate 120 beds. It also entails the delicensing of an additional 73 beds on the existing campus. The proposal, therefore, will not add any new beds to the subdistrict but will, in fact, result in a net loss of 73 beds in the subdistrict. The goal of the project is twofold. First, it is to provide easily accessible, affordable health care to a rapidly growing population in eastern Manatee County. Second, the goal of the project is to "decompress" Manatee Memorial's existing campus in order to modernize it and make it safer and more efficient. Decompression Notwithstanding the awards and accreditation for its operational excellence, Manatee Memorial has serious problems in the physical infrastructure of its existing campus. The main campus is bounded by major roadways and the Manatee River. Further expansion is precluded by the lack of available land on or near the site. The absence of space on the campus currently requires Manatee Memorial to lease space off campus for various non-clinical support functions, such as accounting and bookkeeping. The site is "in close proximity to . . . hurricane surge inundation zones." (Tr. 872). The entire hospital site is only 7 feet above sea level. All of the central plant operations (electrical switching gear, chillers, boilers, air handlers, and emergency generators) and parking lots are flood prone. In the event of a hurricane, the entire hospital would have to be evacuated. When the project was under consideration, "rebuilding 500 beds on [the] location . . . [never came up] as a viable alternative in . . . discussions with the architects" (Id.) because it would be so difficult to comply with rules governing hurricane surge zones. The "main building," the "annex," and three "radial" wings are older multi-story buildings where the acute care beds and patient rooms are currently located. The oldest of these areas, the main building, was built approximately in 1953. For a hospital building, "it is a very old building." (Tr. 104). The annex was built in the late 1950's. Two of the three radials were built around 1961 and the third, the one closest to the river, around 1967. None of these buildings meet minimum applicable requirements specified in the National Fire Protection Association's Life Safety Code, NFPA 101, 1994 Edition, Chapter 13. These fire safety issues at Manatee Memorial are substantial and serious. There is not only a lack of fireproofing of the facility structure but also a lack of fire- smoke compartmentation and deficiencies in vertical chases and the fire alarm system. Deficiencies in the shut-down mechanisms of the air-conditioning system pose the danger of rapid conflagration in case of even a small fire. After acquiring the hospital in 1995, Manatee Memorial undertook a renovation of the substance abuse area. During the course of final inspection by AHCA, it was discovered that the prior owner had undertaken structural work in the hospital but did not submit the work to AHCA for review. The unapproved work substantially compromised the fire integrity in many areas of the hospital. There is no question that a reduction in bed count will allow Manatee Memorial to better organize its physical plant and free more areas to be demolished. Relocation of the 120 beds out of the facility and demolition of the north radial, "one of the poorly constructed areas in the facility" (Tr. 872) was well received by James R. Gregory, the Bureau Chief of AHCA's Office of Plans and Construction, because "it certainly solved the problem at hand . . . how to bring this very large and antiquated building into minimum standards with the Life Safety Code as soon as possible." (Id.) Accordingly, the Office of Plans and Construction has approved a Fire Safety Evaluation System ("FSES") plan for Manatee Memorial's main campus. The plan is contingent upon the removal, whether by relocation or elimination, of the 120 beds Manatee Memorial proposes to relocate to the Lakewood facility and the de-licensure of additional beds. As Blake astutely points out, elimination of the 120 beds is just as effective as relocation of the beds for commencement of the solution to the fire safety problems posed by Manatee Memorial's main campus. At the same time, relocation of the 120 beds rather than elimination is consistent with the current trend in hospital design and planning, the result of changes in health care in the country not the least of which is due to technological advances: to decentralize beds by moving some existing beds in central urban facilities to smaller campuses in suburban areas. These new-style smaller, suburban facilities are oftentimes referred to as health centers and "almost replac[e] . . . the civic centers or courthouses in these areas." (Tr. 873.) As Bureau Chief Gregory summed up, I would say generally the days of going downtown to the great white giant are over except for . . . large teaching institutions. . . . [T]he trend has . . . been to decentralize and to bring health care . . . out towards where the population centers are growing. (Tr. 874). Examples of these facilities in Florida include Florida Hospital at Lake Placid or Heartland of Florida near Haines City or Columbia Hospital of Lake City, all newly- constructed replacement facilities the size of the proposed facility in this case. The Radials The radial wings at Manatee Memorial are called radials because they radiate out from the nursing station. The second floor of the radials consist of three or four-bed "wards." (Wards contain more than two beds.) Although common thirty or forty years ago, wards are no longer recommended in any national hospital construction or operational standards because of the higher average intensity of acuity of patients hospitalized today. Patients with higher acuity are at greater risk of infection. Recognition of an inpatient's right to privacy also comes into play. Patients more often than not (much as airline passengers in the coach compartment with three seats on one side of an aisle would choose to be on the window or the aisle) will choose not to be a patient in a bed in the middle of a ward. For hospital patients, lack of direct access to a window, door, or bathroom facilities typically creates a high level of dissatisfaction with wards regardless of a hospital's quality of care. The four bed wards at Manatee Memorial have no space for modern equipment, no windows to the outside, no bathrooms and no washing facilities. Although the three-bed wards are somewhat more accommodating than the four-bed wards, their bathing and sink facilities are not compliant with the Americans with Disabilities Act ("ADA"). Manatee Memorial considered modifying the wards to create semi-private rooms. All spaces, however, would have to be brought to current Life Safety and ancillary support standards, a requirement that would be impractical to meet. Creation of semi-private rooms, moreover, would result in an inefficient 20-bed floor. Modern hospital needs for efficiency make the design of a nursing station and associated acute care patient wing with less than 36 beds impractical and uncommon. Because of the age of many of the inpatient areas only about 320 of Manatee Memorial's beds are accessible on a daily, operational basis. In the past, these 320 beds for the most part have been enough to serve the hospital's population. In 1999, for example, its average daily census was 196, and not once did the hospital need to resort to emergency bypass status because of a lack of beds. But at other times, the hospital has been perilously close to 100 percent occupancy. And on one occasion in the year 2000, Manatee Memorial was required to institute emergency bypass because it did not have enough beds in adequately designed spaces to receive patients. The wards would be eliminated if Manatee Memorial's CON is approved. Main Building Existing nursing stations on the third floor of the main building are located in exit corridors. Such a location would not be allowed under current standards. The stations were designed more than forty years ago, before the existence of information systems and high-tech monitoring equipment now regarded as essential. The Agency will not permit Manatee Memorial to "grandfather" the various Life Safety and code deficiencies resulting from the age of Manatee Memorial's older patient care floors. Nor will the completion of a Facility Safety Assessment System ("FSES"), now underway at Manatee Memorial, address any of the remaining Life Safety, structural, and ADA code deficiencies that AHCA requires to be remedied if any single renovation is made. For example, installation by the hospital of a window into a patient room that is presently windowless would involve bringing an entire area of the hospital into compliance with applicable codes. As Noel Barrick, Manatee Memorial's architect, explained at hearing, "[the window installation] would be connected to other things. Once you get into any area, AHCA is going to say [']you are playing with that area, you upgrade to meet new standards."['] (Tr. 129). In some instances, bringing into compliance areas adjacent to a simple renovation would not be possible. The patient rooms have 10-foot ceilings. (See Finding of Fact Nos. 69 to 79, below.) Patient bed areas with floor-to-floor heights greater than 10 feet are necessary in order to retrofit all of the required mechanical systems. As for some of the systems, it would be impossible to "get some of that ductwork in a 10 foot floor-to- floor height to meet those standards." (Tr. 130). Because simple renovations would entail upgrading much greater areas of the hospital to meet standards, Mr. Barrick's architecture firm, hired by UHS as part of the due diligence inquiry conducted prior to UHS purchase of the hospital, recommended that Manatee Memorial be decompressed in the interests of cost effectiveness. Floor-to-floor (i.e., height from finished first floor to finished second floor) must have at least twelve-foot, six- inch floor-to-floor height in order to accommodate ductwork, lights, sprinklers, electrical conduit, data lines, and medical gases necessary to meet the basic Life Safety and operational requirements for patient care areas. The floor-to-floor heights in the main building as well as other of the hospital's oldest buildings are only ten feet. Without adequate floor-to-floor space, to accommodate those Life Safety and mechanical items needed and required by AHCA for patient areas, those floors cannot be renovated and used for patient care or brought into compliance with current Life Safety and mechanical standards. The lack of floor-to-floor space has also necessitated construction of ramps between the various older buildings containing patient beds, and the surgical building and radials. These ramps must be and are routinely used by visitors and by staff to transport patients. None of these ramps meet ADA standards. Manatee Memorial's architects considered demolishing the main building and radials entirely. The consulting architect's assessment goal was, however, to reclaim as much space as was available on Manatee Memorial's existing campus before considering the possibility of de-licensure or relocation of beds. Additionally, total demolition would require closing the entire hospital for one to three years, since buildings with patient care areas also contain functional and ancillary areas necessary for operation of the entire hospital. Manatee Memorial's consulting architects have recommended that, on balance, it would be more cost effective and achieve a better result to decompress the main campus by relocating some beds and their ancillaries to a different site. This would create sufficient space on the main campus for modernizing and using, to the maximum extent possible, the main campus. AHCA must review and approve, prior to construction, all new construction and renovation to healthcare facilities in Florida. Rule 59A-3.080(1), Florida Administrative Code. AHCA's Chief of Plans and Construction Review is a registered Florida architect. He does not favor renovation of all 512 beds on Manatee Memorial's existing site because of its location in a hurricane zone as discussed, above. If 120 beds can be relocated to Lakewood Ranch, and 73 beds de-licensed, then Manatee Memorial can eliminate: 71 beds from the north and south radials which were built in the 1960's; 56 beds from the annex, which was built in 1958; and 28 beds from the third floor main building which was built in 1953, leaving 319 beds on a decompressed campus for renovation. One of the benefits of choosing to decompress by relocating beds is that all the renovations can be sequenced so the hospital is not closed during renovation. The total cost for a three phase, 8-year plan which leaves 319 renovated acute care beds and all the tertiary services on the main campus is $43 million. Since Lakewood Ranch will cost $40 million to construct and open, the total cost for Lakewood Ranch's 120 beds and the 3 phase plan to renovate for 319 beds on the main campus is $83 million. Assuming that taking the entire hospital out of service for a sufficient period of time to renovate 512 beds is desirable, and that such renovations are otherwise possible, the cost would be at least $97 million, or $14 million more than the alternative proposed by Manatee Memorial's architects. Manatee Memorial has opted for a plan that will enable it to keep some of its beds in its inventory that would otherwise be casualties of much-needed modernization. Its decision is justified. There is not enough real estate on the main campus to accomplish work necessary to solve the fire safety issues, locate 512 beds and the support services for those beds such as emergency room, laboratory, surgery, and X- ray so that the beds and ancillary areas are designed to meet prevailing community standards for the delivery of health care. Decompression will allow more efficient renovation and use of the outdated radials and annex for business occupancy, to accommodate these non-clinical functions, instead of using them for institutional occupancy. At the same time, decompression by relocating some patient beds and ancillary support for the beds elsewhere will allow the highest and best, if not only, use of salvageable areas on the existing campus without interruption of service. Health Planning Relocation Need Criteria Although AHCA has a rule to determine the need for new or additional beds, it does not have a rule specifying a methodology for evaluating a proposal to relocate existing licensed beds within the subdistrict. The acute care bed need calculation methodology in Rule 59C-1.0384(4) and (5), Florida Administrative Code, therefore, is not applicable to these proceedings. Rule 59C- 1.038(6)(a), Florida Administrative Code, does contain a preference for applicants proposing a capital expenditure on acute care beds that have documented a history of providing services to medically indigent patients. The Agency interprets subpart (6)(a) to be applicable to acute care bed relocations. Manatee Memorial's proposal earns the preference. District and sub-district out-migration Acute care district and sub-district boundaries are used by AHCA and health planners to define the geographic boundaries for inventory and bed need projections. Consistency in providing sufficient access within a subdistrict to accommodate the needs of patients originating within the subdistrict is a desirable health planning goal. For purposes of reviewing the health planning aspects of the application, the relevant geographic health planning area is Manatee County, sub-district 6-3. It is becoming more common for hospitals that have patient care areas that have aged (as in this case, by more than 40 years) to relocate new beds to areas of new and rapid growth within the health planning subdistrict. The Agency has approved these efforts on at least four occasions in the relatively recent past. In some instances the entire hospital was relocated, as in the relocation of Sarasota Doctors Hospital in Sarasota County; in others, as in the proposal in this case, only some of the beds were relocated while the existing campus underwent renovation. The existing acute care beds in Manatee County are not well distributed in relation to population growth in the sub- district. This poor distribution has resulted in considerable out-migration of acute care patients to Sarasota County for services, and, in turn, is a significant factor in the under- utilization of Manatee County hospitals. Until Sarasota Doctors relocated, out-migration was significant back and forth between Sarasota and Manatee Counties, that is, for both the sub-districts represented by the two counties. After Sarasota Doctors' relocation from near Sarasota to eastern Sarasota County approximately 15 miles south of the Manatee County/Sarasota County line, however, the out- migration became primarily one way: from Manatee County to Sarasota County. In 1997, alone, while 312 Sarasota County District 8 residents sought acute care in Manatee County, approximately 5,000 Manatee County District 6 residents sought acute care in Sarasota County. Between 1995 and 1997, Manatee County hospitals experienced an overall increase of 9.5 percent in admissions. For the same period, out-migration from Manatee County for acute care services increased 26.5 percent. Currently, for every one person that comes from Sarasota County to be hospitalized in Manatee County, sixteen are leaving Manatee County to be admitted to a bed in Sarasota County. Out-migration patterns between Manatee County and Sarasota County contribute to the under-utilization of Manatee County hospitals. This disproportionate level of out-migration from Manatee County is inconsistent with typical out-migration between planning areas. It is the result of a poor distribution of Manatee County acute care beds in relation to Manatee County population growth combined with the unappealing and deficient four bed wards and the problems with Manatee Memorial's aged buildings. Geographic Access Manatee Memorial's existing campus is located at the junction of Routes 41 and 301 and the Manatee River. Blake is located about four miles west. Both Blake and Manatee Memorial are located in the Bradenton City limits. Lakewood Ranch is outside the city limits. Approximately one-quarter mile north of University Parkway and just east of the Interstate 75 interchange, it is in south central Manatee County near the Manatee and Sarasota County boundary line. Lakewood Ranch is a master planned community of approximately 5500 acres and involving 3 Developments of Regional Impact ("DRI"). Master planned communities are favored by the State of Florida because all aspects of daily living are included in the multi-use planning: homes, workplaces, shopping facilities, recreation facilities, worship, and medical facilities. State DRI and master planned community requirements have made growth somewhat more predictable. Using periodic aerial photography and subdivision maps to conduct an inventory by actually counting rooftops over time, it is evident that in the last two decades there has been substantial residential, commercial, and office growth in the eastern part of the county along and to the east of the I-75 corridor. This growth commenced with the opening of the corridor 20 years ago. The pattern of substantial growth east of I-75 and much less growth west of the I-75 corridor in Manatee County is expected to continue. As one witness expressed, [T]he most substantial majority of new growth will happen along the I-75 corridor and east of 75, as it's currently doing, and I believe from the activity that we see, that it'll continue. One of the reasons for that is that if you look at a map or a similar aerial photo, to the west of I-75 you will see that it's substantially all built out and there's really very little land available. (Tr. 172). The population located along and east of the I-75 corridor is expected to increase by 28,000 persons between 1999 and 2004. The County, itself, has projected that the population in the area of the county in and around Lakewood Ranch has projected growth at a rate of 600 percent over the thirty years from 1990 to 2020. Manatee County has created infrastructure to support residential development in eastern Manatee County, including 2 elementary, 3 middle and 1 high school. The area is served by many major roads. They include University Parkway which runs east and west. It is six lanes running west of I-75 to the airport and four lanes to Lakewood Ranch Boulevard with plans to six-lane it. A time travel study conducted in accordance with DOT's Manual of Uniform Traffic Studies demonstrates that currently, during the peak hour traffic, the congestion on roads leading from large portions of Lakewood Ranch's primary service area east of I-75 to Manatee Memorial and Blake results in travel times in excess of 30 minutes to reach Blake and between 20 and 30 minutes to reach Manatee Memorial. All the road improvements presently planned by Manatee County are east of I-75 and will not relieve any of the congestion west of I-75. In the absence of planned road improvements west of I-75, the congestion west of I-75 will increase as the result of development along the interstate's corridor and to its east. The road system is one of the reasons out-migration from Manatee County to Sarasota County has increased and one of the reasons Manatee Memorial is feeling the impact of competition with Sarasota hospitals. At present, four hospitals offer more than adequate access to hospital services to the residents of eastern Manatee County: Manatee Memorial and Blake in Manatee County and two Sarasota County hospitals: Sarasota Memorial and Sarasota Doctors. All four compete to and do serve the patients in Lakewood Ranch's proposed service area. There is no evidence of capacity constraints at any of these hospitals. Increasingly, physicians in Sarasota County serve patients in Manatee County and market their services to them. For instance, open heart surgeons practicing in Sarasota also have offices in Manatee County. The yellow pages for the Bradenton telephone directory reveal at least 183 physicians with Sarasota addresses. This does not include the many listings for groups or clinics. These physicians view eastern Manatee County as a market they serve and from which they seek to draw patients to their Sarasota offices. Indigent Care Manatee Memorial is a disproportionate share Medicaid provider. During fiscal year 1997, Manatee Memorial provided 12 percent of its total patient days to Medicaid patients and 3.5 percent of its total patient days to charity care, exceeding the district averages for both Medicaid and charity care. Compared to Blake, Manatee Memorial has consistently provided significantly more Medicaid and charity days. In 1996, for example, Manatee Memorial shouldered a fraction above 87 percent, compared to Blake's 12.96 percent of the Medicaid patient days in the subdistrict. In that same year, Manatee Memorial provided over $10 million in charity care, while Blake provided less than $600,000. While Blake and Manatee Memorial have the same kind of patients, their patient mixes are different. Blake takes many less Medicaid and charity care patients. This is due, in part, to location; Manatee Memorial's location (albeit only four miles from Blake's) attracts such patients. It is also due, in part, to the obligation Manatee Memorial has incurred by agreement with Manatee County to provide care to indigent Manatee County residents, an obligation which has as its source the hospital's former status as the county hospital. Blake is not a party to a similar agreement. Under the terms of Manatee Memorial's agreement with the county there are three different ways for the hospital to be reimbursed for indigent care: reimbursement of 50 percent of the annual interest earned on a fund that's used for general health care purposes within the community, reimbursement at the prevailing Medicaid rate, or reimbursement under a special indigent care calculation. The hospital receives the lowest amount yielded by the three methods. At the time of hearing, at least since September of 1995, when its chief executive officer assumed his position, Manatee Memorial has only been reimbursed on the basis of the first of the three possibilities: 50 percent of the annual interest earned on the county's general health care fund. The shortfall has been substantial. In 1999, inpatient and outpatient charges for care to indigents under Manatee Memorial's agreement with the County amounted to approximately $7.4 million. But Manatee Memorial was only reimbursed $1.5 million, resulting in a deficit of about $5.8 million. The inpatient shortfall alone was about $3.5 million. Over the past ten years, through August of 1999, the shortfall has totaled approximately $36 million worth of uncompensated care provided by Manatee Memorial. On a cost basis, for every dollar of cost incurred to provide services to a County funded indigent in 1999, Manatee Memorial recovered only 70 cents from the County. There is no question that Manatee Memorial's contribution to care of Medicaid patients and indigents is both substantial and costly. Blake's fear with regard to the impact on indigent care in Manatee County of granting the CON in this case and transferring 120 beds from their present location to eastern Manatee County was expressed by its Chief Executive Officer: [W]e'll do 120 now, then next year we will do another 120 until we have eventually moved the patient's right to have a hospital in that location [far to the] east and then we will have a shell of a hospital in a location [in which] there's a great need . . . for indigent care. (Tr. 524). But Blake conceded under cross-examination that simply granting the CON under consideration without more would leave a hospital adequate to handle the indigent care needs of the county at the location where the considerable bulk of those needs are presently met. Lakewood Ranch Design, Cost & Construction The proposed 120-bed Lakewood Ranch project, at the schematic stage, conforms to Chapter 59A-3, Florida Administrative Code, and other applicable codes, including the Americans with Disabilities Act. The proposed construction cost of $133.74 per gross square foot compares favorably with the average cost of $138.45 for five new Florida hospitals completed since 1995. The design, cost, and time necessary to construct and equip the Lakewood Ranch 120-bed facility are reasonable. Financial Feasibility: short-term and long-term Short-term financial feasibility for CON review refers to the ability of the applicant to provide or obtain sufficient capital to construct the project and to finance the project until it becomes financially self-sufficient. To determine at what point the proposed project would become financially self-sufficient, Manatee Memorial used actual recent revenue, fixed and variable cost data, and adjusted service volumes from Manatee Memorial to model Lakewood Ranch's projected financial performance. It is reflected in Schedules 7 and 8 of the application. Manatee Memorial has demonstrated that, if projected utilization is achieved, the proposed project will become profitable in the second year of operation and continue to be financially self-sufficient on an ongoing basis. UHS has provided a commitment letter in the application that states in pertinent part: This letter is to confirm the commitment of Universal Health Services, Inc. (UHS) to provide financing for the planned replacement and relocation of 120 acute care hospital beds for Manatee Memorial Hospital. UHS owns this hospital through a partnership, Manatee Memorial Hospital, L.P. (the applicant), which is comprised of partners which are wholly-owned subsidiaries of UHS. UHS anticipates that it will finance all future capital expenditures for Manatee Memorial Hospital, including this project, entirely from UHS's net cash flow from operations. Accordingly, UHS does not plan to assume any indebtedness to third parties to finance this project, or to pay interest on any such costs. Manatee Memorial has adequately evidenced UHS' commitment and ability to provide the necessary capital, using the ongoing net cash flow from UHS operations, until the proposed project becomes self-sufficient, even if it should take more than 3 years. UHS does not take loans to build hospitals, but always uses current operating funds. Since UHS will fund the project from its own cash flow, Manatee Memorial appropriately did not indicate any financing costs on Schedule 1. The Lakewood Ranch hospital only becomes a depreciable asset after it becomes operational. Accordingly, Manatee Memorial captured Lakewood Ranch's costs of capital as interest on Schedule 8A. AHCA does not require pro forma projections for the main campus. There have been no material changes in UHS' financial strength, or its commitment to the proposed project through the date of hearing. Manatee Memorial does not have any other capital projects planned or approved that would compromise its ability to undertake the proposed project. UHS continues to have ample cash flow, as well as access to credit facilities, sufficient to capitalize and fund start-up operations at Lakewood Ranch. Manatee Memorial has projected that the first year of operation, after construction and licensure, will be January 1, 2004. Manatee Memorial selected eight zip codes as the primary service area for the Lakewood Ranch project. These zip codes correspond to the sub-areas the Manatee County Planning Department uses to project growth for areas within 5-15 minutes driving time from Lakewood Ranch. The selection of these eight zip codes for the project's proposed service area is reasonable. Manatee Memorial assumed it would derive at least 70 percent of its admissions during the first three years of operation from this primary service area. The assumption is consistent with the recent, actual experience of four hospitals in Broward, Collier, Sarasota, and Marion Counties that relocated or developed a satellite by relocating beds to an area of high growth similar to Lakewood Ranch. Using the most currently available population projections provided by Claritas for the eight zip codes comprising Lakewood Ranch's primary service area, it appears the projected occupancy for the proposed facility in the third year of operation will be even greater than projected in the application. Based on reasonable assumptions and methodology, Manatee Memorial will admit 2,600 patients to the Lakewood Ranch facility from its primary service area in 2004, the first year of operation. That equals 11,961 patient days. The hospital projects 17,220 patient days in the second year of operation and 21,812 days in the third year of operation. Out of the 4,742 total admissions in year three of operations at Lakewood Ranch, approximately 3,500 would be due to the projected Manatee County population increase. In the first year of operation of the Lakewood facility, it is reasonable to project that the facility will lose slightly more than $900,000. In the second year of operation, it is reasonable to project a net profit of $3.1 million; and, at the end of the third year of operation, it is reasonable to project a profit of approximately $6.7 million. It is reasonable to expect utilization to increase beyond the third year of operation so "that the hospital [the Lakewood Ranch facility] should sustain profitability in the long run." (Tr. 475). The project is financially feasible in the long term. As an aside, it is reasonable to assume that Manatee Memorial's main campus will lose some patients to the Lakewood Ranch facility. The revenues for the campus will therefore be reduced if the project is approved. So will the main campus' expenses associated with those patients. It is reasonable to assume that the main campus' profit will be reduced if the project is approved. But, AHCA does not require pro formas to show projected financial impact on the main campus as part of the application for the Lakewood Ranch facility. That impact, therefore, whatever it may be, is not considered in this proceeding. On the other hand, the impact to Blake and to the hospitals in Sarasota County is to be considered. Impacts to Blake and hospitals in Sarasota County a. Sarasota Hospitals The two hospitals in Sarasota County that will feel the most impact from approval of CON 9170 are Sarasota Doctors and Sarasota Memorial, particularly Sarasota Doctors. If the proposed facility becomes operational, much of the disproportionate share of out-migration from Manatee County to Sarasota County will be reduced because of Manatee County patients, particularly those residing in the eastern part of the county, choosing the proposed facility over Sarasota Doctors or Sarasota Memorial. The migration patterns for Districts 6 and 8 will adjust to a normal pattern. Some of the loss of patients by the Sarasota hospitals will be mitigated by an increase in the population of Sarasota County. In any event, the continued success of Sarasota County hospitals is not dependent on the out-migration of Manatee County residents. In the case of Sarasota Doctors, the recapture of Manatee County patients by the proposed facility is appropriate in light of Sarasota Doctors' decision several years ago to relocate to the eastern part of Sarasota County near the Manatee County line. Manatee Memorial's proposal will enhance competition. There will be an impact if it is approved to other competitors. But it will not put any other hospital in Manatee County or Sarasota County out of business or compromise their operations with the possible exception of making it more difficult to staff the hospitals as explained in paragraphs 126 to 129, below. Blake calculated that the impact of approval of the application to Blake would be a loss of $1.6 million and $2.7 million in the first and third years of operation, respectively, of the Lakewood Ranch facility. The calculation did not consider that tertiary services that will not be provided at the new facility so that the calculation "is not exact but . . . is quite close." (Tr.698). Assuming the accuracy of Blake's calculation, the impacts do not weigh heavily in favor of denial of the application in the context of Blake's most recent net profit of approximately $18.5 million. Blake's concern about the impact to it from the new facility was much more than the loss in dollars it poses. Blake is much more concerned about the competition posed by the need of its patients to be served by physicians and, in particular, staff who would be given privileges or employed by the new facility. Staffing Staffing and operating three hospitals in Manatee County will require more staff than is presently required for Manatee Memorial and Blake because of the need for "core" staffing. Core staffing is the minimum number of people required to care for a hospital census. Any hospital must maintain a minimum level of core nursing staff regardless of the size of the census. For example, an emergency room must have two people on duty at all times as must a recovery room. In addition, the Lakewood Ranch facility, as a hospital, should be distinguished from an outpatient facility. In contrast to an outpatient facility, essentially an "episodic" facility, the patients at Lakewood Ranch will have a much higher intensity of acuity. In other word, they will be sicker demanding much more intense care. Existing facilities could absorb the Lakewood Ranch facility's patients incrementally without having to add many staff, whereas a brand new facility is required to fully staff its facility. The increased demand for staff, especially nursing staff, will substantially affect Blake. For one, it is likely that the facility will recruit current employees of Blake. To make staffing matters more difficult for Blake, there is a shortage in health care personnel in Manatee County. Indicative of the shortage is Blake's 12 percent vacancy in its nursing staff at the time of hearing. The vacancy existed despite a comprehensive effort on Blake's part to keep and recruit nurses. The effort includes offering nurses on-site child care that is less expensive than rates in the community at large, paid critical care and operating room courses, reimbursement of continuing education expenses and payment for time spent in continuing education, a service excellence program, free parking, and competitive wages. Blake also conducts extensive, ongoing recruitment of nurses. It includes international recruiting, advertising, targeting cities with high unemployment rates or recently closed facilities, recruitment at job fairs and local schools. Blake competes not only with Manatee Memorial for nurses but also Sarasota Memorial and, to some extent, Sarasota Doctors Hospital. It monitors the salaries of those institutions and tries to at least match them. Blake also routinely obtains and reviews regional salary surveys. Bonuses in the market range from $5,000 to $10,000 recently offered by Manatee Memorial. Despite all its extensive recruitment efforts, typically it takes Blake 90 days to fill a nursing position. Recruiting nurses is difficult and expensive. Recruiting an intensive care nurse, for example, costs upward of $60,000 in direct and indirect costs. Recruiting a surgical nurse costs $40,000. The nursing shortage in Manatee County reflects a nationwide crisis in health care personnel. It is more severe than the cyclic shortages previously experienced. But, in all likelihood, the current shortage is also cyclic. No nursing shortage, moreover, is forever. This is because the nursing labor market behaves like any free market. Ultimately, supply and demand are managed in a free market by offering higher wages and increasing the other benefits to address the profession. Eventually, the current shortage should be alleviated by an increase in wages. The current national shortage is expected to be at its worst in 2006. The Lakewood Ranch staffing projections underestimate nurse staff needs by 8 to 10 employees. The underestimation in the context of the whole project is insignificant. Still, approval of the application will make recruitment of nurses by Blake more difficult. It will not be easy for the Lakewood Ranch facility either although there will be many nurses in the area for whom the Lakewood Ranch facility will be the most convenient facility at which to work. Like Blake, Manatee Memorial has developed a variety of strategies for recruiting, training and retaining nurses. It plans to use these at the Lakewood Ranch facility. Strategies include local open houses at the hospital, emphasis on a regional and national market, using the internet, and targeting military trained nurses through job fairs and affiliations with the University of South Carolina and the University of South Texas that allow UHS first access to students in nursing there. While there are inefficiencies in staffing due to the need for core staff at both campuses should the application be granted, there are some counterbalancing efficiencies. For example, efficiencies flow from sharing the same governing board and some of the managerial staff, such as human resources director, risk managers, accounting functions and quality improvement functions. There is little doubt that approval of the application will make it more difficult for Blake to staff its facility and will affect Blake financially in a substantial way. Approval of the Lakewood Ranch facility, at the same time, may have a slight counterbalancing effect. One of the main reasons nurses leave nursing is to seek a less physically demanding profession; modernization of facilities to make them less physically demanding should help to keep some nurses in their profession. Granting the application will lead to two modernized facilities: a renovated Manatee Memorial campus and a brand-new Lakewood Ranch facility. Local Health Plan Preferences Local Health Plan Preference Number 1 affords a preference for applicants documenting that they provide or will provide a large percent of Medicaid and charity care in relation to other hospitals in the subdistrict. Manatee Memorial provides the most Medicaid and charity care in Manatee County, measured in both patient days and dollar volume, and has documented its willingness to do so at Lakewood Ranch. For example, in 1996, Manatee Memorial provided 87 percent of all the acute care inpatient Medicaid days in the subdistrict. Blake provided 12 percent. Manatee Memorial earns this preference. Local Health Plan Preference Number 2 affords a preference to an applicant who can document a commitment to provide care and assure access for the community regardless of ability to pay. Manatee Memorial's continued commitment to provide care, regardless of the ability to pay, is evidenced by a formal resolution of the Manatee County Commission unequivocally supporting relocation of 120 beds to Lakewood Ranch. Manatee Memorial has demonstrated a commitment to provide patient access, regardless of ability to pay. Local Health Plan Preference Number 3 relates exclusively to applicants seeking tertiary services, and is not applicable to this proceeding. Local Health Plan Preference Number 4 is not applicable to this proceeding because the application under consideration is not for additional beds in a fixed-need pool, nor are additional beds being sought under "not normal circumstances". Local Health Plan Preference Number 5A contemplates a preference when a transfer of beds will result in operating cost efficiencies. Manatee Memorial's sharing managerial staff, human resources, governance, administrative functions, and risk management will minimize operating costs achieving the economies contemplated by Local Health Plan Preference Number 5A. Local Health Plan Preference Number 5B affords a preference for an applicant who has documented growth with demographic studies for an area where beds will be transferred. Manatee Memorial has fully documented that the proposed site is in an area of Manatee County that is rapidly growing, relative to the county as a whole. Local Health Plan Preference Number 5C affords a preference for an applicant transferring beds and addresses the availability of professionals and medical personnel in the proposed area. The beds being relocated by Manatee Memorial are already licensed. Staffing them, however, will not be done without some difficulty. Local Health Plan Preference Number 5D contemplates preference for applicants providing patient origin studies related to campus and the proposed transfer site. Local Health Plan Preference Number 5D is satisfied. Local Health Plan Preference Number 6A contemplates a preference for applicants transferring beds and who have analyzed current occupancy and projected impact. Because of the mal-distribution of beds in relation to the population growth, and the inefficiency of Manatee Memorial's existing older patient areas, the occupancy rates at Manatee Memorial are not optimal. Relocation will improve utilization of Manatee Memorial by Manatee County residents. Manatee Memorial receives preference under this Local Health Plan Preference. Local Health Plan Preference Number 6B affords a preference for applicants providing a copy of the existing charge structure at its hospital. Manatee Memorial stated that it does not anticipate any material changes to its existing charge structure, because of constraints placed upon it by payors and competition in the local market. The preference in Local Health Plan Preference Number 7 is awarded to Manatee Memorial. The parties have stipulated that Manatee Memorial has demonstrated intent to serve HIV/AIDS infected persons. Local Health Plan Preference Number 8 affords a preference to applicants that analyze the need and impact of proposed project on existing providers when the need is not currently being met. Residents of District 6 and subdistrict 6- 3 are not going without needed hospital services. Local Health Plan Preference Number 9 affords a preference to applicants documenting a commitment to provide initial and continuing education of staff for patients receiving services. Manatee Memorial has earned this preference.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the application of Manatee Memorial Hospital, L.P. (CON 9170) be granted by the Agency for Health Care Administration. DONE AND ENTERED this 14th day of September, 2000, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of September, 2000. COPIES FURNISHED: John F. Gilroy, III, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Robert D. Newell, Jr., Esquire Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 John D.C. Newton, II, Esquire Berger, Davis & Singerman, P.A. 215 South Monroe Street, Suite 705 Tallahassee, Florida 32301-6313 Sam Power, Agency Clerk Agency for Health Care Administration Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
