The Issue This proceeding concerns Heart of Florida’s Certificate of Need (CON) Application No. 10163 in which it seeks to add up to 14 Comprehensive Medical Rehabilitation (CMR) beds to its existing acute care hospital in Polk County (District 6), and Highlands Regional’s CON Application No. 10165 seeking to add up to seven CMR beds to its existing acute care hospital located in Highlands County (District 6). The CON Applications submitted by Heart of Florida and Highlands Regional were comparatively reviewed with the following co-batched applications to establish new inpatient CMR units in District 6: HealthSouth Rehabilitation Hospital of Polk County, LLC (CON #10162), and Lakeland Regional Medical Center, Inc. (CON #10164). On December 7, 2012, the Agency for Health Care Administration (“AHCA”) preliminarily approved CON Application No. 10164, submitted by Lakeland Regional Medical Center, Inc., and denied all other co-batched applications. Each of the denied applicants filed a Petition for Formal Administrative Hearing to contest the denial of its application. The matters were consolidated into a single proceeding at DOAH. However, the files on Lakeland Regional and HealthSouth Rehabilitation were closed as of April 8, 2013, when the present Petitioners withdrew their opposition to approval of CON 10164 and HealthSouth voluntarily dismissed its petition for formal hearing. The issues remaining in this matter are whether the CON applications filed by Heart of Florida and Highlands Regional in Agency for Health Care Administration (AHCA or the Agency) District 6, satisfy, on balance, the applicable statutory and rule review criteria sufficiently to warrant approval and, if so, whether either or both of the applications should be approved.
Findings Of Fact Stipulated Facts as set forth in PreHearing Stipulation Both Heart of Florida and Highlands Regional have the ability to provide quality of care and have a record of providing quality of care to their patients. Section 408.035(l)(c), Florida Statutes, is not in dispute and not an issue in this proceeding. (Unless specifically stated otherwise herein, all references to Florida Statutes will be to the 2013 version.) Both Heart of Florida and Highlands Regional have the resources and funds for capital and operating expenditures, for project accomplishment and operation; therefore, section 408.035(1)(d) is not in dispute and not an issue in this proceeding. While Heart of Florida and Highlands Regional's proposed salaries on schedule 6 of their respective CON Applications are appropriate and reasonable, the level of staffing necessary and required for a small unit, while still remaining financially feasible remains at issue in this proceeding. Heart of Florida and Highlands Regional's proposed facility costs and design are reasonable and not at issue in this proceeding. Both Heart of Florida and Highlands Regional are financially feasible in the short term to operate the CMR beds proposed in their respective CON Applications; therefore, section 408.035(l)(f) is not at issue with respect to short term financial feasibility. The issue of short-term financial feasibility is not in dispute and not an issue in this proceeding. Both Heart of Florida and Highlands Regional are financially feasible in the long term to operate the CMR beds proposed in their respective CON Applications in accordance with section 408.035(l)(f); however, AHCA has concerns over the appropriate staffing level for small CMR units and thus the issue of how Heart of Florida and/or Highlands Regional's long-term financial feasibility could be impacted if additional staff are required remains at issue in this proceeding. Both Heart of Florida and Highlands Regional propose appropriate costs and methods of proposed construction for their respective CMR projects, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction; therefore, section 408.035(l)(h) is not in dispute and not an issue in this proceeding. The past and proposed provision of health care services to Medicaid patients and the medically indigent by both Heart of Florida and Highlands Regional is appropriate; therefore, section 408.035(1)(o) is not in dispute and is not an issue in this proceeding. The CON Applications of both Heart of Florida and Highlands Regional contained the required application content under section 408.037. In the CMR project proposals of both Heart of Florida and Highlands Regional, CMR services will be provided in separately organized units within their respective facilities, which are both Class 1 acute care hospitals; therefore, Florida Administrative Code Rule 59C-1.039(3)(a) and (b) is not in dispute and not an issue in this proceeding. Both Heart of Florida and Highlands Regional propose to participate in the Medicare and Medicaid programs and, therefore, rule 59C-1.039(3)(e) is not in dispute and is not an issue in this proceeding. Both project proposals of Heart of Florida and Highlands Regional provide that CMR services will be provided under a medical director of rehabilitation who is a board- certified or board-eligible physiatrist and has had at least two years of experience in the medical management of inpatients requiring rehabilitation services; therefore, rule 59C- 1.039(4)(a) is not in dispute and is not an issue in this proceeding. Both Heart of Florida and Highlands Regional propose to provide the following services provided by qualified personnel: rehabilitation nursing, physical therapy, occupational therapy, speech therapy, social services, psychological services, or orthotic and prosthetic services. As such, rule 59C-1.039(4)(b) is not in dispute and is not an issue in this proceeding. Both Heart of Florida and Highlands Regional propose to serve Medicaid-eligible patients in their respective CMR programs. The proposed CMR programs of both Heart of Florida and Highlands Regional provided program descriptions for: Age groups to be served; Specialty inpatient rehabilitation services to be provided, if any; Proposed staffing, including qualifications of the medical director, a description of staffing appropriate for any specialty program, and a discussion of the training and experience requirements for all staff who will provide comprehensive medical rehabilitation inpatient services; A plan for recruiting staff, showing expected sources of staff; Expected sources of patient referrals; Projected number of CMR inpatient services patient days by payer type, including Medicare, Medicaid, private insurance, self-pay and charity care patient days for the first 2 years of operation after completion of the proposed project; Admission policies of the facility with regard to charity care patients. The Health Care Services at Issue AHCA is the state agency responsible for, inter alia, managing the certificate of need program whereby health care providers may seek approval for certain regulated health care services. One such service is comprehensive medical rehabilitation, a level of comprehensive in-patient rehabilitation for persons with certain designated diagnoses and treatments. In furtherance of its duties, AHCA develops and publishes a need for new CMR beds in each of the 11 service districts around the State. Interested applicants for new CMR beds may apply by filing a CON application in response to the published need. In the event there is no need, an applicant may seek approval for new CMR beds by way of “not normal” circumstances. As set forth in Florida Administrative Code Rule 59C- 1.002(41), “Tertiary health service” means: [A] health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost effectiveness of such service. Examples of such service include, but are not limited to, organ transplantation, specialty burn units, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. . . . CMR programs are a tertiary health service. As such, CMR beds are regulated by AHCA. In order to qualify for placement in a CMR bed, a patient must require substantial rehabilitation. To ensure that CMR providers do not inappropriately admit patients that could be treated in a less acute setting, the Center for Medicare and Medicaid Services (CMS) has established eligibility criteria for CMR patients. At least 60% of all patients in a CMR unit must have a primary diagnosis within one of 13 medical conditions, often referred to as CMS-13 categories. Those conditions include active polyarticular rheumatoid arthritis, amputation, brain surgery, burns, congenital deformity, fracture of femur, hip or knee-joint disease, spinal cord injury, stroke, and systematic vasculidities with joint inflammation. Patients with those conditions very often need extensive rehabilitation before resuming normal activities of life. Patients without a CMS-13 diagnosis but having other comorbidities such as age, obesity, and/or high blood pressure may also qualify for CMR services. To be admitted to a CMR program, the patient must be sick enough to need an acute care setting, but well enough to endure three hours a day of rehabilitative therapy, including at least two types of therapy, e.g., speech, occupational, or physical. In this proceeding, there was no published need for new CMR beds in District 6 for the September 2012 batching cycle. The bed need calculation by AHCA resulted in a finding of a net need of minus 48 CMR beds, rounded up to zero. Each of the applicants attempted to prove a need for its proposed project by way of not normal circumstances. District 6 includes five counties: Hillsborough, Polk, Manatee, Highlands, and Hardee. There are almost 2.3 million residents, half of them residing in Hillsborough County. There are over 600,000 residents of Polk County, 330,000 in Manatee County, 100,000 in Highlands County, and 25,000 in Hardee County. Of those counties, Highlands, Manatee and Polk have the highest percentage of elderly. There are four existing CMR providers in District 6, accounting for 173 licensed CMR beds. Two of the providers are in Hillsborough County: Tampa General Hospital with 59 beds, and Florida Hospital Tampa with 30 beds. Blake Hospital in Manatee County has 28 beds. In Polk County there are two approved providers: Winter Haven Hospital has 24 beds currently licensed and Lakeland Regional Hospital is approved to license 32 beds. Heart of Florida Heart of Florida is a 193-bed acute care hospital located in Davenport, Polk County, Florida. It is a joint venture and is owned by Health Management Associates, Inc. and a number of physicians. The doctors own only 2.14% of the property. The hospital offers a full spectrum of healthcare services and is supported by nearly 200 specialists and subspecialists. Heart of Florida is a designated stroke center, has an accredited chest pain center, an orthopedic center, and a joint replacement program. The hospital currently provides skilled outpatient and inpatient therapy services. Heart of Florida is proposing the establishment of a 14-bed CMR unit within the hospital plant. It is the intent of the hospital to convert 14 of its existing acute care beds into CMR beds. The beds will be located on the third floor of the facility in an area which until recently housed an obstetrics unit. The project would include renovation of the unit, including: conversion of existing semiprivate rooms into private rooms; renovation of existing space into a recreation/day room and occupational therapy space; modification of patient showers to provide side approach to the water closets; and creation of a training kitchen, bathroom and bedroom. Heart of Florida set forth nine enumerated bases to establish the need for the CMR beds absent a fixed need pool. Each will be addressed below. Number 1 -- There are only 24 licensed CMR beds in the entire county of 467,045 adults, a ratio of one bed per 19,460 adult residents. No credible evidence was presented that a certain ratio of CMR beds to adult population is necessary. Rather, Heart of Florida maintains that the ratio in its county is somehow pertinent. But not all adults need CMR services, nor does the ratio alone establish a “need” which cannot be addressed by existing programs. Rehabilitation services can be met by sub- acute facilities in many instances. Where such services are provided is often a matter of patient choice and does not always involve CMR services. Number 2 -- There are no beds in Heart of Florida’s service area, i.e., the area from which most of its residents come. There are four existing and one approved provider of CMR services in District 6: Winter Haven Hospital (17 miles from Heart of Florida); Bake Medical Center (96 miles); Tampa General Hospital (62 miles); and Florida Hospital Tampa (60 miles). An approved but not yet operational CMR program at Lakeland Regional is 29 miles from Heart of Florida. Lakeland Regional is the only one of the CMR programs that will be located in Polk County. However, the need for such services is determined on a district- wide, not county, basis. The average annual occupancy rate at Winter Haven Hospital, the closest facility, is 66%. Number 3 -- Continuity of care is important. Heart of Florida would like for its physicians to be able to follow CMR patients by having them receive treatment at a unit located within the hospital. It is unlikely that physicians would travel to see their patients who go to Winter Haven or another CMR provider in the district. This desire for more continuous care, however, does not establish a need for services in the district. Number 4 -- District 6 has one of the highest CMR occupancy rates of any district in the State, and it has the single lowest CMR discharge use rate per 1,000 population age 65 and older. This naked statistic or factoid does not, in and of itself, establish a need for CMR beds at Heart of Florida. There will always be one district with the highest CMR occupancy rate. There will always be one district with the lowest CMR discharge rate per 1,000 population. Absent a clinical correlation between those two facts, they fail to establish need for the CMR program at Heart of Florida. Number 5 -- Heart of Florida is committed to fulfilling a continuum of care for its stroke patients. A CMR program on campus would help the hospital effectuate this commitment by adding CMR services to its treatment of stroke victims. However, this desire on Heart of Florida’s part does not establish a “need” for the program. Number 6 -- There is a large percentage of elderly persons in Heart of Florida’s primary service area as compared to the State average. While this may be a fact, it is not an indicator of need for new CMR beds in the district. Number 7 -- Heart of Florida would like a CMR program to complete its wide array of services available to its patients. Heart of Florida maintains that, “In light of the Affordable Care Act, the Applicant must position itself for the future where it will be able to offer a full array of services to compete effectively in providing quality services.” The hospital’s desire to be more competitive in the market does not establish need for a CMR unit. Number 8 -- Heart of Florida can support a CMR program from its own patient base. In fact, Heart of Florida fully expects that its CMR unit would be occupied by its own patients, not patients from other hospitals. That fact does not establish need in the district for a new program. In fact, its intention to serve only its own patients militates against a district-wide need for such services. Number 9 -- There are no existing CMR beds in Heart of Florida’s primary service area, i.e., in the geographic area from whence most of its patients come. This fact does not address or support the need for CMR beds in the district. The above-stated facts alleging need fall far short of establishing circumstances that warrant approval of Heart of Florida’s proposal. The facts distinguish Heart of Florida’s service area from other service areas around the State. The facts establish that Heart of Florida would enjoy having a CMR unit and that it would likely be profitable. But the facts do not establish need for a new program in the district. Heart of Florida is experiencing an average of 16% to 20% patient readmissions to the hospital. That is, that percentage of patients who are discharged after treatment are having to be readmitted for further care related to the prior treatment. The benchmark for readmissions is about 10%. Under the Affordable Care Act, hospitals which do not meet the benchmark will be assessed a penalty. The hospital’s CEO and its chief nursing officer opined that an in-house CMR unit could help to reduce the readmission rate for some CMS-13 patients. The testimony was not adequately supported and was not persuasive. Based on the total number of discharges from the hospital versus the number of rehabilitative patient discharges, it is not certain the CMR beds would have much impact on the readmission rate. And, even if the CMR unit did help Heart of Florida’s readmission experience, that does not constitute an additional need for the service in the district. Highlands Regional Highlands Regional is a 126-bed acute care hospital in Sebring, Highlands County, Florida. The hospital is owned by Health Management Associates, Inc. (HMA), which is also the primary owner of Heart of Florida. HMA is a Florida-based national operator of community hospitals and health services. It owns and operates 70 hospitals and health systems in 15 states around the country. Highlands Regional proposes the development of a 7-bed CMR unit within its existing infrastructure in Sebring. The unit would be located on the second floor of the hospital in space that was formerly utilized as a hospice. Each of the beds would be located in a private room with a private bath. Highlands Regional sets forth seven bases which it believes justifies the approval of its project by establishing a need despite no fixed need pool. Each of those will be discussed herein. Number 1 -- District 6 has one of the highest CMR occupancy rates of any district in the State, and it has the single lowest CMR discharge use rate per 1,000 population age 65 and older. As stated above in the discussion of Heart of Florida’s proposal, this statistic or factoid does not, in and of itself, establish a need for CMR beds. There will always be one district with the highest CMR occupancy rate. There will always be one district with the lowest CMR discharge rate per 1,000 population. Absent a clinical correlation between those two facts, they fail to establish need for the CMR program at Heart of Florida. Number 2 -- Existing CMR beds are from 50 to 92 miles from Highlands Regional. The hospital is located in a relatively rural area, so longer travel is to be expected for its patients as compared to urban areas. Thus, patients discharged from Highlands County would have to travel farther than patients discharged from other hospitals around the State. However, this fact only establishes that it is more inconvenient for some of Highlands Regional’s patients to get comprehensive medical rehabilitation services. Inconvenience does not establish a need for new beds. Number 3 -- A seamless, uninterrupted continuity of care from the acute care setting to the post-acute CMR setting is not available to some residents in Highlands Regional’s primary service area. While it is clear that there is not a CMR unit near the hospital, there was no evidence provided that patients were not receiving the care they need. If an “uninterrupted continuity of care” standard was applied, then essentially every hospital in the state would “need” a CMR unit. Number 4 -- There is a large percentage of elderly population in Highlands County compared to the State average. This fact does not warrant approval of a CMR unit. Number 5 -- There is a gap in Highlands Regional’s continuum of care. Highlands Regional states that, “In light of the Affordable Care Act, the Applicant must position itself for the future where it will be able to offer a full array of services to compete effectively in providing quality services.” As stated above, the hospital’s desire to be more competitive in the market does not establish need for a CMR unit. Number 6 -- Highlands Regional is able to fully support a CMR program based on its own internal volume of rehabilitation- appropriate patients. This fact does not establish the need for a new CMR unit in the district. The HealthSouth application (10162) was approved despite its contention that patients from Highlands County are in a different medical market and that it would not likely serve patients from other counties. However, CMR proposals are currently approved by AHCA on a district-wide basis despite applicants’ remonstrations to the contrary. Number 7 -- There are no existing CMR beds in Highlands County. There was no competent evidence presented to establish that every county in Florida must have a CMR program. The above-stated facts alleging need fall far short of establishing circumstances that warrant approval of Highlands Regional’s proposal. Highlands Regional is experiencing an average of 16% readmissions to the hospital. The benchmark for readmissions is about 10%. Under the Affordable Healthcare Act, hospitals which do not meet the benchmark will be assessed a penalty. The hospital has about 9,000 discharges a year. Of those, about 277 were CMS-13 discharges. It is not clear that a CMR unit, even if it allowed for fewer readmissions to CMS-13 patients, would resolve Highlands Regional’s readmission problem. Each of the applicants in this case sets forth facts showing that their patients have to travel farther than some other patients in Florida to access comprehensive medical rehabilitation in a CMR unit. Each applicant’s physicians expressed frustration that their patients could receive better care in a CMR unit, but none testified that their patients were not now receiving adequate care. Each applicant established a strong desire for its own CMR unit and showed that the unit would be financially lucrative, but that is not a basis for approving a new unit. Each applicant presented testimony from its physicians containing anecdotal hearsay from their patients concerning unwillingness to travel. There was no competent evidence that CMR services were not available, just that such services were farther away than patients were willing to travel. That inconvenience for patients does not establish a need for CMR services in the district.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Agency for Health Care Administration denying the CON applications of Haines City HMA, LLOC, d/b/a Heart of Florida Regional Medical Center (No. 10163), and Sebring Hospital Management Associates, LLC, d/b/a Highlands Regional Medical Center (No. 10165). DONE AND ENTERED this 29th day of October, 2013, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of October, 2013. COPIES FURNISHED: Lorraine M. Novak, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Geoffrey D. Smith, Esquire Susan C. Smith, Esquire Smith and Associates Suite 201 2834 Remington Green Circle Tallahassee, Florida 32308 Richard J. Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Elizabeth Dudek, Secretary Agency for Health Care Administration Fort Knox Building III, Mail Stop 1 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Stuart Williams, General Counsel Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact The facts, as stipulated to by the parties and as set forth above, are hereby adopted.
Findings Of Fact The parties further stipulated at the hearing that the billing for which Shands seeks payment does not include charges for services rendered during the months Linda Sue Austin was being treated as an out-patient at Shands. All other facts, as stipulated to by the parties and as set forth above, are hereby adopted.
Findings Of Fact Background On July 31, 1987, the Department of Health and Rehabilitative Services (HRS) published in the Florida Administrative Weekly an announcement of the fixed need pools for the subject batching cycle, which pertained to the planning horizon of July, 1992. According to the notice, the fixed need pool, which was calculated pursuant to Rules 10-5.008(6) and 10-5.011(m), (n), (o), and (q), Florida Administrative Code, was adjusted according to the occupancy rate thresholds as prescribed by said rules. The net adjusted need for short-term psychiatric beds in District 7 was zero. By letter to HRS dated August 12, 1987, the North Brevard County Hospital District, doing business as Jess Parrish Memorial Hospital (Jess Parrish), provided notice of its intent to apply for a certificate of need to convert 16 beds from medical/surgical to psychiatric. By Application for Certificate of Need dated September 14, 1987, Jess Parrish requested that HRS grant a certificate of need for the conversion of 16 medical/surgical beds to 16 adult short-term psychiatric beds at a cost of $46,100. Jess Parrish is a tax-exempt organization whose board of directors have been authorized by law to levy ad valorem taxes in a special tax district in north Brevard County for the support of the hospital. The main hospital is located at 951 North Washington Avenue in Titusville, which is in north Brevard County. Brevard County is located in HRS District 7. By letter to Jess Parrish dated October 5, 1987, HRS requested additional information. By response dated November 9, 1987, Jess Parrish supplied the requested responses to omissions. By letter dated November 18, 1987, Jess Parrish provided additional information desired by HRS. By letter dated December 22, 1987, Wuesthoff Hospital (Wuesthoff) informed HRS that it objected to the above-described application because of absence of need. The letter states that Wuesthoff maintained an occupancy rate of 74% during the past year in its 25 short-term psychiatric beds. Wuesthoff is located in Rockledge, which is in central Brevard County. By letter and State Agency Action Report dated January 25, 1988, HRS informed Jess Parrish of its intent to issue the requested certificate of need for the conversion of the 16 beds. By Petition for Formal Administrative Hearing filed February 23, 1988, Wuesthoff challenged the intent to award the certificate of need to Jess Parrish and requested a formal hearing. The Application and Approval Process The application for the certificate of need states that Jess Parrish has a total of 210 beds, consisting of 172 medical/surgical beds, 10 obstetric beds, 20 pediatric beds, and 8 intensive care unit beds. The application contains all elements required by law, including a resolution authorizing the application and financial statements. The application and omissions response state that Jess Parrish admitted about 100 psychiatric patients in fiscal year ending 1987. The omissions response adds that Jess Parrish would offer the following programs for its short-term psychiatric patients: continual evaluation, screening, and admissions; individual, family, and group therapy; occupational, recreational, and vocational therapy; psychological and psychiatric testing and evaluation; day hospital and day clinic; family and friends education and support groups; and specialized treatment programs for geriatric psychiatric patients. The omissions response reports that the only facility with adult short-term psychiatric beds within 45 minutes of Jess Parrish is Wuesthoff. The omissions response states that Wuesthoff had experienced the following occupancy rates in its adult short-term psychiatric program: 1984--59%; 1985--66%; 1986-- 7l%; and first three quarters of 1987--71%. The omissions response acknowledges that Jess Parrish and Circles of Care, Inc. (Circles of Care) had jointly prepared the application and that Jess Parrish "plans to employ by contract, Circles of Care, Inc. to operate and manage our unit" if the application is approved. The omissions response includes a letter to HRS dated November 10, 1987, from James B. Whitaker, as president of Circles of Care. The letter describes the 12-year relationship between the two parties, which began when Circles of Care leased its first 12 beds from Jess Parrish between 1974 and 1980. Mr. Whitaker states that the two parties thus "work[ed] out a management agreement; for the new sixteen bed unit that Jess Parrish has requested." In the State Agency Action Report, HRS notes that the project does not conform with Policy 4 of the applicable District 7 Local Health Plan. This policy provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rate for all existing facilities in the planning area equals or exceeds the following rates: adult--75% and adolescents/children--70%. HRS reports a similar discrepancy as to the occupancy standard in the State Health Plan, which incorporates at Objective 1.2 the same 70%/75% standards. HRS states in the State Agency Action Report that the 1986 occupancy rates for short-term psychiatric beds, which averaged 69.98% in Brevard County, were 87% at Circles of Care, 70.6% at Wuesthoff, and 14% at a new facility, C. P. C.--Palm Bay. In addition, for the first six months of 1987, the report states that the occupancy rates, which averaged 63.5% in Brevard County, were 76% at Circles of Care, 71.5% at Wuesthoff, and 43% at C. P. C.--Palm Bay. In calculating numeric need under the rule, HRS concludes that there was a net need for a total of 547 beds in the district, consisting of 312 in specialty hospitals and 235 in general hospitals. Addressing the provision of the District 7 Local Health Plan focusing upon need at the county level, HRS finds that there was a net need for a total of 38 beds. Recognizing the "sub- standard utilization" of existing short-term psychiatric beds, HRS states that the application was justified "mainly because of the enhanced access to services that the project would provide." All of the other criteria were fully satisfied with one irrelevant exception, and the State Agency Action Report concludes: Although the district and county utilization of short-term psychiatric beds falls below the 70% [sic) adult standard, this project merits a Certificate of Need because there exists numeric need in the service area and because the project affords greater access and availability to psychiatric services for underserved groups. Need District and State Health Plans Part 3 of the 1985 District 7 Local Health Plan, published by The Local Health Council of East Central Florida, Inc., sets forth policies and priorities for inpatient psychiatric services. Policy 1 establishes each of the four counties of District 7 as a subdistrict for purposes of planning inpatient psychiatric services. Policy 3 of the 1985 District 7 Local Health Plan provides a specific methodology to allocate beds when the numeric need rule methodology indicates a need for inpatient psychiatric beds. A minimum of .15 beds per 1000 projected population should be allocated to hospitals holding a general license. A total of .20 beds per 1000 projected population may be located in specialty hospitals or hospitals holding a general license. The population projections are for five years into the future. Policy 4 of the 1985 District 7 Local Health Plan provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rates for all existing facilities in the planning area equal or exceed 75% for adult facilities and 70% for adolescents/children facilities. The policy concludes: Additional beds should not be added to the health system' until the existing facilities are operating at acceptable levels of occupancy. Good utilization of existing facilities prior to adding beds aids in cost containment by preventing unnecessary duplication. The 1988 District 7 Local Health Plan, although inapplicable to the subject proceeding, refers to the pending application of Jess Parrish. The plan states: [T]he residents of District 7 appear to be well-served by the existing providers with only a few exceptions. First, residents of north Brevard County (Titusville area) currently have no access to any certified, short-term, inpatient psych services in less than 22 miles. In many driving situations this distance takes longer than 30-45 minutes to traverse. . . . If [the CON that has been tentatively approved] is sustained through litigation and the unit is finally opened availability of these 16 beds should ameliorate, to a large degree, the potential geographic access problems for north Brevard adult/geriatric patients at least. Objective 1.1 of the 1985-1987 State Health Plan states that the ratio of short-term inpatient hospital psychiatric beds to population should not exceed .35 beds to 1000 population. Objective 1.2 states that, through 1987, additional short-term psychiatric beds should not normally be approved unless the service districts has an average annual occupancy of 75% for existing and approved adult beds and 70% for existing and approved adolescents/children beds. Numeric Need Pursuant to HRS Rules Net Need Rule 10-5.011(1)(o)4., Florida Administrative Code, sets forth the HRS numeric need methodology. The rule provides that the projected number of beds shall be determined by applying the ratio of .35 beds to 1000 population to the projected population in five years, as estimated by the Executive Office of the Governor. The relevant projected population for District 7 is 1,564,098 persons. Applying the ratio, the gross number of beds needed in District 7 is 547. The total number of existing and approved short-term psychiatric beds in District 7 in 1987 was 410. There is therefore a net need for 137 short-term psychiatric beds in District 7. The relevant projected population for Brevard County is 441,593 persons. Applying the ratio, the gross number of beds needed in Brevard County is 155. The total number of existing and approved short-term psychiatric beds in Brevard County in 1987 was 117. There is therefore a net need for 38 short- term psychiatric beds in Brevard County. A minimum of .15 beds per 1000 population should be located in hospitals holding a general license, and .20 beds per 1000 population may be located in specialty hospitals or hospitals holding a general license. The calculations disclose that, for District 7, there is a net need of 73 beds in the former category and 65 beds in the latter category. As to Brevard County, the respective numbers are 41 and 4. Rule 10-5.011(1)(o)4.d., Florida Administrative Code, provides that new facilities for adults must be able to project a 70% occupancy rate for the first year and 80% occupancy rate for the third year. Jess Parrish projects that its short-term psychiatric program will experience a utilization rate of 66% at the end of the first complete year of operation and 82% at the end of the third complete year of operation. These projections are reasonable and substantially conform with the requirements of the rule. Rule 10-5.011(1)(o)4.e., Florida Administrative Code, provides that no additional short-term inpatient beds shall normally be approved unless the average annual occupancy rate for the preceding 12 months in a "service district" is at least 75% for all existing adult short-term inpatient psychiatric beds and at least 70% for all adolescents/children short-term inpatient psychiatric beds. HRS considered the 70%/75% occupancy standards in making the July, 1987, announcement of a zero fixed need pool for short-term psychiatric beds in Brevard County. The determination of zero fixed need was a reflection that, although numeric need existed, the occupancy standards had not been satisfied. The incorporation of the occupancy standard into the July, 1987, fixed need calculation represented a deviation from nonrule policy deferring computation of the occupancy levels until the application-review process. The prior announcement of a fixed need pool on February 27, 1987, stated that a number of beds were needed even though the occupancy situation in District 7 was about the same. Subsequent announcements likewise deferred consideration of the occupancy standard. HRS has explicated its nonrule policy of excluding occupancy standards from the calculation of numeric need when publishing fixed need pools. Unlike the relatively simple task of determining the relevant population projection and multiplying it by the proper ratio, application of the occupancy standards, especially at the time in question, required numerous determinations and calculations. By attempting to incorporate the occupancy standards into the calculations upon which the fixed need pool were based, HRS increased the potential for error, which occurred in this case, rather than increased the reliability of the information. Although adequate reason exists for revising the July, 1987, published fixed need pool, Rule 10-5.008(2)(a), Florida Administrative Code, prohibits revisions to a fixed need pool based upon a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied. However, the revision of the July, 1987, fixed need pool does not represent a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied. The revision to the fixed need pool, which did not represent a change in need methodology or underlying facts, was a result of three legitimate considerations. First, HRS revised the fixed need pool to implement its policy decision to limit the fixed need pool to the numeric need calculation and reserve the calculations of occupancy standards to the application-review process. This consideration does not involve a change in the methodology of determining numeric need or applying occupancy standards. Second, HRS revised the fixed need pool to correct earlier, erroneous calculations. This consideration does not involve a change in the underlying facts, but merely in the computations based upon the same facts. Third, HRS revised the fixed need pool to reflect developing policy in the application of the occupancy standards. HRS decided to apply the more liberal 70% occupancy standard to facilities serving both adults and adolescents/children, exclude from the determination of occupancy levels any facilities serving only age cohorts not served by the applicant, and restrict the 75% occupancy standard to facilities serving adults only. HRS made these changes, which it felt would not harm existing providers, in recognition of the failure of data provided by health-care suppliers to distinguish between adult and adolescents/children admissions and patient days. These considerations approximate a change in methodology, but the revision resulting from such considerations does not violate the rule because HRS already has shown that consideration of the occupancy standards should not take place until after publication of the fixed need pool. In the present case, two facilities in District 7 serve only adolescents/children. These facilities are C. P. C.-- Palm Bay and Laurel Oaks, which is in Orange County. Eliminating their occupancy rates, the district occupancy rate in the year ending June 30, 1987, was 71.9%. Removing the occupancy rate of C. P. C.--Palm Bay from Brevard County, the county occupancy rate during the same period was over 75%. Under the revised policies, Brevard County had a net need of 38 short- term psychiatric beds, applicable occupancy standards in the county and district were satisfied, and the July, 1987, publication of a fixed need pool of zero did not preclude the finding of need under other than "not normal" circumstances. Accessibility Financial Accessibility The primary service area of Jess Parrish is north Brevard County. A higher percentage of the population of this area lives below the poverty level than does the population of any other sub-region of Brevard County. According to the 1980 Census data, the applicable percentages of area residents living below the poverty level were 12.7% in north Brevard County, 10% in central Brevard County, 8.4% in south Brevard County, and 9.6% in Brevard County overall. Partly as a reflection of the different sub-regions and partly as a reflection of the commitment of Jess Parrish to provide access to underserved populations, Jess Parrish provides considerably more services to Medicaid patients than does either of the other major general hospitals in central and south Brevard County. In 1987, 11.5% of the admissions and 8.9% of the patient days at Jess Parrish were Medicaid. The respective numbers are 7% and 6% for Wuesthoff and 5.8% and 3.9% for Holmes Regional Medical Center, which is in Melbourne. A key component of financial accessibility is the effect of the proposed program on Circles of Care. About 55% of the patients of Circles of Care are indigent. Another 17% of its patients earn between the minimum wage and $15,000 annually. Circles of Care has participated in all phases of the application process on behalf of Jess Parrish. The approval of the new program would not have an adverse effect on Circles of Care. To the contrary, the new program at Jess Parrish would provide Circles of Care with more treatment options, especially with respect to indigent patients, whose need for short-term psychiatric services has proven at times difficult to meet. These options are especially valuable at a time when there is no net need in Brevard County for any more short-term psychiatric beds in specialty hospitals, such as Circles of Care. The 52 psychiatric beds licensed to Circles of Care are in two different units contained within a single hospital facility located in Melbourne, which is in south Brevard County. Sheridan Oaks is a 24-bed, private unit, which cannot accept many Baker Act patients without adversely affecting the other patients and the psychiatrists who refer private-pay patients to this unit. The other unit is a public Baker Act receiving facility with 28 beds, for which Circles of Care receives state funds. Unlike Sheridan Oaks, the public receiving facility employs the psychiatrists who work there. About 85-90% of all Baker Act patients in Brevard County come through this public receiving facility, whose occupancy rate was 98% in the year ending June 30, 1987. In addition to these units, Circles of Care operates a mental health outpatient clinic in Titusville, an outpatient/inpatient treatment center in the Rockledge/Cocoa area, numerous social clubs throughout Brevard County for the chronic mentally ill, and numerous public education and awareness programs concerning the treatability of mental illness. Another limitation of being a specialty hospital is that Circles of Care does not qualify for Medicaid reimbursement. Jess Parrish, as a general hospital, qualifies for such reimbursement and projects in its application that 39% of its patient days will be Medicaid and 9% of its patient days will be indigent. Geographic Access Jess Parrish is located at the north end of Brevard County, which runs about 80 miles north-south. Wuesthoff is about 25 miles south of Jess Parrish, and Titusville is about 40 miles north of Melbourne. Intercity north-south traffic uses Interstate 95, which is west of the above-described cities, and U.S. Route 1, which runs through the center of each of these cities. Rule 10-5.011(1)(o)5.g., Florida Administrative Code, provides that short-term inpatient psychiatric services should be located within a maximum travel time of 45 minutes under average travel conditions for at least 90% of the population of the service area. This criterion is presently met without the addition of short-term psychiatric beds at Jess Parrish. This factor is outweighed, however, by another factor in this case. Jess Parrish projects about half of its patients will be indigent or Medicaid, and north Brevard County has a disproportionate share of the county's impoverished residents. Average travel conditions for these persons require public transportation, which, in north Brevard County, is limited to Greyhound/Trailways and local taxi companies. Exclusive of time waiting for the bus and traveling to and from the bus stations, the time for the 25-mile trip between Titusville and Rockledge, of which there are three or four trips daily (excluding off-hour trips), ranges from 25-35 minutes. There is evidence in the record that mentally ill bus passengers do not always make it to their intended destinations by way of intercity buses. The use of available public transportation is therefore problematic, but in any event adds considerable time to the travel time to Wuesthoff for those individuals who do not own a motor vehicle. Effect on Wuesthoff The effect of the conversion of medical/surgical beds to short-term psychiatric beds will have no material effect on Wuesthoff, even though it did reduce the number of short-term psychiatric beds from 30 to 25 in 1986. The occupancy rate for Wuesthoff's short-term psychiatric unit in 1987 was 70.6%. The prime service areas of Wuesthoff and Jess Parrish as to psychiatric admissions do not substantially overlap. Although Jess Parrish may be expected to draw more patients from Wuesthoff's prime service area following commencement of the new operation, many of Jess Parrish's patients will be from the indigent and Medicaid payor classes for which the competition is not intense. The addition of a 16-bed short-term psychiatric unit at Jess Parrish will not materially influence the availability of qualified personnel for Wuesthoff. It appears that Jess Parrish will be able to staff the relatively small 16-bed unit without employing significant numbers of professional employees of Wuesthoff. Some of the relatively few patients whom Wuesthoff can be expected to lose to Jess Parrish involve referrals from Titusville-area physicians, psychiatrists, and psychologists, who will place their patients in the closer facility once it is opened. The negative impact upon Wuesthoff is outweighed in these cases by gains for the patients in continuity of care and community support. Financial Feasibility The short-term financial feasibility is good. Jess Parrish has available to it sufficient funds to undertake the relatively modest capital outlay in constructing the facility, which will consist of about 8000 square feet on an existing floor of the hospital. The long-term financial feasibility is generally good. The financial projections are based on reasonable assumptions, which are largely derived from the actual experience of Circles of Care. The projections accurately estimate revenue sources and expenses. Jess Parrish reasonably projects an adequate supply of patients from a combination of sources, including Circles of Care, existing patients whose diagnoses include psychiatric components, and numerous health-care professionals in north Brevard County. The financial projections contemplate a material contribution by Circles of Care, but project no compensating expenditures. However, this deficiency is largely offset by the likelihood that the financial participation of Circles of Care will be restricted to a share of any excess of revenues over expenses of the new project, possibly excluding reimbursement of fairly minor expenses. If that is the case, the effect of any management agreement would be only to reduce the excess of revenues over expenses enjoyed by Jess Parrish from the operation of the short-term psychiatric unit. The management agreement would not expose Jess Parrish to losses that would not have otherwise existed but for the agreement to make payments to Circles of Care. Under these circumstances, the omission of the information, although material, does not seriously cast into doubt the long-term financial feasibility of the project. Quality of Care The quality of hospital care offered by Jess Parrish is excellent. The quality of the various psychiatric services offered by Circles of Care is also excellent. Both facilities are accredited by the Joint Commission on the Accreditation of Hospitals. The issue in this case involves the quality of care to be expected in the 16-bed short-term psychiatric unit for which Jess Parrish seeks a certificate of need. Circles of Care and Jess Parrish have agreed that Circles of Care will be responsible for recruiting most of the personnel for the new program and will employ the program's medical director, who will be responsible for treatment decisions. In addition, Circles of Care will advise Jess Parrish as to the adoption of policy, which will remain ultimately the responsibility of Jess Parrish. Jess Parrish will employ the head nurse and all other full-time professional staff working in the unit. The tentativeness of the arrangement between Circles of Care and Jess Parrish is partly explained by the desire of both parties to avoid the time and expense of negotiating an agreement in every detail prior to obtaining final approval of the certificate of need. In addition, both organizations were devoting substantial time to the subject litigation, for which Circles of Care was paying a portion of the expenses. In the final analysis, the failure to work out the agreement, although not a positive feature of the application, is not a serious problem for two reasons. First, Circles of Care and Jess Parrish have a long history of mutual cooperation. The relationship began when Jess Parrish leased Circles of Care 16 hospital beds for psychiatric use. Although the arrangement ended several years ago when Circles of Care constructed its Melbourne facility, the two organizations have since cooperated in several less intensive ways. Second, although Circles of Care has superior expertise in the area of mental health, Jess Parrish qualifies by itself to operate the proposed facility. Circles of Care has already provided much of the necessary technical information required for the preparation of budgets and pro formas. Recruiting would probably take somewhat longer without Circles of Care, but the modest construction budget obviously does not involve significant debt service, so that the delay would not be costly. Perhaps the most significant loss from a quality-of-care perspective would be the medical director, whose expertise will be critical. Again, this would be largely a problem of delay only, as Jess Parrish would have to find a replacement, although it appears likely that the director may be Dr. David Greenblum, who is already a member of the active medical staff at Jess Parrish. Given the quality of care provided by Jess Parrish in the past, there is no basis for any concern that, in the unlikely event that the parties fail to negotiate an agreement, Jess Parrish would jeopardize its reputation as a quality 200-bed general hospital in order to commence prematurely a 16-bed short- term psychiatric unit. Other Factors The record does not demonstrate that there are less costly, more efficient, or more appropriate alternatives to the inpatient services proposed in the subject application. There are no crisis stabilization units or short-term residential treatment programs available in Brevard County. The proposed project will have a measurable impact only upon Circles of Care, whose existing inpatient facilities will be enhanced, and Wuesthoff, whose existing inpatient facilities will not be materially affected. In general, these existing services are being used in an appropriate and efficient manner. On the other hand, the beds that Jess Parrish seeks to convert are underutilized in their present designation. The medical/surgical beds at Jess Parrish have been utilized at a rate of less than 60% over the past three years. There are no feasible alternatives to renovation of the existing facilities. The costs and methods of proposed construction are reasonable and appropriate. The approval of the application will foster healthy competition in the area of short-term psychiatric services and promote quality assurance.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Jess Parrish for a certificate of need to convert 16 medical/surgical beds to 16 short-term adult psychiatric beds. DONE and ENTERED this 30th day of June, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-1220 Treatment Accorded Proposed Findings of Jess Parrish 1-6 Adopted or adopted in substance. 7-8 Rejected as irrelevant. 9-10 Adopted or adopted in substance. 11 Rejected as recitation of testimony and subordinate. 12-13 Adopted or adopted in substance. Rejected as irrelevant. Adopted to the extent of the finding in the Recommended Order that there likely will be an agreement between Circles of Care and Jess Parrish. Rejected as unsupported by the evidence that such an agreement exists already. Also rejected as unnecessary insofar as the application can stand on its own without the participation of Circles of Care. 15a Adopted or adopted in substance. 15b-15c Rejected as irrelevant. 15d-15g Adopted in substance, although certain proposed facts rejected as subordinate. However, the first sentence of Paragraph 15f is rejected as against the greater weight of the evidence. 15h Rejected as recitation of testimony. 16-18 Adopted or adopted in substance except that all but the last sentence of Paragraph 18g. is rejected as against the greater weight of the evidence and legal argument. 19 First sentence adopted. 19 (remainder) -22. Rejected as subordinate and recitation of evidence. Generally adopted, although most of the facts are rejected as subordinate in the overall finding and cumulative. Adopted except that sixth sentence is rejected as against the greater weight of the evidence and the seventh sentence is rejected as subordinate. Adopted in substance. First sentence adopted. Remainder rejected as irrelevant. Rejected as irrelevant. Adopted. 28a Rejected as unsupported by the greater weight of the evidence. 28b-28d Adopted or adopted in substance. and 31 Rejected as subordinate. Rejected as unnecessary. 32-50 Adopted or adopted in substance. Treatment Accorded Proposed Findings of HRS 1-11 Adopted or adopted in substance. & 14 Rejected as irrelevant. & 15-16 Adopted. 17 Rejected as unnecessary. 18-74 See rulings on Paragraphs 16-50 in preceding section. Treatment Accorded Proposed Findings of Wuesthoff 1-3 Adopted or adopted in substance. Rejected as irrelevant. Rejected as against the greater weight of the evidence and legal argument. 6-10 & 12 Adopted or adopted in substance. 11 Rejected as against the greater weight of the evidence. Rejected as recitation of testimony and cumulative. Rejected as cumulative except that second sentence is adopted. Rejected as recitation of testimony. Rejected as cumulative, subordinate, and legal argument. Rejected as cumulative except that second sentence is adopted. First clause rejected as against the greater weight of the evidence. Remainder rejected as irrelevant. Rejected as cumulative and subordinate. 20-23 Rejected as irrelevant and unnecessary. Rejected as against the greater weight of the evidence. Rejected as irrelevant and unnecessary. Rejected as cumulative. 27-28 Rejected as irrelevant and unnecessary. 29 Rejected as legal argument. 30-32 Rejected as irrelevant. 33-41 Rejected as against the greater weight of the evidence and subordinate. 42 and 51 Rejected as recitation of evidence. 43-45 Rejected as against the greater weight of the evidence. 46 Rejected as legal argument. 47-50 and 52-54 Rejected as subordinate. 55 Rejected as against the greater weight of the evidence. 56-59 Rejected as irrelevant. 60-66 Rejected as subordinate and recitation of testimony. 67-69 Rejected as against the greater weight of the evidence. 70-73 Rejected as against the greater weight of the evidence and subordinate. 74-78 Adopted. 79 Rejected as against the greater weight of the evidence. 80-82 Adopted. 83-85 Rejected as against the greater weight of the evidence. 86 Rejected as subordinate and against the greater weight of the evidence. 87-91 Adopted or adopted in substance. 92 Rejected as against the greater weight of he evidence. 93-94 Rejected as subordinate. Rejected as against the greater weight of the evidence. Rejected as irrelevant. 97-98 Rejected as against the greater weight of the evidence. Rejected as irrelevant. Rejected as subordinate. 101-102 Rejected as against the greater weight of the evidence. Rejected as partly cumulative and partly legal argument. Rejected as against the greater weight of the 105 evidence Rejected and irrelevant. as against the greater weight of the 106-108 evidence. Rejected as subordinate. 109 110-113 Rejected evidence. Rejected as against the greater weight of as subordinate. the 114-117 118-120 Rejected evidence. Rejected as against the greater weight of as irrelevant and subordinate. the 121-122 Rejected as subordinate. 123 124-125 First sentence adopted in substance. Remainder rejected as subordinate. Rejected as subordinate. 126-129 Rejected as unsupported by the greater weight of evidence. the COPIES FURNISHED: Anthony Cleveland W. David Watkins Oertel, Hoffman, Fernandez & Cole, P.A. Post Office Box 6507 Tallahassee, Florida 32314-6507 John Rodriguez 1323 Winewood Boulevard Building 1, Room 407 Tallahassee, Florida 32399-0700 William B. Wiley Darrell White McFarlain, Sternstein, Wiley & Cassedy, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 Stephen M. Presnell MacFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Based upon an agreement between the petitioner and the respondent, and a later addendum, petitioner received Certificate of Need Number 1460 in February of 1981 granting the petitioner the authority to construct 126 additional general medical/surgical beds but to only license and operate 72 of such beds. The instant proceeding involves petitioner's application for a Certificate of Need to license and operate the remaining 54 beds which have been previously constructed under Certificate of Need Number 1460. St. Joseph's Hospital is a 649-bed full service major referral hospital in Hillsborough County owned and operated by the Franciscan Sisters of Allegheny. Its services include a comprehensive community mental health center, a comprehensive pediatric unit with 88 beds, a radiation therapy center, a 60- bed community cancer center, cardiac catheterization, cardiac surgery and a large and active emergency room. It serves a considerable number of indigent patients and participates in the Medicaid and Medicare programs. Petitioner is now requesting permission to license the regaining 54 beds which were authorized to be constructed pursuant to Certificate of Need Number 1460. The project involves no additional construction or renovation inasmuch as all 126 beds previously authorized have been completed. No capital expenditure will be required in order to place the 54 beds into operation. If the Certificate of Need is granted, petitioner intends to create two specialty medical/surgical units: a 32-bed cardiac surgical unit to accommodate patients from the open heart surgical program and a 22-bed medical unit for psychiatric patients requiring medical treatment. There currently are no other beds available in the hospital to convert for use for the psychiatric patient or for the cardiac surgical unit. Petitioner has been operating, on occasion, at occupancy levels in excess of 90 percent. At times, it has been necessary to place non-emergency patients in the emergency room and have them remain there until beds become available. There are sometimes up to 40 patients on the waiting list for elective surgery. Due to the shortage of empty beds, petitioner cannot now admit new members to its medical staff. Steady operation of the hospital at occupancy levels exceeding 90 percent can have an adverse effect upon the efficiency of the nursing staff and the quality of care offered to patients. Because the bulk of projected growth in Hillsborough County is expected to occur in the center and northwestern area of the county, it is anticipated that the pattern of utilization of petitioner's facility will continue. While the licensing of the 54 additional beds involves no capital expenditure on petitioner's part, it is estimated that, if petitioner is not permitted to license these beds, a total yearly loss of over $3.8 million will be experienced. This figure is the sum of lost net revenues from the beds in the amount of $87,339 and lost net ancillary revenues in the amount of $2.36 million, as well as the absorption of $232,750 in yearly depreciation costs and $1.14 million in committed indirect costs. Petitioner anticipates a loss per patient day, calculated at 100 percent occupancy, of $16.82 if the licensing of the beds is not approved. This would result in an increase of current patient charges by 9.1 percent in order to maintain petitioner's budgeted profit margin. Petitioner is located in HRS District VI which, at the time of the hearing, was composed of Hillsborough and Manatee Counties. Some 81 percent of all beds in the District are located in Hillsborough County. As of the time of the hearing, the District had 3,899 licensed acute care beds, with 606 additional beds having been approved but not yet operational. The generally accepted optimum utilization rate for acute care beds is 80 to 85 percent. For District VI, the overall utilization rate is below the optimum level. In Manatee County, utilization of acute care beds is at 78.3 percent. In Hillsborough County, the utilization level is at 77.4 percent, with the major referral hospitals experiencing a higher level of utilization than the smaller community hospitals. Rule 10-5.11(23), Florida Administrative Code, contains the governing methodology for determining acute care bed needs of the various Districts. Applications for new or additional acute care hospital beds in a District will not normally be approved if approval would cause the number of beds in that District to exceed the number of beds calculated to be needed. Application of the Rule's formula to District VI results in a total acute care bed need of 3,622 projected for the year 1988. Given the 4,505 existing and approved beds in the District, there are 883 excess beds in District VI under the Rule's formula methodology for projecting need. The 1982 Health Systems Plan adopted by the Florida Gulf Health Systems Agency makes no bed need projections for other specialty medical/surgical beds," but shows no need for medical/surgical beds. Rule 10-5.11(23), Florida Administrative Code, provides that other criteria may result in a demonstration of bed need even when the formula approach illustrates no need for beds. When additional beds are approved pursuant to other criteria, those beds are counted in the inventory of existing and approved beds in the area when applying the bed need formula to review future projects. The formula methodology does account for the inflow and outflow of patients in a specific area. While Rule 10-5.11(23) permits the Local Health Councils to adopt subdistrict bed allocations by type of service, the Council for District VI had not adopted its local health plan as of the date of the hearing in this matter. The Rule itself simply addresses the need for general acute care bed needs in the future.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of St. Joseph's Hospital, Inc. for a Certificate of Need to license 54 acute care medical/surgical beds be DENIED. Respectfully submitted and entered this 10th day of November, 1983, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 1983. COPIES FURNISHED: Ivan Wood, Esquire David Pingree Wood, Lucksinger & Epstein Secretary One Houston Center Department of Health and Suite 1600 Rehabilitative Services Houston, Texas 77010 1323 Winewood Boulevard Tallahassee, Florida 32301 Steven W. Huss, Esquire 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The petitioner Hillsborough County Hospital Authority, a public body corporate, owns and operates two public hospitals - Tampa General Hospital and Hillsborough County Hospital. In 1981, the Authority received Certificate of Need Number 1784 which authorized an expenditure of $127,310,000 for the consolidation of the two hospitals. The project involved new construction and renovation at Tampa General, delicensure of beds at Hillsborough County Hospital and the transfer of those beds to Tampa General. The Certificate provided for a total of 1,000 licensed beds at Tampa General Hospital and for the "renovation, new construction, consolidation and expansion of service per application." The completion of the total project was projected to occur by October, 1987, but is presently running about four months behind schedule. When the Authority received its Certificate of Need in 1981, it was then operating a total of 93 psychiatric beds between the two hospitals -- 71 at County Hospital and 22 at Tampa General. The plan for consolidation and the 1981 Certificate of Need called for an overall reduction of 14 psychiatric beds - from 93 total beds between the two facilities to 79 total consolidated psychiatric beds, at the conclusion of the project. At the time the Authority obtained its Certificate of Need in 1981, there was no differentiation between determinations of need for general acute care beds and psychiatric beds. The number of psychiatric beds operated by a hospital were not separately listed on a hospital's license. As noted above, Tampa General was operating 22 psychiatric beds when it received its 1981 Certificate of Need. Because of an increased demand for acute care beds (non- psychiatric medical and surgical beds) in late 1982, Tampa General closed the psychiatric unit and made those 22 beds available for acute care. In the Authority's 1983-85 license for Tampa General, those 22 beds were included in the 637-bed total, which was not broken down by bed type. An attachment to the license indicates that the total bed count should read 671. In the space designated for "hospital bed utilization," the figure "O" appears after the word "psychiatric." (Respondent's Exhibit 1) In 1983, the statutory and regulatory law changed with regard to the separate licensure and independent determination of need for psychiatric beds. Section 395.003(4), Florida Statutes, was amended to provide, in pertinent part, that the number of psychiatric beds is to be specified on the face of the license. Rule 10-5.11(25), Florida Administrative Code, adopted in 1983, set forth a specific psychiatric bed need methodology for use in future Certificate of Need decisions. In order to implement its new 1983 policy and rule with regard to the separate licensure and determination of need for psychiatric beds, HRS conducted a survey to determine the number of existing psychiatric beds in the State. Hospitals then had the opportunity to indicate whether their existing beds were to be allocated or designated as acute care beds or psychiatric beds. HRS conducted the survey by directly contacting each hospital which had previously indicated it was operating a psychiatric unit and then contacting by telephone any facility not answering the initial inquiry. In August and September of 1983, the Authority indicated to HRS that Tampa General did not have any psychiatric beds in operation. HRS published the results of its survey and final hospital bed counts in the February 17, 1984 edition of the Florida Administrative Weekly, Volume 10, Number 7. The inventory listed Hillsborough County Hospital as having 77 psychiatric beds and Tampa General Hospital as having O psychiatric beds. The notice in the Weekly advised that hospital licenses would be amended in accordance with the published inventory to reflect each hospital's count of beds by bed type. Hospitals were further notified that "Any hospital wishing to change the number of beds dedicated to one of the specific bed types listed will first be required to obtain a certificate of need." (Respondent's Exhibit 2). For economic and business reasons, and in order to accomplish a more orderly consolidation of the two hospitals, the Authority now desires to re-open a small, self-funding psychiatric unit at Tampa General Hospital. It wishes to utilize the maximum number of psychiatric beds designated in its 1981 Certificate of Need application (93), including the beds which had been temporarily changed in late 1982 to acute care beds, while gradually phasing out a sufficient number of beds at the County Hospital to bring the total number of psychiatric beds down to 79 by late 1987. In order to implement this plan, the Authority applied to the office of Licensure and Certification in 1985 for the licensure of 77 psychiatric beds at County Hospital and 22 psychiatric beds at Tampa General Hospital. The Authority acknowledges that it should have applied for only 16 psychiatric beds at Tampa General Hospital to meet the 1981 figure of a total of 93 beds. HRS issued a license for the 77 requested psychiatric beds at County Hospital, but issued a license for only 2 psychiatric beds at Tampa General. The record does not adequately reflect the rationale for licensing even 2 beds at Tampa General. It is not economically or practically feasible for a hospital to operate a separate 2-bed psychiatric unit. The rationale for refusing to license the remaining psychiatric beds requested is the change in the statutory and regulatory law occurring in 1983 and the survey results published in 1984 illustrating Tampa General to have no psychiatric beds in operation at that time. The stated reason for denial is "because you have failed to obtain a Certificate of Need or exemption from [CON] review . . . ." (Petitioner's Exhibit 3).
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the request of the Hillsborough County Hospital Authority for the licensure of 16 short-term psychiatric beds at Tampa General Hospital be DENIED. Respectfully submitted and entered this 24th day of December, 1985, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of December, 1985. APPENDIX-CASE NO. 85-3109 The proposed findings of fact submitted by the petitioner and the respondent have been approved and/or incorporated in this Recommended Order, except as noted below. Petitioner Page 3, last sentence and Page 4, first sentence Rejected, not supported by competent, substantial evidence. Page 6, first full paragraph Rejected, not a finding of fact. Page 6, second paragraph Rejected, not a finding of fact. Page 7, Reject those findings based upon a conclusion that Tampa General has Certificate of Need approval for psychiatric beds. Respondent 9. Second and third sentences Rejected, irrelevant and immaterial to issue in dispute. COPIES FURNISHED: William S. Josey, Esquire Allen, Dell, Frank and Trinkle P. O. Box 2111 Tampa, Florida 33601 R. Bruce McKibben, Jr., Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 David Pingree Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 ================================================================ =
The Issue Whether Petitioner, Palm Beach-Martin County Medical Center, Inc.'s ("PBMC"), application for a certificate of need ("CON") to build a 60-bed inpatient rehabilitation hospital in Palm Beach County, Florida, should be approved, or denied (as proposed by Respondent, Department of Health and Rehabilitative Services ("HRS") in preliminary action.). By petition filed with HRS on August 1, 1984, PBMC invoked Section 120.57(1) remedies to contest DHRS' preliminary denial of its application for a CON authorizing establishment of an inpatient rehabilitation hospital at its medical campus in Jupiter, Florida, by converting 60 existing skilled nursing beds to comprehensive medical rehabilitation inpatient beds. On August 14, 1984, HRS forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer to conduct the requested proceedings. Petitions to intervene for the purpose of contesting issuance of a CON to PBMC were subsequently filed by NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute, Rehab Hospital Services Corporation, and University Rehabilitation Services, Inc. (collectively referred to a "NME"). Intervention was granted and final hearing was set for May 1-3, 1985. On PBMC's subsequent unopposed motion for continuance, hearing was reset for July 8-10, 1985; then, on Intervenor's unopposed motion, continued and reset for October 21-23, 1985. At final hearing on October 21-23, 1985, PBMC presented (in support of its application) the testimony of Dino Cagni, Frank Griffith, Richard Chidsey, M. D., Thomas Schultz, and Woodrin Grossman. Elizabeth Dudek testified on behalf of HRS. NME presented (in opposition to PBMC's application) the testimony of Mark Rottenberg, M. D., Jerry Ingran, Tom R. Futch, and Dan Sullivan. PBMC exhibit Nos. 1 thorugh 20, HRS exhibit nos. 1, 2A, and 2B, and NME exhibit nos. 1 thorugh 9 were received in evidence. The parties stipulated that the CON application at issue is governed by statutory criteria contained in Section 381.494(6)(c) and (d), Florida Statutes, except for Section 381.494(6)(c) and (13), which they agreed were either inapplicable or were satisfied by the PBMC application. They agreed that rule criteria in DHRS Rule 10-5.11(1)-(9), (11), (12), and (24), Florida Administrative Code, also applied. The transcript of hearing was filed on December 2, 1985. PBMC and NME filed post-hearing memoranda and proposed findings of fact and conclusions of law (including responses) by January 20, 1985--within the time agreed on at hearing. (Explicit rulings on their proposed findings are contained in the attached Appendix.) HRS filed no proposed findings or memorandum of law. Based on the evidence adduced at hearing, the following facts are determined.
Findings Of Fact Background PBMC, a nonprofit corporation organized in the early seventies to serve the health care needs of residents of northern Palm Beach County and southern Martin County, owns and operates a community not-for-profit hospital known as Jupiter Hospital. Jupiter Hospital is a 156-bed acute care hospital. It is the northernmost hospital in Palm Beach County and provides health care services to the residents of northern Palm Beach and southern Martin Counties. PBMC also owns and operates a nonprofit 120-bed nursing home known as the Jupiter Convalescence Pavilion, located in the same complex as Jupiter Hospital. PBMC is governed by an eight-member Board of Directors. Jupiter Hospital is governed by a Board consisting of 22 members: 11 are physicians and 11 are lay persons from the community. PBMC also has a management contract with HCA Management Company. Pursuant to this contract, HCA Management Company provides an administrator and a finance director. All other employees are employed by PBMC. Overall policy decisions regarding the operation of Jupiter Hospital and Jupiter Convalescence Pavilion are made by the PBMC Board. The Jupiter Convalescence Pavilion, however, has a separate Board of Directors which has never voted on the CON application at issue here. On or about March 15, 1984, PBMC submitted an application for a CON to establish a 60-bed comprehensive inpatient rehabilitation facility on the PBMC campus in Jupiter. The application called for the conversion of 60 nursing home beds in the Jupiter Convalescence Pavilion to rehabilitation ("rehab") beds, and renovations and improvements to the first floor of the two-story nursing home to accommodate the new rehab facility and the services it would offer. (PBMC Exhibit Nos. 1 and 2) On or about July 2, 1984, HRS (preliminarily) denied PBMC's application. (HRS Exhibit No. 1) PBMC filed a timely petition for a hearing under Section 120.57, Florida Statutes, to challenge HRS' decision. On September 12 and October 9, 1984, NME Hospital, Inc. d/b/a Delray Rehabilitation Institute, Rehab Hospital Services Corp., and University Rehabilitation Services, Inc., moved to intervene in this proceeding. On October 2, 1984, and January 21, 1985, these motions were granted. NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute is a 60-bed for-profit comprehensive inpatient rehab hospital under construction in Delray Beach, south Palm Beach County, on the campus of Delray Medical Center. The name of the hospital was changed recently to Seacrest Hospital. Rehab Hospital Services Corp. will have operational responsibility for Seacrest Hospital-- scheduled to open in the spring of 1986. Rehab Hospital Services Corp. is a for-profit corporation that operates comprehensive rehab facilities. It also owns and will operate Treasure Coast Hospital, a 40-bed freestanding comprehensive rehabilitation hospital under construction in Vero Beach, Indian River County, Florida. This hospital, like Seacrest, is scheduled to open in the spring of 1986. NME Hospitals, Inc. d/b/a Delray Rehabilitative Institute and Rehab Hospital Services Corp., are wholly-owned subsidiaries of National Medical Enterprises. National Medical Enterprises is one of the largest for-profit chains of acute care hospitals, psychiatric hospitals, long-term facilities, and rehabilitation hospitals in the world. National Medical Enterprises acquired Rehab Hospital Services Corp. in February, 1985. PBMC proposes to convert the first floor of its two story nursing home into a comprehensive inpatient rehab facility. On the first floor, there are two wings (with 30 beds in each) that will be converted. In addition, approximately 10,000 square feet of new construction will be necessary to house some of the rehab services. (PBMC Exhibit No. 2) The second story of the building will remain in service as a 60-bed nursing home. At hearing, PBMC proposed, in the alternative, to convert only 30 of the nursing home beds to inpatient rehab beds. This alternative calls for conversion of only one wing of 30 beds on the first floor of the nursing home. New construction required to accommodate the proposed rehab services would remain the same. (PBMC Exhibit No. 2) The 30-bed proposal has been approved by a majority of the members of the PBMC Board, although the nursing home's Board has not voted on it. REHAB BED NEED IN DISTRICT IX PBMC is located in Palm Beach County, which is in HRS District IX. District IX also includes the counties of Martin, St. Lucie, Okeechobee, and Indian River. (NME Exhibit No. 9) Although at the time of hearing, there were no existing, licensed inpatient rehab beds in District IX, there are 100 CON-approved beds. (PBMC Exhibit No. 10; NME Exhibit No. 9) The total CON-approved beds consist of the 60-bed Seacrest Hospital and the 40-bed Treasure Coast Hospital, both of which are owned by NME, but under the operational control of Rehab Hospital Services Corp., a corporate subsidiary. HRS measures the need for inpatient rehab beds using Rule 10-5.11(24), Florida Administrative Code. The need determination of Rule 10-5.11(24) has two components. The first part, set out at subsection (c)1., consists of a mathematical formula with which HRS initially calculates the numerical need for rehab beds. The second part of the rule enumerates the following factors that should also be considered in measuring the need for additional rehab beds: historic, current and projected incidence and prevalence of disabling conditions and chronic illness in the population in the service district by age and sex group; trends in utilization by various categories of third party payors; existing and projected inpatients in need of rehab services; and the availability of specialized staff. (Rule 10 5.11(24)(c)2., Fla. Admin. Code) Numerical Need Numerical bed-need is calculated using the mathematical formula set forth in Rule 10-5.11(24). (NME Exhibit No. 9) If applied to District IX for the year 1990, a numerical need for 83 beds is shown. HRS already has, however, already approved 100 beds in District IX. Thus, under this formula, all parties agree there is an excess of 17 rehab through 1990. (NME Exhibit No. 9) Other Indicia of Need But the fact that the mathematical formula shows no need for additional rehab beds does not require denial of an application. Need may be shown using the other factors listed in the rule, irrespective of whether the formula shows numerical need. For the purpose of demonstrating need under these additional indicia of the HRS rule, PBMC presented a methodology and need analysis developed by Richard Chidsey, M. D. (a psychiatrist on the staff of PBMC), and applied by Thomas Schultz, as health care planner. Dr. Chidsey selected various categories of diagnostically related groupings ("DRGs") which he considered to be categories of acute care patients who would be candidates for treatment in an inpatient rehabilitation hospital. Then, based on his experience, he designated a percentage in each DRG category to represent those patients who he felt would need such rehab hospitalization. Dr. Chidsey and Mr. Schultz then identified six area hospitals in Palm Beach and Martin Counties which they considered to be within the catchment area for PBMC's proposed rehab beds. Mr. Schultz then obtained 1984 DRG discharge data (in the categories designated by Dr. Chidsey) from each of the six hospitals. Using this information, Mr. Schult projected that those six hospitals would generate 919 referrals to the rehab beds at PBMC. Based on these projected referrals, Dr. Chidsey and Mr. Schultz concluded that the beds proposed by PBMC were needed and would attain the requisite levels of occupancy mandated by HRS rehab rule. For several reasons, this methodological is rejected as lacking in credibility. Dr. Chidsey, a staff psychologist at PBMC, has not had an inpatient rehab practice since the mid 1970s. His practice in Palm Beach County does not involve inpatient rehab services and only a small portion of his practice involves patients needing rehabilitation for major disabilities. In opposition to the DRG analysis made by Dr. Chidsey and Mr. Schultz, NME presented the testimony of Mark Rottenberg, M.D., and Dan Sullivan, an expert in health care planning and finance. Dr. Rottenberg is a pyschiatrist who lives in Detroit, Michigan, and maintains an active inpatient rehab practice. Dr. Rottenberg was critical of the DRG categories and referral percentages chosen by Dr. Chidsey, and testified that Dr. Chidsey's analysis significantly overstates the number of patients needing inpatient rehabilitation in many of the categories chosen. Dr. Chidsey's methodology is one which is not generally used or accepted by health care planners, and has not been subject to verification. This methodology, admittedly an institution specific methodology for looking at bed need and utilization, if applied to District IX as a whole, would predict the need for approximately 800 inpatient rehab beds or ten times the number predicted by the HRS rule. This is a gross overstatement of need, one which even PBMC does not defend. The weight to be given Dr. Chidsey's opinion on the need for the proposed hospital is also affected by his obvious personal stake in the outcome. If approved, the proposed rehab hospital would, in all likelihood, be under his direction and control. He has worked to establish such a rehab hospital for many year, yet he opposed earlier applications for rehab beds in Palm Beach County because they would have competed with outpatient units with which he worked. Dr. Rottenberg testified in a more detached manner and his recent inpatient rehab experience is more extensive than Dr. Chidsey's. His criticism of Dr. Chidsey's analysis is persuasive and Dr. Chidsey's methodology, as applied by Mr. Schultz, is rejected as lacing in credibility. The lack of need for additional rehab beds in District IX reflected by the mathematical formula is corroborated by the fact that Dr. Chidsey refers only a very small number of his patients to existing and available inpatient beds in Broward or Dade County. These counties are close enough so that if the need for beds is as pressing as PBMC suggests it is reasonable to expect that Dr. Chidsey would be referring more patients for inpatient rehab care. Another factor supporting a finding that the proposed rehab inpatient beds are not needed is the absence of any existing utilization data relating to the 100 approved (but not yet operational) beds in District IX. Since the district is already overbedded (according to the numerical formula), prudent health care planning would suggest that the two proposed facilities be allowed to open and their actual utilization determined before further rehab beds are added. PBMC correctly points out that, as a group, elderly people have a greater need for inpatient rehab services than younger people, and that Palm Beach County has a higher percentage of elderly people than the state as a whole. But the elderly nature of the population is a factor which has already been taken into account in the acute care discharge portion of the rehab methodology. The availability of ample outpatient rehab facilities has a tendency to reduce the average length of stay of patients at inpatient rehab facilities. There are numerous outpatient rehab facilities available in Palm Beach County. There is a comprehensive outpatient rehabilitation facility ("CORF") in West Palm Beach and another CORF has recently been approved at Palm Beach Gardens Medical Center, a short distance from PBMC. Also, most of the acute care hospitals and home health care agencies in the area provide outpatient rehab services. Both Seacrest and Treasure Coast Hospitals will offer outpatient rehab services. The existence of these services can reduce the length of stay of patients in a rehab hospital, thereby reducing the number of beds needed to serve the area. It has not been proven, however, that the availability of these outpatient facilities would reduce the average length of stay ("ALOS") at inpatient rehab facilities in Palm Beach County below the 28-day ALOS standard HRS now uses in its bed-need methodology. There has been an increasing trend toward recognition of rehab services by third-party payors, although recognition by private pay insurers (such as Blue Cross, Aetna and Prudential) is still fairly limited. The advent of the Medicare prospective payment system and DRGs, has also increased the demand for rehab services. Prior to implementation of the DRG system, Medicare reimbursed hospitals on a cost basis; patients could remain in hospitals long enough to receive needed rehab services and hospitals would be reimbursed for services. In contrast, the DRG system pays hospitals a fixed amount per admission based on diagnosis--this encourages hospitals to discharge patients earlier, sometimes before needed rehab services are provided. One effect of these financial incentives has been to increase the demand for inpatient rehab beds. The extent and likely duration of that increased demand has not, however, been shown. PBMC asserts that less weight should be accorded the calculation of bed-need by the numerical formula contained in Rule 10-5.11(24), because it fails to reflect these recent changes in health care delivery. As proof of the rule's asserted understatement of need for rehab beds, PBMC applied the formula to actual utilization in Broward County, District X, which has three rehab facilities. When the rule's 85 percent occupancy standard is applied, there is a need shown for 127 rehab beds in 1990--46 more than the 891 shown by the numerical formula. But the formula's apparent understatement of need in District X does not translate to understatement of need in District IX. This is because factors which affect rehab bed utilization in the two districts are not the same. While the two districts are contiguous, and the size and characteristics of their population are similar, the location of the populations and the concentrations of physicians (both of which can affect demand for rehab persons) are different. Accessibility Rule 10-5.11(24) also requires that at least 90 percent of the target population of a proposed facility reside within two hours driving time. Ninety percent of PBMC's target population is located within 30 minutes driving time of the proposed facility. Both Seacrest and Treasure Coast Hospitals will, however, provide available and accessible alternatives to the proposed PBMC facility. The average automobile travel time on the major north/south highways between Seacrest and Treasurer Coast Hospitals is approximately two hours. Since the proposed PBMC facility would be located between these two hospitals, and the main population concentration of District IX is located along the coast, the two hospitals should be within two hours travel time (under average traffic conditions) for most of the residents of the District. AVAILABILITY, QUALITY OF CARE, AND EFFICIENCY OF LIKE AND EXISTING HEALTH CARE SERVICES As reflected by the rule methodology and other developments in delivery of health care, there is a clear demand for inpatient rehab services in District IX. Although there are no existing inpatient rehab facilities in the District, it is likely that Seacrest and Treasure Coast Hospitals--at the southern and northern ends of the district--will adequately satisfy that demand until at least 1990. Seacrest Hospital is approximately 50 minutes driving time south of the proposed PBMC facility, while Treasure Coast Hospital is approximately 1.3 hours driving time north of the facility. When completed, both hospitals will offer services similar to and at least as intensive as those proposed by PBMC. Because of the travel times and distances involved, PBMC maintains that Seacrest Hospital (to the south) and Treasure Coast Hospital (to the north) will not be reasonably accessible to the patients in its proposed service area. Regular involvement of a patient's family in rehab therapy is an important factor and many rehab patients are elderly. A round trip to either of these NME facilities from the PBMC service area is estimated to take at least 1.5 hours-- 45 minutes each way. Because family involvement in a patient's therapy requires three to five visits a week, PBMC asserts that a one-way driving time of more than one-half hour is unreasonably burdensome to family members. With less family participation, the quality of care declines. PBMC's contention that one- way travel times from one half hour to 45 minutes are unreasonable is, however, rejected as not substantiated by the weight of the evidence. Dr. Rottenberg's testimony to the contrary is accepted as persuasive. Moreover, HRS Rule 10- 5.11(24)(c)3.c, contains an accessibility standard for rehab inpatient services. By requiring applicants to demonstrate that at least 90 percent of the target population resides within two-hours driving time of the proposed facility, the rule implies that driving time of up to two hours are acceptable and not unreasonably burdensome. HRS' interpretation--that this rule encompasses a two- hour driving time accessibility standard--is a reasonable one. Although it is possible that one-way travel times of from one-half hour to 45 minutes may affect the frequency of visits by family members and he patient's primary care physician, the extent which any reduced visitation rate may affect the quality of care provided is open to conjecture and has not been meaningfully established. PBMC proposes an average charge of $335 per day during the first year of operation of its rehab hospital, and $358 per day the second year. While these charges are significantly lower than the $465 per day charge proposed for both Seacrest and Treasure Coast Hospital, PBMC has seriously underestimated the number of registered nurses (with specialized rehab training) it would be required to employ. A 60-day hospital offering intensive and quality rehab services normally requires between 25 and 30 registered nurse FTEs; yet PBMC projects only four for its entire facility. If PBMC was required to hire additional registered nurses, its projected charges per day would increase significantly but--due to the cost savings derived from converting an existing structure--it is reasonably expected that the charges would still be less than, or comparable to, those of Seacrest and Treasure Coast Hospital. In summary, while there are no existing rehab inpatient facilities in District IX reasonably available to serve the patients in PBMC's proposed service area, there soon will be. Seacrest and Treasure Coast Hospitals, opening in the spring of 1986, will offer quality rehab services at least as intensive as those proposed by PBMC; their charges will be comparable to or somewhat more than those proposed by PBMC. QUALITY OF CARE The proposed PBMC rehab hospital will meet the standards published by the Commission on Accreditation of Rehabilitation Facilities ("CARF") and deliver quality medical care to its patients. PBMC is committed to this objective and will hire the staff and purchase any equipment necessary to achieve it. The medical program will be run by a qualified psychiatrist. Physicians with staff privileges will be allowed to admit patients to the facility, but a psychiatrist will be assigned to co-manage each patient. There are two features of PBMC's proposal which, while adequate, are less than optimum. One--the understatement of the number of registered nurses needed to provide quality services has already been mentioned. This problem would, in all likelihood, be remedied by the hiring of additional staff. The other shortcoming is PBMC's plan to serve two of the patients' daily meals in their bedrooms, rather than in a central dining area. It is important that patients with disabilities be able to practice their social skills and interact with others in preparation for their return to the community. Dining together in a congregate setting facilitates this kind positive socialization experience. Since PBMC patients would dine together only once a day, their exposure to this socialization experience would be limited. AVAILABILITY AND ADEQUACY OF OTHER HEALTH CARE FACILITIES AND SERVICES As already mentioned, there are numerous home health agencies, nursing homes, and acute care hospitals which offer outpatient rehab services in District IX. Although these services are not a substitute for comprehensive inpatient rehab services (which offer more intense services to patients with more severe disabilities or ambulatory difficulties), the existence of such outpatient services may allow patients to be discharged earlier than otherwise and lessen demand for inpatient beds. Although there are no existing comprehensive rehab inpatient facilities in District IX which provide an alternative to the PBMC proposal, these soon will be in the form of Seacrest and Treasure Coast Hospitals. ECONOMIC AND SHARED SERVICES PBMC intends to enter into referral agreements with acute care hospitals, nursing homes, and home health agencies in the service area of its proposed rehab hospital. The proposed hospital will benefit from being located close to Jupiter Hospital. Rehab inpatient services can complement the other medical services offered on the PBMC campus. The location of the rehab facility on the first floor of the nursing home will ease the transfer of patients to the nursing home on the second floor. The proposed rehab hospital would purchase ancillary services from, and share engineering and support services with, Jupiter Hospital. This would obviate the need to duplicate equipment and services already available in Jupiter Hospital and will allow for more efficient use of existing equipment and services. The rehab facility would also share services with the nursing home, such as dietary, maintenance, purchasing, housekeeping, and laundry. The existing outpatient rehab services at Jupiter Hospital would be relocated in the new rehab hospital. Integration of the inpatient and outpatient services will improve the efficiency and quality of rehab services. By sharing services with Jupiter Hospital and the connecting nursing home, the proposed rehab facility would achieve economies of scale and improve the overall quality of service. NEED FOR RESEARCH AND EDUCATION FACILITIES Currently, there are no existing acute care of rehab facilities in District IX that have training programs for physicians interested in rehab medicine. If granted a CON, PBMC will attempt to establish a training program in affiliation with the University of Miami Medical School and the Veterans Administration Hospital in Miami. PBMC also proposes to establish a residency program in rehab medicine at its new facility, in cooperation with medical schools at the University of Miami and Temple University. Such a residency program would provide further opportunities for training health care practitioners. AVAILABILITY OF RESOURCES AND ACCESSIBILITY TO PATIENTS PBMC has sufficient funds to undertake and complete the project. At the time of hearing, PBMC had 10 million dollars in reserves which could be used to construct and operate the proposed rehab hospital, and cover any shortfall. The projected construction costs for this facility are only 1.2 million dollars. The PBMC Board is committed to this project, although the separate Board of the nursing home has not voted on it. It is reasonably anticipated that there would be enough qualified physicians and personnel available to staff and operate the proposed facility. Dr. Chidsey, a board certified psychiatrist with 20 years of experience in rehab medicine, is the architect of the proposed program and will be one of the principal admitting physicians. Other qualified psychiatrists have expressed an interest in the proposed facility and would be recruited if PBMC's application is approved. PBMC expects to hire new employees to staff the proposed rehab hospital. It plans to hire a total of 68.4 FTEs for the facility's first year of operation, which includes six registered nurses, 22.6 nurse's aides, 3.4 occupational therapists, and 7.1 physical therapists. (PBMC Exhibit No. 13) As already mentioned, the projection of six registered nurses appears to be an understatement of expected actual needs. PBMC should be able to recruit enough qualified nurses, nurse's aids, and technicians to administer its proposed program. Jupiter Hospital has been offering rehab services to inpatients and outpatients, so PBMC has experience in hiring rehab personnel. It has received applications for employment from rehab nurses in the last few months. Should a problem arise, PBMC can use the recruiting resources of Hospital Corporation of America, which operates and/or manages over 400 hospitals. A number of acute care hospitals in the area have been forced to lay off personnel as patient utilization and census have dropped, resulting in an increase in the number of available qualified health care personnel. In addition, PBMC has trained personnel at its disposal who have been providing rehab services to patients in Jupiter Hospital and in Jupiter Convalescence Pavilion. Also, PBMC has numerous volunteer workers who could be trained to assist in administering the rehab program. PBMC's location near several major traffic arteries make it more accessible to its target population. The same population, however, has reasonable access to Seacrest and Treasure Coast Hospitals. At Jupiter Hospital, PBMC treats all patients regardless of their ability to pay. It is against PBMC policy to deny medical care based on inability to pay, and there is no evidence that it has ever done so. PBMC's nursing home has a Medicaid contract, and twenty per cent of its patients are Medicaid patients. Jupiter Hospital does not have a Medicaid contract, but has treated Medicaid patients regularly and simply "written off" the costs of care. Because the volume of Medicaid patients has steadily increased, Jupiter Hospital has now applied for a Medicaid contract and is awaiting approval. Presently about one percent of its patient population is Medicaid patients. It also has a contract with Palm Beach County to provide ambulatory surgery to indigents. Approximately fifty per cent of the admissions at Jupiter Hospital in 1985 were Medicare patients. (NME Exhibit No. 13) PBMC's proposed rehab facility would also accept Medicare, Medicaid, and indigent patients. A patient mix of ten percent Medicaid, sixty percent Medicare, two percent indigent, and four percent bad debt is projected. Approval of PBMC's proposal would enhance access to comprehensive rehab services for medically underserved groups, as well as other residents in the catchment area, although it has not been shown that such services will not be reasonably available at Seacrest and Treasure Coast Hospitals. FINANCIAL FEASIBILITY Since PBMC has not shown need for its proposed rehab hospital or demonstrated that it will meet occupancy levels needed to become self- sustaining, it cannot be concluded that the hospital is financially feasible in the short-term (without a continuing subsidy) or the long-term. The pro formas provide little assurance of the hospital's financial feasibility. They simply assume occupancy levels of seventy per cent in the first year and eight five percent in the second year--then test financial feasibility against those levels. The underlying assumptions were not shown to be reasonable or based on reliable or verifiable data. The pro forma projections are also deficient because they reflect an understatement of the number of registered nurses needed to staff the facility, thereby underestimating salary and benefit expenses by as much as $600,000. (This is the approximate cost of increasing the number of registered nurse FTE's from 4 to 25.) The pro formas assume a combined level of seventy per cent Medicare and Medicaid utilization. In order to qualify for Medicare reimbursement--on which the proposed hospital would financially depend--there must be 24-hour coverage by registered nurses with specialized rehab training or experience. It is unlikely that the staffing levels reflected in the pro formas would be adequate to meet the Medicare standard, thus placing a major financial assumption of the project in question. IMPACT ON COSTS OF HEALTH CARE AND COMPETITION PBMC projects an average daily charge significantly lower than NME's projected charges of its two facilities in District IX (Seacrest and Treasure Coast Hospitals), and the actual charge of its existing facility in Sunrise, Florida. However, PBMC's projected charges depend on it achieving occupancy rates which have not been substantiated by the evidence. Consequently, projected cost savings for patients in District IX are speculative and uncertain. At the present time, both of the approved inpatient rehab facilities (Seacrest and Treasure Coast Hospitals) in District IX are owned by NME. In addition, NME owns and operates a 108-bed rehab hospital in Sunrise, Broward County, Florida, which is approximately 45 minutes driving time south of the Seacrest Hospital site. NME also owns and will operate a new 60 bed rehab hospital in Melbourne, Florida. Melbourne is in Brevard County, immediately to the north of Indian River County. The Melbourne facility is about 45 minutes driving time north from the Treasure Coast Hospital site. Approval of PBMC's application will increase competition among providers of inpatient rehab services to residents of District IX. Increased competition may contribute to a lowering of health care costs for District IX. It is also likely that PBMC would draw a significant number of admissions and patient days which would otherwise accrue to Seacrest and Treasure Coast Hospitals, thereby causing them substantial financial injury. The approval of PBMC's application would also enhance the bargaining position of HMOs and PPOs, which negotiate with health care providers for discounts or lower costs. In the absence of the proposed PBMC hospital, NME--as the only provider of inpatient rehab services in District IX--would have less incentive to negotiate with HMOs and PPOs, or reduce its charges. ALTERNATIVES Both parties admit that instead of converting the 60 nursing home beds into comprehensive rehab beds, PBMC could convert acute care beds at the adjacent 156-bed Jupiter Hospital. Since 1982, the nursing home has experienced an occupancy level exceeding ninety percent. In contrast, the hospital has experienced a sharp decline in utilization. The average patient census in 1983 was 70.5 percent; by 1985, it had dropped to 50.3 percent. In terms of serving the needy, 20-30 percent of the nursing home residents are Medicaid patients, compared to only one percent of the hospital's patients. Citing these figures, NME contends that conversion of "needed" beds in the nursing home to rehab beds- -when "un-needed" hospital beds abound next door is an inappropriate choice by PBMC. PBMC responds that there is an excess of nursing homes in District IX; that a new 120-bed nursing home is opening up nearby; and that the configuration and layout of the nursing home made the conversion and construction of additional areas for rehab therapy relatively inexpensive. These assertions were not refuted by NME. Moreover, the record does not contain a cost comparison between the two alternative sources of rehab beds. NME has failed, therefore, to prove that PBMC's decision to convert nursing homes rather than hospital beds was inappropriate. ALTERNATIVES TO NEW CONSTRUCTION PBMC's proposal calls for a limited amount of new construction. To a significant extent, the new rehab facility will utilize existing space on the first floor of the nursing home. The nursing home was constructed in accordance with standards and specifications suitable for an inpatient rehab facility. The additional areas that need to be constructed are relatively minor and of minimal cost. By converting space in the nursing home, rather than building an entirely new facility, PBMC has adopted an appropriate and cost-effective alternative to constructing an entirely new facility, assuming that the rehab hospital is needed in the first place. STATE AND LOCAL HEALTH PLANS PBMC's application exceeds the 3.9/1000 ratio of rehab beds to projected acute care admissions set forth in the State Health Plan. If PBMC's application was approved, there would be an excess of 7 rehab beds in District IX in 1990. In addition, the District IX Local Health Plan states that "comprehensive medical rehabilitation services should be available to all residents of the district." When Seacrest and Treasure Coast Hospitals open in the spring of 1986, this requirement will be satisfied. 30-BED PROPOSAL As an alternative to its 60-bed application, PBMC proposes to convert only 30 of its nursing home beds. The same findings as to need, geographic and financial accessibility, availability and adequacy of alternatives, quality of care, economies and shared services, need for educational facilities, availability of resources, short-term financial feasibility, impact on health care costs, alternatives to new construction, and consistency with the State and Local Health Plans, apply to this alternative proposal. HRS Rule 10-5.11(24)(c)3.a., expressly requires new and separate rehabilitation facilities, such as proposed by PBMC, to have at least 40 beds. PBMCs 30-bed proposal does not satisfy this requirement.
Recommendation Accordingly, based on the foregoing, it is RECOMMENDED: That PBMC's application for a CON be DENIED. DONE AND ORDERED this 19th day of February, 1986, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of February, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-2917 RULINGS ON PBMC'S PROPOSED FINDINGS OF FACT Approved. Approved, with clarification that nursing home Board has not voted on the application at issue. 3-15. Approved in substance. Approved, but these cases are distinguished from the instant case. Rejected as irrelevant since the quality of evidence presented at the de novo hearing is at issue, not the propriety of preliminary agency action. 18-22. Rejected as not supported by the greater weight of the evidence. The Chidsey-Schultz analysis was not shown to be reasonable or reliable, and overstated actual need. 23. Approved, but an adequate supply of rehab beds will be made reasonably available to residents of District IX within the next couple of months. 24.-25. Rejected for the reasons stated in 18-22, infra. Approved except for conclusion, not proven, that the numerical formula understates need for rehab beds. Approved, except the elderly nature of the population is a factor in the acute care discharge portion of the methodology and quality outpatient programs can reduce demand for rehab inpatient beds. Substantially approved, except statements about ALOS other than 28 days are conjectual. Approved. Approved, but modified to reflect that inpatient rehab coverage is still limited. Rejected as unsupported by the evidence. The comparison of District IX to District X is inappropriate. Rejected as unsupported by the evidence. The methodology takes age into account. Rejected as unsupported by the evidence. See, para. 16-32, infra. Approved. Approved, but these cases are distinguishable. Approved, but modified to reflect that Seacrest and Treasure Coast Hospitals will adequately satisfy this need through 1990. 37.-40. Approved. 41.-43. Covered in finding nos. 29-31. Approved, but PBMC's projected charges are uncertain due to understatement of number of registered nurses needed and failure to demonstrate need for the facility. Rejected as unsupported by the weight of the evidence. 46.-47. Approved, except the number of registered nurses needed is understated. Approved. Approved, except the availability of outpatient rehab service tends to decrease need for inpatient services. Rejected as speculative. Rejected as unsupported by the greater weight of the evidence. Approved, except for the second sentence, which was not proven. 53.-61. Approved in substance. Rejected as unsupported by the greater weight of the evidence. Approved. Approved, except the number of needed registered nurses is overstated. 65.-71. Approved in substance. 72. Approved, but short run financial feasibility (without a continuing subsidy by PBMC) is in doubt because need has not been shown. 73.-75. Rejected as unsupported by the greater weight of the evidence. Neither need nor short and long term financial feasibility has been shown. 76. Approved, except for the last sentence which is rejected as not supported by the greater weight of the evidence. 77.-80. Substantially approved, but the charges are uncertain due to understatement of nursing need and failure to demonstrate need for the proposed facility. Financial feasibility is in doubt. Approved, but the extent to which it would still underprice the charges of Seacrest and Treasure Coast Hospitals is uncertain. Substantially approved, with caveat that inadequate nursing staff would place Medicare funding in jeopardy. Rejected as nursing staff costs are understated. 84.-85. Rejected, since without a showing of need, the financial feasibility is in doubt. Approved. Covered in finding no. 56. Approved. Covered in finding no. 57. Covered in finding no. 58. Covered in finding no. 57. Rejected as the extent to which costs may be lowered, and the likelihood, were not shown. Approved. Covered in finding nos. 59-60. Approved. Approved. First sentence, approved; second sentence rejected as speculative. Approved. Covered in finding no. 62. 100-102. Approved. First sentence, approved; second sentence, rejected as not proven by the greater weight of the evidence. First sentence, approval; second sentence, rejected as not proven. Rejected, as approval would not be consistent with the State Health Plan. Approved. Rejected as not proven since nursing needs were understated and need for the rehab beds was not demonstrated. Approved, except that the 30-bed facility would not satisfy the requirement of Rule 10-5.11(24)(c)3.a. RULINGS ON NME'S PROPOSED FINDINGS OF FACT 1-2. Approved. Approved, with clarification that the numerical formula shows excess beds in 1990. Approved, except for statement in the second sentence alluding to NME's ostensible "recognition" that Treasure Coast Hospital would be marginally successful at 60 beds, which is not proven. Approved. Approved, except for the fist sentence, which is argumentative. 7.-8. Approved. 9. Approved, except for the reference in the second sentence to what HRS consistently "recognized" in the past. Non-rule policy, no matter how often applied in the past, must be proved, anew, at each Section 120.57(1) proceeding. The generic impropriety of institution specific health care planning was not demonstrated in the instant case. 10.-11. Approved. 12. Approved, except for last sentence, which is not supported by the greater weight of the evidence. 13-16. Approved. Approved, except for the first sentence, which is not supported by the greater weight of the evidence. Approved, except for the first sentence, which is not supported by a preponderance of the evidence. Approved. 20.-21. Rejected, as unsupported by a preponderance of the evidence. Approved and clarified to reflect that PBMC has not demonstrated that the proposed hospital will be financially feasible. Approved. Approved. Rejected as unsupported by a preponderance of the evidence. Approved. Approved, except it has not been shown that the services of Treasure Coast and Seacrest Hospitals will be more comprehensicve than those proposed by PBMC, or that the approval of the PBMC Hospital will adversely affect the ability of Treasure Coast and Seacrest to attract and maintain staff. COPIES FURNISHED: J. Marbury Rainer, Esquire Jack C. Basham, Jr., Esquire 133 Carnegie Way 1200 Carnegie Building Atlanta, Georgia 30303 Harden King, Esquire 1323 Winewood Boulevard Tallahassee, Florida 32301 Michael J. Glazer, Esquire P. O. Box 391 Tallahassee, Florida 323029
Findings Of Fact On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986. On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility. HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application. HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents. On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986. On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties. By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility. (Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application. HCAC's Proposal The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County. The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife. The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI). HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management. The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services. Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital. The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program. The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital. One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days. The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered. HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment. Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility. The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture. The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application. The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations. PROJECT AND CONSTRUCTION COSTS HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6. Table 1 - Source of Funds The estimated total project cost of the 120-bed facility would be $6,469,500. The estimated project cost of the 105-bed facility would be $5,696,940. The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility. Table 2 - Total Debt Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project. Table 3 - New Purchase Equipment HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000. The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project, $80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract. The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of $850,000 to $900,000. Table 7 - Utilization by Class of Pay Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows: Year 1 -- Contract/Indigent 8.64 percent (1989) Medicare 26.10 percent Insurance and Private Pay 65.26 percent Year 2 -- Contract/Indigent 8.48 percent (1990) Medicare 26.15 percent Insurance and Private Pay 65.37 percent The proposed payor mix for the 105-bed facility is, in patient days, as follows: Years 1 and 2 - Medicare 3.3 percent Insurance and Private Pay 90.7 percent Indigent 6.0 percent The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole. Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable. HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection. HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly. Table 8 - Effects on Patient Charges HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge - $214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge - $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare. The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project. Table 10 - Projected Utilization The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization. Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105- bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation. Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at 80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients. The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days. Table 11 - Manpower Requirements For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and 1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project. There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable. For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages. Table 16 - Areas and Square Feet / Table 18 - Space Requirements HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population. HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities. There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage. Table 19 - Nursing Unit Area Summary HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable. Table 25 - Estimated Project Costs Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities. HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940. HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to $95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable. HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low. Table 26 - Project Completion Forecast HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable. Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable. The supplies and other expenses depicted in the pro forma (year one at $55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day. The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue. Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of $395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately $1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000. HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to 8 percent of gross revenue. CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL HEALTH PLAN The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's. HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole. Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy. Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned. Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2. Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3. Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4. Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy. Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f). Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f). Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds. Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan. Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding. Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made. Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1. Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I. Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee. HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent. AVAILABILITY AND ADEQUACY OF ALTERNATIVES There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low. THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care. PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH CARE RESOURCES HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources. The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center). There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County. Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services. FINANCIAL FEASIBILITY HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown. IMPACT ON COSTS AND COMPETITION If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries. Charter is a hospital located in District XI and consists of 88 beds, 80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff. PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent. OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision. The occupancy rate of all psychiatric beds within District XI was below 80 percent. HCAC'S PROPOSED NEED METHODOLOGY At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI. The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care. HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode. HCAC's bed need computation is as follows: Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions) District XI: July 1991 Condition Admission Rate Schizophrenia & Other Psychoses 99 Affective Disorder Psychosis 20 Affective Disorder Neuroses 60 Neuroses and Personality Disorders 199 20 Projected 1991 Population Age 18+ 1,459,437 Total Projected Admissions 2,904 Average Length of Stay 90 Projected Patient Days Target Occupancy 80.00 261,385 percent Total Beds Required 895 Beds Currently Available 438 South Florida State Hospital (450 X .48) Residential Treatment Facilities 216 233 Net Beds Needed 496 The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds. In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days. In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the 135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low. HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds. Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions. In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335. Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors Corporation, Inc. be DENIED. DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON 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 1st day of March, 1988. COPIES FURNISHED: Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308 Tallahassee, Florida 32308 H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302 William E. Hoffman, Esquire 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 George N. Neros, Jr., Esquire 101 North Monroe Street Monroe-Park Tower Suite 900 Tallahassee, Florida 32301 Donna H. Stinson, Esquire The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact The Applicant. The buildings at Shands Teaching Hospital are owned by the State of Florida. Shands Teaching Hospital is itself a not for profit Corporation authorized by statute. The hospital was previously owned by the State of Florida and was part of the University, but in 1979 the hospital corporation became a not for profit corporation responsible for the management of the hospital. The structure was changed so that the management and the operation of the hospital could be improved to meet the changing needs of medical education, research and patient care. The Board of Shands is made up of three major elements. The Board includes individuals who hold office at the University, examples being the President of the University of Florida, the Vice President for Health Affairs, the Dean of the College of Medicine and others in similar capacities. There is also representation by the Chairman of the Board of Regents, or someone appointed by the Chairman of the Board of Regents. The Chief Executive Officer of Shands is on the Board and then there are public members nominated by the Board itself and appointed by the President of the University. All of the initial members of the public were appointed by the University of Florida President. The Board of Shands has voted to support this application. The Health Center includes six colleges and the hospital. The most important college for the purposes of this case is the College of Medicine. Shands has sharing arrangements with the VA Hospital. The hospital contracts for many services with the College of Medicine. The chairmen of the College's clinical departments are also the chairmen of the hospital departments. In order to be on the hospital staff you must be on the faculty of the College of Medicine. The Dean is on the Board of the Hospital, and the Chief of Staff of the Hospital is also an Assistant Dean in the College. Shands is a statewide resource for providing health care to Florida residents. Among its unique programs are: The crippled childrens' program, set up by the Children's Medical Services Program Office of HRS, with the assistant of a Shands' pediatrician, Dr. Gerold Shiebler. It is the only approved hospital in HRS District III for participation in the program. Treatment programs for extremely complex childrens' problems. One of only 4 hospitals certified in Florida to do heart surgery under the Children's Medical Services Program. The only facility in the Southeastern United States doing bone marrow transplantation in children. The only children's rheumatic fever and rheumatology programs in HRS District III, and the only facility in District III doing sickle cell screening. It is the keystone of regionalized medical services for children. Shands is one of the top centers in the entire United States for musculo-skeletal tumor surgery for children's musculoskeletal problems, including myelodisplasia, cerebral palsy and other gait and neuromuscular disturbances in children. Shands has been designated by the Governor's Advisory Council on Spinal Cord Injury as a spinal cord injury center. A large brain tumor microsurgery program receiving patients from around the country. The only Florida hospital offering a new internal radiation treatment. The Proposed Project. Shands' application is for a certificate of need for a 20-bed comprehensive medical rehabilitation unit to be used in teaching and education programs by colleges of the University of Florida. The 20 proposed rehabilitation beds would be located on the tenth floor of an existing building at Shands. The tenth floor would be constructed along with the ninth and eleventh floors which have already been CON-approved. The gross square footage for the rehabilitation unit would be 35,500. In Shands' application, the estimated cost of the project was placed at $4.3 million. Shands' application proposes to designate eight of the 20 rehabilitation beds for pediatric services. Normally Shands does not allocate beds in advance for a particular service, since "political fallout negotiations for who gets what space" often changes the number of beds ultimately dedicated for a particular service or age group. The Intervenor. Intervenor, Alachua General Hospital ("Alachua General") is a 453-bed full service hospital in Gainesville. Alachua General is an active participant in the Medicare and Medicaid funding programs. Alachua General is the only area provider for Baker Act patients and has been since the inception of Baker Act. Alachua General is the only provider of services to Alachua County indigent patients through its service agreement with Alachua County. Criterion 381.494(6)(c)1. (The need for the health care facilities and services being proposed in relation to the applicable district plan and State health plan). District Health Plan. Alachua County is situated in HRS District III. One of the purposes of the Local Health Council (LHC) is to assist HRS to provide community and local planning since it has a closer hands on sensitivity to the local needs than HRS. The Board of Directors of the District III LHC is appointed by county commissioners. This LHC is comprised of many health professionals, including nurses, physicians, hospital administrators, and the Director of the VA medical center. No representatives of Alachua General are on the LHC. The applicable District III Plan provides review guidelines and recommendations intended for use by HRS in making certificate of need decisions. These recommendations "state specific steps which should be implemented to most appropriately meet the region's (District III) needs." The two recommendations in the District III Plan for rehabilitation services are as follows: One comprehensive medical rehabilitation inpatient facility should be located in District III. Any additional comprehensive medical rehabilitation beds should be added only when those added in the initial facility have achieved a 75 percent annual occupancy rate. These recommendations were formulated after extensive research and input from many sectors of the health care industry. Drafts of these recommendations underwent public review and comment prior to final adoption. Both Alachua General and Shands participated in this public review. Shands did not oppose these recommendations. Also, Shands did not ask for special consideration as a teaching facility. Shands was assured that this was not necessary since special consideration already was engrafted on the CON statute. The District Plan takes no cognizance of the statewide educational and training needs to be met in a major teaching hospital, nor of the occupancies which can be projected for a state wide health care and teaching resource such as Shands. These recommendations were adopted by the LHC in December 1984. The effect of these recommendations was to carry over through at least 1985. These recommendations address concerns about cost containment and the rational development of new sophisticated services. These recommendations were intended to control even if there was a net need of beds per Rule 10-5.11(24) since they encourage the development of one facility and then allow for utilization of that facility prior to consideration of future development. The LHC will reevaluate the single location recommendation once the one facility has generated utilization. HRS uses and relies on LHC recommendations in making certificate of need decisions even if such recommendations are not adopted as agency rules. Alachua General's 40-bed comprehensive rehab hospital has been approved but was still under construction at the time of the final hearing. There is no other existing rehabilitation facility in the District, so there was no evidence of occupancy of existing facilities. In circumstances where a need for more than one facility exists, HRS in the past has approved more than one application without waiting for occupancy levels to be met and has done so where facilities had been previously approved but not yet built and where facilities already existed but had not reached desired occupancy levels. For example, a 40-bed rehabilitation hospital, was approved in one district while at the same time a 24-bed new patient unit in an existing acute care hospital was approved, both of which were approved while an outstanding 60-bed freestanding facility that had been approved was not yet built or operated. That was in HRS District VIII. In HRS District IX, two facilities were approved two weeks apart for separate individual free standing rehab hospitals. Third, in District X, Broward County, approval for a new rehab hospital had been given, but the facility was not constructed or licensed, yet the Department approved conversion of nursing home beds at another facility to comprehensive rehabilitation hospital beds. In addition, on three occasions the Department granted certificates of need in districts where beds were licensed and operating, but had not yet attained 85 percent occupancy levels. Here, Alachua General projects that the required occupancy levels will be met at its facility (assuming no new beds are added at Shands). Were it not for the peculiar nature of Shands and its proposal, an application for new rehabilitation beds in District III at a facility other than Alachua General would not be in compliance with the District Health Plan. However, the District Health Plan does not by its terms address Shands and its proposal and cannot be read to strictly govern this case. State Health Plan The state health plan incorporates the methodology for determining need for comprehensive rehabilitation beds contained in Rule 10-5.11(24), Florida Administrative Code. Under the rule methodology, there is a need for 58 comprehensive rehabilitation beds by 1988. At this time, the only licensed or approved comprehensive rehabilitation beds in District III are the 40 beds approved for Alachua General. The state health plan also incorporates subparagraph (b)3.b of Rule 10-5.11(24), Florida Administrative Code. That subparagraph calls for 85 percent occupancy of all existing rehabilitation facilities in the district during the preceding calendar year. As previously discussed, in circumstances where a need for more than one facility exists, HRS in the past has approved more than one application without waiting for occupancy levels to be met and has done so where facilities have been previously approved but not yet built and where facilities already existed but had not yet reached desired occupancy levels. Criterion 381.494(6)(c)3. (The ability of the applicant to provide quality care.) Shands generally has the ability to provide quality comprehensive rehabilitation care. Shands proposes to dedicate eight of the 20 rehabilitation beds for pediatric patients. This was not expressed or implied in its CON application, and Shands is not certain whether eight beds would in fact ultimately be designated for pediatric patients given the politics at Shands. Shands does not know how many rooms or patient rooms will be equipped for pediatrics at this point. If beds are dedicated to pediatric patients, several problems with quality care are presented. Pediatric comprehensive rehabilitation requires different kinds and modes of care and separate equipment and treatment areas. Shands' proposal would require dual commitment in terms of space, equipment, staffing, training and programming. Separate recreational areas, dining areas and therapy areas may be required. However, it is not necessary to totally segregate pediatric rehabilitation patients from adult rehabilitation patients by setting up units on different floors although this is typically done by hospitals treating pediatric and adult patients for communicable diseases. The Shands' proposal includes ample floor space (35,500 square feet) to enable Shands to resolve the problems presented by serving both an adult and pediatric rehabilitation patients in its proposed unit. Some of Shands' rehabilitation equipment for its proposed comprehensive rehabilitation unit on the tenth floor already has been purchased and is in use in occupational and physical therapy areas on the sixth floor of the same building. At least some of this equipment probably will remain where it is on the sixth floor. Ideally, occupational and physical therapy areas should be as close to the patients as possible. But Shands' plans are not unprecedented and need not seriously detract from the quality of rehabilitation care Shands will be able to give. The evidence was not clear whether there are bed rails and hand rails on the sixth floor to accommodate the needs of rehabilitation patients. However, if there are not, the evidence was sufficient to prove that Shands can and will accommodate the needs of its rehabilitation patients. On the other hand, integration of Shands' proposed rehabilitation unit into its acute care hospital will make available backup medical services as may be necessary for rehabilitation patients. Normally, an essential for patient eligibility for comprehensive rehabilitation treatment is sufficient recovery from acute care medical problems. Rehabilitation units normally do not accept a patient who has continuing or serious acute medical problems; needed minor treatment is normally administered at free standing rehabilitation hospitals by qualified medical specialists on staff. However, Shands and Shands' proposal is somewhat unique. First, being a tertiary hospital, Shands cares for patients who generally have more severely acute conditions and are more likely to require intensive medical care even during rehabilitation. In addition, Shands' proposal envisions beginning comprehensive rehabilitation at an earlier stage than normally begun at a freestanding hospital. The Shands rehabilitation unit would enable Shands to think in terms of comprehensive rehabilitation and actually begin comprehensive rehabilitation at the earliest possible date. These features of Shands' proposal will enable Shands to give even better quality care than a free standing rehabilitation hospital normally is capable of giving, especially to patients of the kind Shands cares for in its acute care hospital. Criterion 381.494(6)(c)4. (The availability and adequacy of other health care facilities and services in the service district of the applicant, such as outpatient care and ambulatory or homecare services, which may serve as alternatives for the healthcare facilities and services to be provided by the applicant.) There is no available or adequate alternative that would meet a need for comprehensive rehabilitation beds. Criterion 381.494(6)(c)8. (The availability of resources *** for project accomplishment and operation; effects on clinical needs of health professional training programs in the service district; accessibility to schools for health professions in the service district for training purposes; alternative uses of such resources for the provision of other health services; and accessibility to all residents of the service district.) The parties have stipulated that the staffing of Shands' proposed rehabilitation unit could be obtained and that the full time equivalent employees set out in the application was appropriate or at least not challenged. Manpower requirements are not an issue. Shands has the funds necessary for capital and operating expenditures. Shands has reserve funds available (working capital reserve) of between $8 and $9 million. In addition, there are between $5 and $8 million of other uncommitted funds available for construction. Shands' proposed project will enhance professional training programs in District III, meet clinical needs for those programs, and be accessible to schools for health professions in the service district for training purposes. The services will be available to all residents of District III and the State of Florida. Criterion 381.494(6)(c)11. (The needs and circumstances of those entities which provide a substantial portion of their services or resources, or both, to individuals not residing in the service district in which the entities are located or in adjacent service district.) Shands provides, and proposes to provide in its application, a substantial portion of its facilities and services to individuals not residing in the service district or in adjacent service districts, including both students and patients. Patients. As previously mentioned, Shands is a tertiary acute care hospital, attracting patients with severely acute medical conditions from throughout the State of Florida and the southeast. Alachua General's 40-bed free standing comprehensive rehabilitation hospital can be expected to be used to meet primarily the need for comprehensive rehabilitation of patients with less severely acute medical conditions and residents of District III. Not many patients from outside District III needing rehabilitation from less severely acute medical conditions can be expected to go to Shands. There are 442 approved rehabilitation beds not yet on line in Florida. Also, existing rehabilitation beds are located in adjoining service districts. Referring an acute care patient to Shands for a short length of stay is not the same as a referral for a more complicated and lengthy rehabilitation treatment. Family participation is an integral part of the rehabilitation process, and preference to be near one's family is a factor. However, it still can be anticipated that substantial services will be rendered to patients from outside District III and the adjoining service districts who have more severely acute medical conditions and need comprehensive rehabilitation. Students. Shands intends to use its comprehensive rehabilitation unit in part to start an educational residency program in physical medicine and rehabilitation ("PMR'). Students in other medical internship and residency programs including neurology, neurosurgery, orthopedic surgery, internal medicine, pediatrics and other disciplines also will benefit from exposure to PMR and the comprehensive rehabilitation unit. In addition, the allied medical specialties of medical technology, physican assistants, clinical and community dietetics, physical therapy, occupational therapy and rehabilitative services also are taught at the University of Florida College of Health-Related Professions. These students also would benefit from exposure to PMR and the comprehensive rehabilitation unit as part of their education. A substantial number of these students can be expected to be from outside District 111 and the adjoining service districts. Additionally, the populations whom they will ultimately serve after their education will be substantially outside District 111 and the adjoining service districts. 1. Criterion Section 381.494(6)(c)7. (The need for research and educational facilities, including but not limited to institutional training programs and community training programs. for health care practitioners and for doctors of osteopathy and medicine at the student, internship, and residency training levels.) Absence of a program in physical medicine and rehabilitation is a significant deficit in the overall quality of medical and medically related education at the University of Florida. At this time there are no PMR programs in the State of Florida. There is a need for educational programs in PMR in Florida to meet the anticipated need for physiatrists (PMR specialists) in Florida in the future. Criterion Section 381.494(6)(c)6. (The need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas.) Shands' proposal will not meet any need in District III for special equipment and services which are not reasonably and economically accessible in adjoining areas. Criterion Section 381.494(6)(c)12. (The probable. impact of the proposed project on costs. of providing health services proposed by the applicant.) If eight of Shands' proposed twenty beds are designated for pediatric patients, only twelve will remain to compete with Alachua General's forty beds. Of those twelve, a substantial portion probably will be used by nonresidents of District III (although Alachua General will be sufficiently affected as an existing provider to have standing to intervene as a substantially affected party). Those which are directly competitive with Alachua General's forty rehabilitation beds will likely have a positive effect on the cost of providing comprehensive rehabilitative services in District III. There is sufficient need generated in District III to support the Alachua General facility and the directly competitive Shands beds without duplication of services. As a result, the competition will likely contribute to improvements or innovations in the financing and delivery of those health services and promote quality assurance and cost effectiveness. Criterion Section 381.494(6)(0)2. (The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services . . . in the service district of the applicant.) Patient Care. Alachua General's free standing comprehensive rehabilitation unit will be just as available and accessible to District III residents at Shands proposed unit. Alachua General will also be able to provide quality comprehensive rehabilitation appropriate to the medical needs of most of the patients residing in District III. However, Alachua General does not serve pediatric patients, and there are no comprehensive rehabilitation services for pediatric patients in District III. In addition, a number of Shands' patients can be anticipated to be suffering from too severely acute medical conditions for it to be appropriate to refer them to Alachua General for comprehensive rehabilitation services, at least at first. It is recognized that comprehensive rehabilitation services generally only come into play after a patient is able to be released from an acute care hospital. But being a tertiary hospital and university hospital, Shands' patients do not all fit the norm. Without a Comprehensive rehab unit at Shands, those patients would be deprived of comprehensive rehabilitation services at an earlier and, in their case, more appropriate point in their recovery. There is a need under the HRS rule methodology for fifty-eight comprehensive rehabilitation beds in District III. Alachua General's forty beds can be expected to be efficiently utilized. Occupancy rates in the second year of operation are expected to be between 75 and 85 percent. As a result, Alachua General will not be adequate or available to handle all of the need in District III. In addition, as a tertiary and university hospital, Shands might attract some patients not even accounted for in the rule methodology. Education. Shands did not prove that it has fully explored the possibility of operating its educational and residency programs in PMR out of the Alachua General facility. The evidence was that it might be possible to create such a program and have it accredited. Alachua General made a proposal to Shands along those lines, but Shands has not responded. Although there exists a possibility of using Alachua General's comprehensive rehabilitation beds to support Shands' education and residency programs in PMR, such an arrangement would not be ideal. Only one or two such programs exist in the United States. All other PMR education and residency programs are based at a teaching hospital. This enables the educators to control the educational and residency programs. It also allows more stability for planning purposes to know that the continued existence of the program does not depend upon the will of another institution. Finally, it allows the PMR students to have the benefit of being totally integrated into the medical educational institution and affords the other medical and health related students to have the benefit of being integrated into the PMR programs. Alachua General's free standing comprehensive rehabilitation facility is located seven to nine miles from Shands. In addition to the disadvantages mentioned in the immediately preceding paragraph, the distance between the two facilities would pose significant logistical problems in operating Shands' education and residency programs in PMR out of the Alachua General facility. Many educational and residency programs in PMR that are based at teaching hospitals are affiliated with other hospitals through which its students rotate for periods between three months and a year. It would be beneficial to Shands' educational and residency programs to affiliate with Alachua General to provide additional opportunities for Shands' students to rotate through the Alachua General facility. Alachua General would be the closest available facility for such purposes. Affiliation with Alachua General would enable Shands to expand its PMR programs in a reasonable way to be available to more students. And a rotation through the Alachua General facility would expose Shands' students to comprehensive rehabilitation provided in a different setting and to patients who have generally less severely acute medical conditions at the time of their rehabilitation than the patients at Shands. Criterion Section 381.494(6)(c)5. (Probable economies and improvements in service that may be derived from the operation of joint, cooperative, or shared health care resources.) As just mentioned, there is the potential for Shands and Alachua General to share the use of their facilities to form an educational and residency program in PMR that would be stronger than such programs operated exclusively at either one or the other of those facilities. In addition, at the Shands facility itself, Shands already has substantial equipment and services in physical and operational therapy on the sixth floor of the building in which the rehabilitation unit is proposed on the tenth floor. That equipment and those services can be integrated into the comprehensive rehabilitation unit. Finally, as a tertiary acute care hospital, Shands will have substantial equipment and services of other kinds that would be available for use in treating comprehensive rehabilitation patients as might become necessary in the course of their rehabilitation. This potential for sharing services is significant since Shands can be expected to be providing comprehensive rehabilitation services to patients who are still suffering from more severely acute medical conditions than one would normally expect in a comprehensive rehabilitation unit. Criterion Section 381.494(6)(c)9. (The immediate and long-term financial feasibility proposal.) Immediate Financial Feasibility. Shands has reserved funds available (working capital reserve) of between $8 million and $9 million dollars. In addition to that, there are between $5 and $8 million dollars in other uncommitted funds available for construction. Shands estimates the cost of its proposed project at $4,320,000. This estimate is too low. Actually, a more reasonable estimate of what it will cost Shands to construct its rehabilitation unit on the tenth floor of its existing building would be approximately $5.5 million dollars, or approximately $275,000 per bed. This more accurate estimate adds a ten percent construction contingency factor, an additional 3.5 percent of construction costs for architects/engineering fees, a 2.5 percent of construction cost fee for construction supervision, and an additional $160,000 for elevators. Shands' $160,000 equipment cost estimate normally would be low but is reasonable in this case since much of the equipment Shands plans to use in the proposed rehabilitation unit already has been purchased and is in operation on the sixth floor. Normally, total project costs for a rehabilitation bed proposal should be in the range of $125,000 to $145,000 per bed, and within a maximum of $175,000 per bed. However, in this case, Shands is building its unit on the tenth floor of an existing building in conjunction with the construction of the ninth and eleventh floors of the building. The difficulties of that type construction explain the high cost of construction of Shands' proposed project. In addition, Shands' proposed unit will take up approximately 35,500 square feet. This is approximately 500 square feet per bed larger than usual even for a teaching hospital needing oversized nursing stations as well as classrooms and support areas for the educational/training programs. Given Shands' proposal to have a comprehensive rehabilitation unit in its teaching hospital, Shands had no choice but to add a floor to its present structure. And given that type of construction, Shands has little choice but to build the entire tenth floor. For these reasons, the cost and square footage of Shands' proposed project, while very high by all standards, is reasonable in this case. In addition, the additional square footage per bed will give Shands flexibility in accommodating pediatric patients within the proposed comprehensive rehabilitation unit. Even with a $5.5 million dollar cost estimate, Shands' proposed project is immediately financially feasible. Shands could finance its proposed project through operations or by borrowing from the capital markets. Long-Term Financial Feasibility. Financed over 30 years, the additional 1 to 1.2 million dollars of construction costs would result in approximately $35,000 per year additional cost of operation. If Shands operates at 85 percent occupancy, an additional charge of approximately $6 per patient day would pay the additional cost. Shands' utilization estimates are based on an internal demand analysis. The internal demand analysis probably is somewhat unreasonably inflated. Shands projects an average length of stay for its rehabilitation patients of 52 days. It also projects a 125 day average length of stay for spinal cord injured patients. The average lengths of stay probably are overstated, but the internal demand analysis projects approximately 20 percent more demand than the proposed 20-bed unit could accommodate. In addition, it does not take into account any referrals for comprehensive rehabilitation services from any acute care hospitals other than Shands . Taken as a whole, the evidence was sufficient to prove that the demand for Shands' rehabilitation unit will result in enough utilization to keep the unit at least 85 percent occupied, especially if some of the beds are designated for pediatric patients. Shands' financial pro formas do not include a line item for interest to be paid on project debt. If the project is financed by borrowing from the capital markets, an interest expense line item should be included in the pro forma. However, it is not clear at this time that Shands will borrow from the capital markets to finance its rehab project. If critical to the long term financial feasibility of the project, Shands could pay for the rehab project out of operations. Given Shands' expected utilization, its comprehensive rehabilitation unit will be financially feasible in the long run if Shands charges approximately what it proposes to charge per diem for comprehensive rehabilitation services -- approximately $555 for January 1, 1999 and approximately $600 for January 1, 1990. The projected charges are reasonable and feasible. Section 381.494(6)(d). As mentioned, it would be possible to accomplish part of what Shands proposes by using Alachua General's facilities. That alternative certainly would be much less costly and, in that sense, more efficient. But the findings do not demonstrate that it would be more appropriate. Using Alachua General's facility to meet the need for comprehensive rehabilitation beds in District III would leave pediatric patients without comprehensive rehabilitation. In addition, patients suffering from more severely acute medical conditions frequently admitted at Shands would be deprived of the opportunity to begin comprehensive rehabilitation at an earlier stage in their recovery. Alternatively, if those patients were transferred to Alachua General at earlier stages of recovery than normal, the transfer could be anticipated to result in acute medical situations which Alachua General is not equipped to handle. Even disregarding those special attributes of Shands' proposal, Alachua General only meets 40 of the 58 bed need for comprehensive rehabilitation beds in District III. Regarding the educational and residency program in PMR which Shands proposes, the alternative of using Alachua General as the base for those programs is a possibility but is less than ideal and fraught with difficulties. For these reasons, although the Shands project is very costly, it is appropriate under the circumstances to spend the money it will take to accomplish the project. It is anticipated that Alachua General's 40 bed facility will be used in an appropriate and sufficient manner by the time Shands proposal would become operational. There are no alternatives to new construction, for example, modernization or sharing arrangements, available in this case. Pediatric patients and certain Shands patients suffering from more severely acute medical conditions will experience problems in obtaining care of the type proposed in the absence of Shands' proposed new services. P. Balanced Consideration of the Criteria. Balancing all the criteria that have been considered, it is found that there is need and sufficient justification to grant Shands' application in this case. The cost of the proposal is very high and would be cause for denial of an application for comprehensive rehabilitation beds in other circumstances. In addition, there is the possibility that some of the need addressed by the proposed project could be met using Alachua General's 40-bed facility. But the special needs of a top quality educational and residency program in PMR, of some of Shands' patients suffering from more severely acute medical conditions and of pediatric patients justify the expenditure despite the high cost and other partial alternatives.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Health and Rehabilitative Services, grant the application of Shands Teaching Hospital and Clinics, Inc., for a Certificate of Need for a twenty-bed comprehensive rehabilitation unit to be used in conjunction with the teaching and education programs of colleges of the University of Florida on the condition that 8 beds are designated for pediatric patients. RECOMMENDED this 10th day of April, 1986, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of April, 1986. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 84-2090 PARAGRAPH A - RULINGS ON SHANDS' PROPOSED FINDINGS OF FACT. In part rejected as part irrelevant and in part a Conclusion of Law and in part covered by Findings 23 and 65 to the extent necessary. Rejected as subordinate and unnecessary. In part covered by Findings 5 and 48-49 and in part rejected as subordinate and unnecessary. Accepted. Accepted. Accepted. Accepted. In part covered by and in part rejected as contrary to Finding 45. Rejected as subordinate and unnecessary. Accepted. Rejected in part as contrary to the greater weight of the evidence, in part is argumentative and in part as Conclusion of Law. Rejected as contrary to Finding 45 and the greater weight of the evidence. Covered by Finding 1. Covered by Finding 2. Covered by Finding 3. Covered by Finding 4. Covered by Finding 5. Rejected as contrary to the greater weight of the evidence. In part covered by and in part rejected as contrary to Findings 9 through 22. In part covered by and in part rejected as contrary to Findings 9 through 22. Covered by Finding 25. In part covered by Finding 15 and in part unnecessary and irrelevant. See Finding 19. In part covered by Finding 20 to the extent necessary and not subordinate, cumulative or argumentative and in part rejected as contrary to the greater weight of the evidence. See Finding 20. Rejected as contrary to the greater weight of the evidence. Covered by Finding 21. Covered by Finding 15. Rejected as contrary to the greater weight of the evidence. In part covered as necessary by and in part rejected as contrary to Finding 65. Rejected as subordinate and not relevant or necessary except as covered by Findings 40, 48 and 65. Most of the internal demand generated at Shands already is included in the 58 bed need in 1988 generated by the rule methodology. $ The first two sentences are not contested and are accepted. The third sentence also is accepted and is covered as necessary by Finding 65. Not contested and accepted. Covered in part by Findings 27 and 36. The second sentence is not contested and is accepted. Otherwise rejected as subordinate, cumulative and unnecessary. Covered by Finding 24. Covered by Finding 35. Covered as necessary by Finding 49. Rejected as subordinate, irrelevant and unnecessary. Rejected in large part as subordinate, cumulative and unnecessary. Covered as necessary by Findings 50-53 and 68. In part covered by and in part rejected as contrary to Findings 45-53 and 68. Covered by Finding 27. Covered by Finding 35. Covered by Finding 55. Covered by Findings 42 and 43. Covered by Findings 39-41. Covered by Findings 36 and 57-67. In part rejected as contrary to the greater weight of the evidence and in part covered by Findings 36 and 57- 67. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67. Covered by Finding 59. In part covered by Finding 58 and in part rejected as subordinate and unnecessary. Covered by Findings 60-62, in part rejected as subordinate and unnecessary. Cumulative. Rejected as subordinate and unnecessary. Subordinate and unnecessary. Subordinate and unnecessary. Covered by Finding 64. Covered by Finding 64. Covered by Finding 42. Covered by Finding 43. Covered by Findings 36 and 37. Covered by Finding 38. Covered by Findings 39-41. In part covered by and in part rejected as contrary to Finding 45. Covered by Findings 45-53. Covered by Findings 45-53. Covered by Findings 45-53. Covered by Finding 70. Covered by Finding 71. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected. Whether Shands "meets all of the criteria" is not the question. See Finding 72. RULINGS ON ALACHUA GENERALS' PROPOSED FINDINGS OF FACT Covered by Finding 8. Rejected as subordinate, irrelevant and unnecessary. Rejected as subordinate, irrelevant and unnecessary. Rejected as subordinate, irrelevant and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. 9. 10. 11. Covered by Findings 6 and 7. Covered by Findings 6 and 7. Covered by Findings 6 and 7. Covered by Findings 6 and 7. Rejected as cumulative. Subordinate to Finding 61 and unnecessary. Rejected as contrary to Findings 30, 61 and 62. Subordinate to Finding 61 and unnecessary. Rejected as contrary to Finding 62. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. To the extent necessary covered by Finding 30. Covered by Finding 60. Rejected as subordinate and unnecessary. Covered by Finding 58. Rejected as unnecessary. Subordinate to Finding 60. Covered by Finding 58 and cumulative. Covered by Finding 58. Covered by Finding 58. Covered by Finding 58. Covered by Finding 58. Covered by Finding 58. Covered by Finding 59. Covered by Finding 58. Covered by Finding 58. Covered by Finding 58. Rejected in part as cumulative and in part as subordinate and unnecessary. Covered by Finding 58. Rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 28-31 and 59. In part covered by and in part rejected as contrary to Findings 28-31 and 59. In part covered by and in part rejected as contrary to Findings 28-31 and 59. In part covered by and in part rejected as contrary to Findings 28-31 and 59. In part covered by and in part rejected as contrary to Findings 28-31 and 59. In part covered by and in part rejected as contrary to Findings 28-31 and 59. Rejected in part as subordinate in part as unnecessary and in part as contrary to Finding 45. To the extent necessary, covered by Finding 45. Rejected as cumulative, subordinate and unnecessary. To the extent necessary, covered by Finding 40. To the extent necessary, covered by Finding 40. Subordinate to Finding 45. Subordinate to Finding 45 and unnecessary. Accepted, but unnecessary. Rejected in part as subordinate and unnecessary and in part as contrary to Finding 45. Accepted, but unnecessary. Accepted, but unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. 64A. Covered by Finding 9. Covered by Finding 10. Rejected in part as cumulative, in part as subordinate and in part as unnecessary. Covered by Finding 11. Covered by Finding 12. Covered by Finding 13. Covered by Finding 14. Covered by Finding 16. Covered by Finding 17. Covered by Finding 18. Rejected as cumulative and unnecessary. Covered by Finding 19. Rejected in part as Conclusion of Law and in part as subordinate and unnecessary. Rejected in part as contrary to the greater weight of the evidence and in part as Conclusion of Law. In part covered by Finding 46 and in part rejected as Conclusion of Law and irrelevant. First sentence rejected as contrary to the greater weight of the evidence and the remainder covered by Finding 40. To the extent necessary, covered by Findings 40 and 65. Rejected as subordinate and unnecessary. First two sentences rejected as cumulative, last sentence rejected as contrary to the greater weight of the evidence. See Findings 46-53 and 68. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Rejected as subordinate and unnecessary. Rejected as contrary to the greater weight of the evidence and Findings 46-49. Rejected as Conclusion of Law, subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary and as an attempt to illegally obtain comparison of Alachua General's later batched application with the Shands application. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary t9 Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. Rejected as subordinate and unnecessary. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68. In part covered by and in part rejected by Findings 28 30. In part covered by and in part rejected by Findings 28 30. In part covered by and in part rejected by Findings 28 30. In part covered by and in part rejected by Findings 28 30. In part covered by and in part rejected by Findings 28 30. In part covered by and in part rejected as contrary to Findings 31-34. In part covered by and in part rejected as contrary to Findings 31-34. In part covered by and in part rejected as contrary to Findings 31-34. In part covered by and in part rejected as contrary to Findings 31-34. In part covered by and in part rejected as contrary to Finding 66. In part covered by and in part rejected as contrary to Finding 66. Rejected as contrary to the greater weight of the evidence. Rejected as cumulative. In part covered by and in part rejected as contrary to Finding 65. In part covered by and in part rejected as contrary to Finding 65. In part covered by and in part rejected as contrary to Finding 65. In part covered by and in part rejected as contrary to Finding 65. Rejected as subordinate and unnecessary. COPIES FURNISHED: Kenneth F. Hoffman, Esquire Kenneth G. Oertel, Esquire Oertel & Hoffman, P.A. Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 William C. Andrews, Esquire Scruggs and Carmichael P. O. Drawer C Gainesville, Florida 32602 James C. Hauser, Esquire Messer, Vickers, Caparello, French & Madsen P. O. Box 1876 Tallahassee, Florida 32302 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building 1, Suite 406 1323 Winewood Boulevard Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue The issue for consideration in this matter is whether Respondent, NME's application for a Certificate of Need to provide comprehensive medical rehabilitation beds in Department District X should be approved.
Findings Of Fact At all times pertinent to the allegations contained herein, the Department was the state agency with the authority to and the responsibility for evaluating and approving CON applications for health care facilities in this state. Department District X is a single county district which encompasses the whole of Broward County, Florida. Broward County consists of two distinct service areas for health care providers; the north and the south. Facilities located in the northern part of the county, for which the dividing line is accepted as State Road 84 and Interstate 595, which run east/west across the county, primarily serve the northern area of the county. By the same token, those providers located south of the dividing line are primarily in service to residents in the southern portion of the county. Legitimate basis exists for the distinction between the north and south county segments. The county is divided into two taxing districts which generally follow the service district boundaries and these taxing districts are utilized to provide and reimburse for health care services. In addition, physician practice patterns show generally that physicians stay, refer, and admit to facilities within that portion of the county where they live and practice. There is little medical intercourse between the sections. A third basis for distinction is the fact that generally patients follow physicians, and will normally present for treatment at those facilities located in the section in which they reside and their practitioner locates. At the present time, of the five providers which offer CMR services in Broward County, (District X), four are located in the northern section of the county, and the fifth, Memorial, is located in the south. Memorial currently has 22 of the 213 existing and approved CMR beds in the District. This constitutes approximately 10% of the total number or approved and existing beds in the District while 32% of the population of the District resides in that service area. By the same token, if one considers the number of CMR beds per 100,000 population, the number in the north service area is approximately 4 times that in the south. Petitioner, Memorial, is a 618 bed acute care regional public hospital providing numerous specialized acute care services to District X as well as adjoining areas in the southeast region of the state. It is operated by the South Broward Hospital District, a taxing entity created by the Florida Legislature in 1947, and has a history of being a disproportionate share provider of medical services to the indigent through Medicare and Medicaid programs as well as other charity care programs. In fact, Memorial provides the sixth highest level of indigent care in this state. Memorial currently has provided CMR services since 1985 and operates a 22 bed CMR unit. It also offers open heart surgery, neurosurgery, pediatric cardiac catheterization, pediatric trauma, pediatric open heart surgery, and pediatric oncology and hematology. The facility has recently submitted a letter of intent to the Office of Emergency Medical Services requesting to be designated as a regional adult trauma center. HMC is a 334 bed acute care hospital also located in the southern service area of District X, in a six story building containing approximately 300,000 square feet and an adjacent five story medical office building. It also offers a broad range of general acute care services as well as specialized programs in the treatment of diabetes, laser surgery, eating disorders and oncology. It also provides intensive care, coronary care, and progressive care beds, though all may not be considered as active tertiary care services. HMC has a large medical staff consisting of over 400 physicians representing almost all medical specialties. More than 90% of the staff are board certified and the rest are board eligible. The medical staff of HMC and Memorial tend to overlap almost in its entirety. HMC's medical staff also includes five physicians who specialize in physical medicine and rehabilitation, (physiatry), all of whom are board certified except for one who has recently taken the board examination. HMC is a subsidiary of NME Hospitals, Inc., a national publicly held health care company which owns, manages or operates more than 150 acute care, rehabilitation, and pediatric hospitals throughout the United States and overseas. NME has a rehabilitation division which specializes in comprehensive rehabilitation services. This division would manage the CMR unit at HMC if approved. HMC is accredited by the Joint Commission of Accreditation of Health Care Organizations and maintains extensive quality assurance activities. On March 11, 1991, HMC filed a Letter of Intent to apply for a CON to convert 30 existing acute care medical surgical beds to 30 CMR beds. Somewhat later, but still during March, 1991, both Memorial and HMC filed applications for a CON for CMR beds. Memorial's application sought the addition of 4 CMR beds to its existing 22 bed unit. Both applications were preliminarily approved by the Department. Thereafter, both Memorial and HMC filed Petitions in opposition to the preliminary approval of the other applicant's application. HMC ultimately dismissed its Petition in opposition to Memorial's 4 beds, and that application is not in issue here. Prior to hearing, the parties agreed that the provisions of Section 381.705(1)(m), Florida Statutes, as they relate to costs of construction and construction methods and itemization and costs of equipment of HMC and its application are not in issue. Memorial, however, did not waive its right to challenge the plan and design of the plan as to quality care considerations in HMC's application. The parties also agreed that Section 381.709(2)(c), Florida Statutes, was in issue but that sup-paragraphs a, b, and d of that section were not. The Hearing Officer's resolution of Petitioner's objections on this matter established that the Letter of Intent was timely filed in the appropriate place and the proper notice published. HMC's Letter of Intent included therewith a resolution of the NME Board of Directors which was accompanied by a certificate as to its accuracy. The corporate resolution certificate, dated March 5, 1991, indicating the resolution was enacted on February 19, 1991, was executed by Mr. McKay, Vice President and Assistant Secretary of NME Hospitals, Inc. Memorial questioned Mr. McKay's authority to sign the certificate as custodian of the corporate records. The evidence presented indicated, however, that Mr. McKay is a keeper of the corporate seal and custodian of corporate records pertinent to the eastern region of NME Hospitals, Inc., and as such he was an appropriate custodian of the records and competent to execute the certificate. The issue as to the date on the certificate appears to be no more than a scrivener's error. The errors which exist are harmless. The documentation contains all certification necessary for a valid Letter of Intent. Daniel J. Sullivan, a consultant in health care management, did a need analysis study of the Broward County District for HMC to determine whether a CMR facility was needed within the District and if so, where. He first looked at the planning area and what services were available, both those in existence and those approved but not yet on line. He also looked at utilization of CMR services in the area and trends toward service utilization, geographic distribution of existing services, the fixed need pool, relevant Department rules relating to numeric need and other factors, and in that connection, any other unusual factors bearing on need. Mr. Sullivan's study clearly established to his satisfaction that HMC does not serve all of Broward County - only, primarily, those patients residing in Hollywood, Hallendale, and Dania, all of which are in the southeast corner of Broward County. The secondary service area goes down into Dade county and up to Ft. Lauderdale. The data for this study and the need analysis comes from the Hospital Cost Containment Board, (HCCB), and is considered to be reliable. Mr. Sullivan also did an analysis of areas served by other providers in the county and determined that Memorial's service area is similar to that of HMC. North Broward Medical Center serves the very northeast part of the county. Holy Cross Hospital serves the lower north to northeast part of the county. Based on this, he concluded that facilities in the northern part of the county serve the northern county area. Only Petitioner and HMC serve the southern part of Broward to any measurable extent. Utilization of CMR beds is very high district-wide, both historically and currently. Occupancy in the District for the relevant period was 91.21% county-wide, with Memorial Hospital having an occupancy rate of 99.32%. This is not, in Sullivan's opinion, a historical aberration. The same trend goes back to the mid 1980's. In 1989 for example, utilization was at 89% and it has gone up since that time. In Sullivan's opinion, the system is now near capacity and the occupancy rate remains high. Both Holy Cross and North Broward Medical Center have 20 new beds each as of the last quarter of 1991. When those beds came on line, the utilization rate still remained very high NBMC's new program was at about 75% occupancy after less than one year operation. These north county beds will be used by north county patients and will not, for the most part, be available to south county residents. Rule 10-5.039, F.A.C., is the Department's rule regarding need determination, and it contains a numeric need formula for projecting future needs for service ((2)(a)). The Department publishes a fixed need pool every six months to identify need. The last one published before this application showed a zero bed need in the fixed need pool. Mr. Sullivan believes, however, this is not an accurate predictor of bed need since the realities of the market place are not related to the Department's fixed need pool. Mr. Sullivan's calculations show a gross bed need in 1990 of 88 beds considering the existing 213 licensed and approved beds. Since these are running at an occupancy rate higher than 90%, this shows the rule grossly underpredicts the need for the service. In fact, the Department has prepared State Agency Action Reports, (SAAR), in both the NBMC and St. Joseph applications and the Memorial application which reflects this trend. Mr. Sullivan believes the need formula is not a good predictor of future needs because it assumes, incorrectly, that the number of patients needing the service is directly related to acute care hospital discharges. Historically, however, this has not been the case. Since 1986, the ratio of CMR discharges to acute care discharges has grown and has never closely approximated the rule's standard ratio of 3.9. Other factors are provided for in subparagraph (2)(b) of the rule. The District's population trends show a relatively older population, (more than 20% of the population is over 64 years old), and by 1996 that percentage will increase somewhat. Since July, 1989 approximately 33% of the people with the top ten conditions utilizing CMR services were from South Broward County. Extrapolating this indicates a net need of 11 beds if an 85% occupancy rate is experienced. Since the actual occupancy rate remains, in fact, higher than 85%, Mr. Sullivan believes this method is accurate. A modification of this need, relating to discharge rates, was done in the Omissions Response herein which shows a need, by 1996, of 39 beds, not including the 4 beds approved for Memorial. As to population, the elderly are most at risk for conditions requiring CMR care since they, by far, experience the largest percentage of strokes and orthopedic related conditions. With the elderly and very elderly percentage of the total population increasing, this would tend to drive the need for CMR services and beds. Mr. Sullivan calculated need for the purposes of the application for the southern portion of the District along, utilizing a method which, though not officially recognized, uses the same criteria for analysis used in the District analysis. Doing so, he concluded there would be a 1990 need for 53 additional beds. Utilizing the 17(a) method to project into the future, he calculates a 1996 need for 57 beds. Concerning subparagraph (2)(B)3 of the rule, considering the growth rate of CMR admissions per 1,000 population, (from 1.41 to 2.24 during the period 1986 through 1990), at HMC, Mr. Sullivan also concluded that the growth rate would be plus or minus 4.5% over the next 5 years. He also concluded that the length of stay will remain at 21 days over the next 5 years and feels this is conservative when compared to the rest of the state and the 28 day figure used in the rule. There is some pressure to have patients discharged as soon as possible which impacts on length of stay. Considering all these factors, Mr. Sullivan expects a District X need as a whole of 65 beds in 1996, not including the 4 beds approved for Memorial. This would result in an actual 61 bed need by 1996. All this means that if the number needed is the same for the South County and the County as a whole, then the number is acceptable and all the need is in the South County. As to trends in the utilization by third-party payees, this factor has driven the growth. Medicare and insurance companies recognize the efficacy of CMR services as opposed to the fragmented treatment otherwise provided. They consider that every dollar spent on CMR saves money for the health care system. Subparagraph (c)1 of the rule requires a unit have at least 20 beds. In the instant application, HMC is seeking 30 beds and this clearly meets the rule criteria. The occupancy standard of 65% in the first year, as outlined in sub- paragraph (c)2 of the rule, is estimated to be met easily, and the 85% requirement for existing providers will also be met. All together, there appears to be a high demand for CMR services in Broward County in general and in the south half of the county in particular, and it is reasonable to assume that the 30 beds for HMC, as well as the additional beds sought by Memorial, could be approved without adversely affecting any existing providers. Regarding the rule's accessibility standard which requires 90% of the target population to reside within 2 hours diving time of the proposed facility, this is clearly met since all of Broward is within 2 hours driving time of both HMC and Memorial. Turning to the provisions of Section 381.705, Florida Statutes, specifically (1)(a), (b) and (2)(a),(b) and (d), all are highly interrelated. While geographic availability may not be of concern, the availability of empty beds is of great concern. Historically, the District has operated well above the 85% occupancy rate for over 3 years. The system currently is clearly inadequate and the existing alternatives, home care and outpatient services, do not replace the services in issue but supplement and are follow-ons to inpatient CMR care. Concerning economies of shared service, Mr. Sullivan feels certain economies will accrue as a result of this conversion if approved. Existing space will be used and can share administrative and overhead expenses; the contractor to be used to accomplish the project is qualified and experienced and knows how to economize. Impacts on competition will be minimal if any, given the high level of need. As to any impact on HMC, the sharing of costs and services between the integrated portions of the facility would generate economies. At the present time there is no existing competition other than the beds at Memorial. If HMC is granted its certificate and becomes an existing provider, the resultant competition should be beneficial to both institutions. There are no alternatives to this service which are less costly or more efficient. Any alternatives would be either more expensive or inappropriate. The facilities are currently being used in a very efficient manner and this would not change. If the application is not approved, according to Mr. Sullivan there are and will be patients who are in need of and who will be denied CMR services in South Broward County. He believes the 1989 Florida State Heath Plan and the District's 1990 Health Plan, those applicable here, are consistent with this application. The preferences called for in the plans will be met and satisfied. HMC agrees to accept Medicaid patients and has committed 1% of its service to the indigent. It should be noted that Memorial's projected need for CMR beds is identical to that of this applicant, and this tends to indicate Memorial also feels there is a need for additional beds in the south county. It's application was filed subsequent to the initial approval of the 30 beds in issue here. It is immaterial at this point that District X has more CMR providers and more licensed CMR beds than any other district in the state. Also not controlling is the fact that under the state's bed need methodology, as outlined in the rule, there is a 125 bed excess projected by 1996 for District X. It must be noticed here that CMR services are defined by rule as tertiary health services which are generally specialized services using specialized equipment and personnel. They should be centralized in a centralized location to encourage better utilization of resources. HMC is a community hospital which does not now have any other tertiary hospital services but Dr. Jay S. Mendelsohn, a psyiatrist testifying on behalf of HMC claims that the majority of rehab problems are not so specialized as to require tertiary services and are mainstreamed. Dr. Mendelsohn, a specialist in physical medicine and rehabilitation, as a physiatrist, coordinates care on a rehabilitation unit including actual treatment, nursing care, and social work relative to the patient's condition. A physiatrist sees, on an inpatient basis, patients with such infirmities as stroke, hip fractures, multiple sclerosis, multiple trauma, and other similar conditions. The patients are usually those with neuromuscular or musculoskeletal problems, though he does, on occasion, see those with arthritis complications. Dr. Mendelsohn has privileges at several hospitals in Broward County including both Memorial and HMC. He practices mostly at Memorial where he was, from 1985 through 1991, Medical Director of the rehabilitation unit. His associate, Dr. Novick, is the current Medical Director. CMR patients are usually referred for this service by other physicians. Hip fractures and strokes are primarily from orthopaedic surgeons and neurologists, but internists, family practitioners, and physicians practicing in other disciplines also refer as appropriate. To Dr. Mendelsohn's knowledge, South Broward County is somewhat unique. Physicians there generally stay in that area and do not practice or draw patients from north of I-595. Another group practices primarily in the northeast portion of the county and a third group practices in the northwest county. Most physicians use the hospitals in the area in which they practice. In the south county, patients needing inpatient rehabilitation can at present, from a practical standpoint, go only to Memorial Hospital since it has the only rehabilitation beds available in the area. His experience indicates substantial difficulty in getting patients admitted to that unit since it generally fills its rehabilitation beds with patients primarily from it own patients already admitted to other services. Patients from other hospitals or from the community normally have great difficulty getting admitted, and this problems has existed for quite some time, (over 5 years). He has encouraged Memorial's staff to apply for more rehabilitation beds. If a Memorial patient is unable to get into the rehabilitation unit at Memorial, that patient then has to obtain the needed rehabilitation treatment on an acute care ward. Patients at other facilities often are not admitted at all, and this situation affects the course of treatment and reduces the amount and the beneficial effects of therapy by approximately one-half. The providers in the northern part of the county are not a good source of therapy to patients from the southern portion of the county because: Since south county physicians normally do not go to the north portion of the county, the patient has to have a different physician who is not familiar with either the patient or the condition and who must, therefore, do repeat tests and other diagnostic procedures. The patients' families find it harder to visit the patients in the north part of the county and therefore do not visit as frequently. Family visits are important to the success of the therapy. When the patient goes home, his family does not know how to help out because they did not receive the training they would have ordinarily have received had they been able to visit in the inpatient facility more frequently. Older patients' spouses often do not drive or, if they do, find the extra distance to the north portion of the county too much to travel. As a result of all the above, the continuity of care concept, which is important from a medical care standpoint, is adversely affected. Patients needing treatment at HMC's facility, if approved, would be much like those treated at the currently existing Memorial facility. Dr. Mendelsohn is familiar with Rehabilitation Hospital Services Corporation, which will be contracted with to run the HMC facility if approved. To his knowledge, the quality of care provided by it is good and comparable with that provided elsewhere. Dr. Mendelsohn anticipates he would refer 5 to 10 patients a week from his and his associate's practice to HMC's CMR facility if approved. He feels he could keep the 30 beds filled without taking any patients from Memorial's unit which would still remain operating at capacity. The 21 day stay average at Memorial is shorter than he would expect to see. This is consistent with Sullivan's conclusion, supra. If more beds were available, the stay at both facilities would probably be longer. This is in part because now the patient is getting therapy on the acute care ward while waiting to get into the rehab unit. This pretreatment would be accomplished on the CMR unit if the space were available. As a result, then, the opening of HMC's CMR unit would, in his opinion, in no way adversely affect Memorial's ability to keep its unit full. Dr. Mendelsohn's comments are not biased by the fact that he is a financial investor in the corporation which will operate HMC's unit. Within the pertinent medical community there is a great deal of frustration and anger over the inability to get patients into a rehabilitation center and keep them there for the appropriate length of time. The alternatives to the proposed facility, such as inpatient treatment on other services or in other hospital facilities in the county, or in nursing homes, are not as good. By the same token, outpatient care is not as good because of the unavailability of sufficient treatment due to Medicare and other financial restraints. The difficulties experienced by physicians practicing in the southern Broward County area who desire to admit their patients for CMR service is typified by that of Dr. Jeffrey A. Crastnopol, an orthopedic surgeon practicing in Hollywood since 1984, and a member of the staff at Memorial, HMC, and other hospitals in the area. Dr. Crastnopol sees a wide range of patients from children to the elderly. His practice deals mostly with trauma in children, sports trauma, and trauma related to bone brittleness in the elderly. Almost all his patients live within the southern Broward area. All hospitals where he is on staff are in that area as well. Dr. Crastnopol has chosen not to take patients from outside his geographical area because he has sufficient patients from in his area to keep him busy. In his experience, of all the other orthopedists he knows, none practicing in the southern Broward area is on staff in any of the hospitals in the northern Broward area. Most are on staff at both Memorial and HMC. Most of Dr. Crastnopol's patients are elderly, suffering hip fractures; pelvic, lumbar and spinal fractures; herniated discs; and the complications of arthritis as well as other symptoms. He and his associate saw between 10 and 15 patients with these conditions in the two weeks prior to the hearing. Of that number, he referred at least 3 for inpatient rehabilitation at Memorial and has an additional 4 or 5 other patients now in acute care services who will need CMR services. His trauma cases usually go to the emergency room first or the patient will call him or their primary care physician. The patients frequently request a particular hospital but, if a patient is already admitted to Memorial, he would try to keep that patient there for rehabilitation services. If the patient is at HMC, and if there were a rehab unit there, he would try for admission at that facility. At the present time, only Memorial has rehab beds available for Dr. Crastnopol to refer to and he often has trouble getting a bed for a patient there since it is usually full. The wait for an opening may be from 4 to 5 days or the patient may not be admitted at all. The delay is controlled by physiatrists at Memorial and though they try to be accommodating, frequently patients from outside that facility cannot be admitted. When that happens he then has to consider other institutions further away or nursing homes with less than full rehabilitation services. According to his experience, patients at Memorial will almost always be admitted to Memorial's rehab unit. Patients at HMC may not, and he, as well as all other physicians testifying, indicate there is a difference in the waiting lists. Dr. Crastnopol believes the best thing for the patient is for the doctor to be able to treat these injuries in a rehab unit. To transfer to one where he cannot come is not as good. He believes that patients on rehab units recover faster than those who are in alternative treatment plans. He also contends that home care and outpatient care are not suitable alternatives to inpatient care, especially for the elderly. He agrees with Dr. Mendelsohn that the northern Broward facilities are generally too far from the families of patients from the south. Since he is not on staff up there, he would not be able to provide the continuity of care which he, and all other physicians testifying, feel is so important. Dr. Crastnopol contends that from a clinical standpoint there is need for additional rehab beds in south Broward County. HMC provides a good service, and he has no doubt that it would provide a rehab service of the highest quality if its unit were approved. He would refer patients to it. He treats Medicaid and indigent patients, and in all fairness to Memorial, that installation has never tried to dissuade him from admitting that category of patient to its facility. Dr. Crastnopol took time from his busy practice to travel to Tallahassee to testify here because he feels there is a need for the service applied for. He, too, is an investor in the limited partnership which owns the building in which the hospital is situated, but in no way would this interest prejudice or bias his testimony. At the present time, only between 30 and 40% of his patients are treated at HMC, whereas between 60 to 70% are treated at Memorial. Similar testimony came from Dr. Jose M. Muniz, an internal medicine specialist practicing in Hollywood, Florida for the past 17 years. Dr. Muniz is on staff at both HMC and Memorial and serves as Chief of Staff at HMC. He is also on the utilization review and quality assurance committees there. As with Dr. Crastnopol, his patients are mainly older, 70% of whom are over 65. The other 30% are adult to middle age. Ninety-eight percent of his patients come from Hollywood and the south Broward area. As a result, Dr. Muniz has no hospital affiliation in the north Broward area. Dr. Muniz refers to rehabilitation patients who experience bone fractures and strokes, and he sees patients at both hospitals. He has had some referral problems at Memorial. He feels very strongly about the necessity for continuity of care and asserts it is important for him to continue to see his patients in a rehabilitation unit because they still have an underlying medical problem which he must continue to treat. It is not good for his patients to go far afield for rehabilitation service due to a lack of availability in the immediate area. He cannot continue to treat the patient who thereby feels abandoned, and the family also has additional difficulties in getting to see the patient. Nursing homes, while an alternative to a rehab unit, are not, in Dr. Muniz' opinion, an acceptable one. They have neither the staff nor the equipment to provide the appropriate treatment, and in his opinion, placing a patient who needs rehabilitative services in a nursing home is no more than warehousing that patient. HMC's application has a high level of support in the local medical community. A second rehab unit has been sought by numerous physicians in the area, and Dr. Muniz believes there is a definite need for additional rehabilitation beds to satisfy the need for rehab availability after the acute care condition has been stabilized. He is satisfied that if HMC gets its rehabilitation unit, its quality of care will be as high as that in the other services already provided there. Dr. Jubran Hoche, a Board certified neurologist at Memorial, HMC, and other facilities in the southern Broward area, often has patients who need inpatient rehabilitation services. Most are elderly stroke victims and younger patients with multiple sclerosis, a demographic consistent with prior evidence considered. He sees between 2 and 3 such patients per week. He begins to evaluate his stroke patients for rehabilitation when they stabilize, somewhere between 7 and 10 days after suffering their stroke. He has found rehabilitation beneficial to recovery and currently refers such patients to Memorial from all facilities where he is on staff. He often has trouble getting beds there, however, and over the years has found that patients already in Memorial have a priority over outsiders when it comes to getting into the inpatient CMR unit. Patients from other facilities face a waiting list and as a result, many are transferred outside the southern part of the county for inpatient rehabilitation. This is not a good alternative because it interferes with the beneficial continuity of care cycle and raises numerous other problems. Noting that Memorial plans to open a satellite facility in southwest Broward County and shift beds there, he contends that this will still increase the need for CMR beds in the county. There is already a clear need for more inpatient CMR beds in south Broward. In his experience, HMC provides a good quality service and would provide the same in any approved CMR unit to which he would refer patients from those who presently he cannot get into Memorial's unit. As with the other physicians who testified here, he has taken the time from his practice to travel to Tallahassee on HMC's behalf because of his sincere concern with continuity of care. Testimony in the form of depositions from Drs. Klotz, Bennett, Petti, and Moskowitz, and Mr. Jensen support and reiterate, fundamentally, the direct testimony of the above physicians and administrators. According to Holly Lerner, Administrator and Chief Operating Officer at HMC for several years, NME Hospitals, Inc. is a wholly owned subsidiary of National Medical Enterprises, an international health care corporation. The local facility is a six story hospital with approximately 300,000 square feet in addition to an adjacent office building. Over 400 physicians are on staff from most medical specialties including 5 physiatrists. HMC practices on an open staff basis meaning any qualified physician can apply. Almost all physicians on staff currently are Board certified and there is an internal requirement that all be at least Board eligible. The hospital is accredited by appropriate accrediting agencies. HMC is located approximately 1 mile from Memorial Hospital. It has an active quality assurance program, and any inpatient rehabilitation unit approved would be subject to the same quality review. HMC pays property and indigent care taxes to the taxing authorities. In contrast to Memorial, however, it gets no funds from those taxing authorities for treating indigent patients. It has a Medicare contract and has never turned away a patient because of an inability to pay. If the requested rehab unit is approved, the hospital's current outpatient physical therapy program will move off-site. The new inpatient rehab unit will have physical therapy capability on site. Management of the facility will be by an experienced firm well qualified to run it. All services required for physical therapy by Department rule are currently available and will continue to be provided. The new unit, if approved, will seek CARF accreditation. All variable services are currently provided and will continue to be provided. All optional services, except therapy for children, will be provided. HMC now has transfer agreements with Memorial and various nursing homes within the area. It also has a rehab agreement with Sunrise Hospital and a contract with the state to treat patients at a Medicaid contract rate. If at all possible, management intends to continue this on an inpatient basis. Discussions have been held with the Dean of a nearby osteopathic medical school to have a residency and intern program at the hospital and though it is still in negotiation, the parties have, in essence, formulated a tentative agreement to effectuate this development. Though disputed by Memorial, manpower requirement estimates are considered adequate to properly staff the facility if approved and the personnel costs are also considered reasonable even with cost of living increases over the next 5 years. In that regard, overhead staff has surveyed salaries within the area and tried to stay at the 70% level. HMC's salary levels are somewhat lower than that of Memorial but, nonetheless, HMC has had no difficulty in getting and retaining qualified support staff. Petitioner's evidence in opposition was not persuasive. According to Paul Echelard, Administrator and Chief Executive Officer of Pincrest Rehabilitation Hospital, and Florida Vice President of Rehabilitation Hospital Service Company, (RHSC), a subsidiary of NME which manages rehab hospitals throughout the country and which will operate the rehab unit at HMC, inpatient rehabilitation assesses an individual who has had a debilitating injury, after medical stabilization, for improvement potential, and helps improve his living capabilities. Inpatient rehabilitation helps to restore both motor and cognitive functions. The minimum requirements for a CMR program include 3 hours per day of speech therapy, occupational therapy, and physical therapy, 5 days a week. The actual program administered is tailored to the patient's individual needs. If, for example, the patient cannot take 3 hours per day, it may be less, if such reduction is documented. RHSC operates 31 rehab hospitals ranging from 60 to 101 beds. The contract management division also operates hospitals for others. All are accredited except those which have not yet been open the required 6 months. The management company brings the expertise of NME's rehab division, which has access to hundreds of experts in numerous fields, and provides program management, program development, and program education. Program Management involves the day to day running of the program. Rehabilitation programs and staffing are different from acute care functions. Management personnel are supplied. Program development defines the methodology to be followed in each type of case. It works with the staff, with physicians, and with the community to develop programs designed to fit the needs of that facility and that community. The program education division provides information on benefits of rehabilitation in areas where such is not well known. It educates hospitals in the area as well as physicians and the community. For these services, the company charges a fee of $105.00 per patient per day which includes the salary of the medical director of the rehab unit and several other supervisory personnel. Though one might see complex, high level cases at HMC, where there is a need for a lot of high level supplemental medical treatment or procedures, the patient probably will not be treated at HMC. If HMC's program is approved, transfer agreements will be entered into with Sunrise or Pinecrest Rehabilitation Hospitals to take care of those patients whose conditions are too severe or too complex for the inpatient CMR unit at HMC. South Florida's normally more elderly population generates a higher need for medical rehab services. Also, medical science now saves people who, before, would not survive their basic illness, and these people generate a greater need for medical rehab services. The utilization of rehab services has increased significantly since 1988 as the result of Medicare, and due to an increased awareness of the service by physicians. Also, insurance companies now recognize the benefits of dollar savings of rehab over acute care treatment. Another factor involves the implementation of DRG's which exempted rehab, among other areas, from the DRG limits. With this development, however, services and personal criteria for inpatient rehabilitation patients were developed to insure against abuses. Not all hospitals can meet these criteria, but the number of providers has grown fivefold due to the recognition of the health and financial benefits to society. In Mr. Echelard's opinion, the payer projections by categories of payer found in the application are reasonable and based upon the applicant's experience. The personnel costs are in addition to the $105.00 per day fee charged by RHSC. The assumed 65% utilization figure for the first year can easily be accommodated by the staff which is more than adequate to meet the requirements of good quality of care. Much the same can be said for the second year with the increase in both patient census and full-time employees. The salaries projected in the application are generally reasonable, though a few may be somewhat low. RHSC would help to recruit personnel for HMC's facility. It has a national recruiting program and sends recruiters to universities and conferences across the country. All RHSC facilities are open to serve as clinical training facilities. They advertise widely for personnel though they do not "head hunt" at other hospitals. As a result, Mr. Echelard feels HMC would have no trouble getting enough qualified personnel, and it is so found. Turning to the unit itself, from a physical standpoint Mr. Echelard has no trouble with the currently existing physical therapy unit being geographically separated from the bedroom area. In fact, this may be beneficial as it tends to simulate the real world and may increase patient mobility skills. He considers the proposed layout to be acceptable and to meet accreditation standards. The proposed patient charges of $1,078 per day is considered reasonable and closely approximates the $1,050 per day charged at Pinecrest as well as other competing providers. Sharon Gordon-Girvin, a health care consultant and formerly the chief of the Department's Office of Community Health Services, reviewed HMC's instant application for Memorial. HMC's application describes it as a provider of primary and secondary services, a general description of a normal acute care hospital. It has no licensed tertiary services. Five hospitals in Broward County are licensed to offer CMR services. They include Petitioner, Holy Cross, North Broward Regional Medical Center, St. Johns Hospital and Sunrise . Only one of these, Memorial, is in the south Broward region. District X, with the 5 providers offering a total of 213 CMR beds, has more CMR beds than districts in the rest of the state with the exception of Dade County. Other districts have greater population with fewer licensed beds, but it must be noted that without information on demographics, that statistic is of little import. Under the pertinent Department rule, the planning horizon for CMR beds is 5 years into the future. Bed need determination is provided for in Rule 10- 5.039, F.A.C., and consistent therewith, the Department did a projection of bed need for 1996 which showed a new need of 88. Because the number of existing beds exceeded that figure it determined the need to be zero. Even if there is a zero need, however, the rule provides 4 other factors for consideration, (Rule 10-5.039(2)(b)1-4), but in her opinion, HMC's application is not consistent with these 4 factors. One of these deals with historic, current and projected incidents of illness. This witness does not believe there is adequate evidence or discussion in the application of any historic incidents of disease sufficient to support any future prevalence. There is no data as to sex or group of patients. The second deals with trends by categories. Here the application, she feels, contains no detail of payment trends shown as to categories of payor. As to the third criterion, dealing with existing and projected inpatients in need of rehabilitation services, the application does contain some information in its Exhibit 17. The fourth criterion relates to availability of specialized staff, and the application discusses how the staff will be recruited, but not the availability of qualified personnel to fill the positions. In that regard, it is well recognized, she contends, that this type of staff is in short supply. Other evidence of record would tend to confirm this opinion. Ms. Gordon-Girvin indicates that the 1989 State Health Plan is pertinent to this application. This plan contains 5 preferences to be used in evaluating applications. These include: Conversion of excess acute beds. Here, the application conforms but Ms. Gordon-Girvin cannot say if the per diem costs would be lower by conversion. Specialty rehab services not currently found in the District. Here, no services not already available were proposed. Teaching hospitals. This is not truly a statutorily mandated teaching hospital even though evidence shows staff may be made available as faculty at the osteopathic medical school with which HMC plans a collaboration. A disproportionate share of charity care. Here, Ms. Gordon-Girvin feels that HMC is not such a provider and that its application is not consistent with this preference. Existing comprehensive outpatient rehab facility. This, again, is not met by the applicant. These preferences are, it must be noted, not mandatory for approval. The 1990 Broward Regional Health Plan is also applicable, and it outlines 3 priorities in its review criteria. These are: The applicant agrees to cooperate and provide data on utilization. In this regard, HMC's application is consistent. Unserved populations. Here, Ms. Gordon-Girvin contends that the instant application does not meet the preference since it is not for construc- tion of a new facility. Situations where the institution's occu- pancy is greater than 85%. Here, clearly HMC does not meet this criteria because it does not have a history of 85% occupancy. Again, however, these are merely guidelines to apply among competing applications and are not preconditions to approval. Ms. Gordon-Girvin points out that the need for CMR services is not considered on a less than district-wide basis, since the rule directs an evaluation of tertiary services on a district-wide basis, and, therefore, the breaking down of the district into north and south services areas is inappropriate. She asserts that in her opinion, the existing rule based on need is not an adequate predictor of need within a district. Instead, she feels the methodology used in Exhibit 17 to the application and omissions response is reasonable. However, she disagrees with HMC's calculations therein because, while the model is credible, the wrong data (the length of stay from 1984, rather than the actual current length of stay) was used. She feels district experience for length of stay (21 days) should be used. Ms. Gordon-Girvin also feels that the methodology used on Application Exhibit 18 is also not appropriate because the variables were not kept constant. It used some date from the sub-area which should not be done because of the rule requirement to treat tertiary services on a district-wide basis. She does not explain, however, that if the rule shows a need for 88 beds and there are already 173 beds licensed, the rationale for a subsequent approval of those excess beds. In that regard, then, the question she does not answer is, if one aspect of the rule is disregarded, cannot another also be disregarded with equal validity? HMC has urged the calculation as set forth in Exhibit 20 of its application, but Ms. Gordon-Girvin does not agree with that because it uses a constant rate of increase in the admissions rate. It also does not ground its assumptions on any existing realities. The initial figure for admissions in 1991, she opines, is overstated, and it, too, does not use accurate real information. If the 3,009 figure were corrected to an "actual" figure, it would result in a net loss of 27 beds and an increase of only 9 additional beds by 1996. She contends that Exhibit 20 is not consistent with the existing rule methodology, because the proposed facility to open in 1993, not 1996. As a result, she sees no need to compute the need in 1996. As to her disagreement with the 4.5% growth in annual admissions, she claims the actual rate shows a decrease from 1990 to 1991. Therefore, the table containing that growth assumption is not justified. She also disagrees with Exhibit 21 because it is applied to a subdistrict and her other objections, (no historical basis for utilization numbers), are also pertinent here. Accepting that the current rule is not a good predictor, she looked at the dispersion of population and beds and determined that there are about twice as many elderly in the northern part of the county as there are in the south. Applying this to the southern area, there should be a total of 46 beds there. Therefore, she asserts, that while there is a need for new beds in District X, all should be in the south, but not as many as requested. If the 30 beds applied for by HMC are approved as well as those approved for Memorial, this would result in 56 beds or 10 too many. In her opinion, based on the incidence model with some adjustment, the actual need is for somewhere between 5 and 20 beds district-wide which should all be located in the south county. Her reasoning and conclusions, however, are not persuasive. Ben F. King, Vice-President for Finance of the Florida Region, Eastern Division of NME, and an expert in health care finances, is satisfied from his familiarity with the application in issue here that the project is financially feasible in both the short and long term. The proforma submitted by HMC in the application, and amended in the omissions response, refers, among other things, to patient day projections. These are converted to revenue by taking the days listed and multiplying by the charge for room and board for each year, and he is satisfied that the rates listed are reasonable. The listed revenues are not what is actually collected, however. They are reduced by deductions for Medicare, Medicaid, indigent, and write-offs (discounts) for health maintenance organizations and insurance companies. In year 1, Medicare contractual is calculated based on reimbursement founded not on cost but on DRG (diagnostic related grouping). This results in no additional reimbursement for patients already in the hospital on an admitting DRG. Therefore, the first year revenues are much lower than in the second and subsequent years. Moving on to year 2, however, the operator gets paid for costs of operation of the unit. Medicare tracks the per-diem costs and income from the hospital, and to be conservative in the preparation of this pro forma, HMC took the existing reimbursement rate of slightly more than $700.00. In calculating reductions, indigents are assumed to be a 100% write-off. Private payments are considered to be a 50% write-off, HMO's a 20% write-off, and insurance an 11% write-off. Mr. King considers all these to be reasonable and consistent with the current experience not only of HMC and NME but of other providers as well. In Broward County, indigent patients are funneled to the county hospitals which receive tax funding for that purpose. This is different from other counties which contract with hospitals to provide indigent care. HMC calculates its revenue estimate in what it considers a conservative manner. Taking off the contractual allowances for Medicare and Medicaid and the other write-offs results in a reduction of more than 50% of gross revenue, and from that figure is taken the expenses, depreciation, interest, etc. to get to the net revenue figure. All the expense categories and the factors they include are considered reasonable by Mr. King. The salary and wages figure includes an add- on of 20% for benefits, which is above the figure for salary and wages found in Table 11 of the application. Supplies includes the provision of housekeeping services, laundry and linen, and dietary services. These, too, he considers reasonable. RHSC's management fee of $105.00 per day includes the personnel provided, the marketing services, the management services, and manuals. This is considered a valuable benefit and the fee is considered comparable with other units. The personnel sent to do the actual work are RHSC employees and not hospital employees. The indigent care assessment is 1.5% of net revenue and is a tax paid to the state. Contract costs are ancillary expenses for ancillary services such as laboratory, pharmacy, etc., already provided by the hospital. The cost listed in the pro forma is only for additional patients generated on the unit in issue. General and administrative - other expenses (joint venture rent, recruitment, insurance, utilities, property taxes, maintenance, education, etc.) are also deducted, and taken together, the above results is an operating revenue net loss for the first year. Depreciation and amortization are self explanatory as is interest expense which is calculated at 10%. Interest rates are anticipated to drop in the future, however, and this will help the picture. The net loss projected for the first year does not necessarily mean that the project is not financially feasible since financial feasibility is calculated over a 5 year basis. In the second year of operation, revenues are projected to increase by 6.5%, a figure considered to be reasonable. Expenses were inflated at 5% except for those not fixed to inflation (indigent care assessment and the joint venture rent). NME has the funds to commit the initial capital and working capital for the first year. The 1989 and 1990 NME financial statements submitted with the application are those most current to filing. These statements, along with the 1991 capital budget, show more than $750,000.00 committed to the start-up of HMC's program. Much of the information presented by Mr. King in his testimony comes from the pro forma and the amendment thereto. Primarily, the difference is only in the amount provided for RHSC's management fee. Any other inconsistencies or errors shown to exist are, for the most part, minor. The entire project is based on 30 beds. The figures assumed for both revenue and expense are reasonable, considering the "other" factors testified to by the physicians and noted previously. This is so notwithstanding the fact that HMC has experienced only a 30% use rate in its acute care beds. However, in light of these other factors, there may not be any correlation between acute care and rehab either from the Medicare or other standpoints. According to Madeline Hellman, Administrative Director of Rehab Services for Memorial, CMR is a high intensity program as well as a high cost program because it uses a large number of professionals to treat the patient in a multi-disciplinary program. Memorial's existing unit has 22 beds in semiprivate rooms. It has an admissions process designed to insure that appropriate patients only are admitted. These patients are made up of a high percentage of stroke, orthopedic, and spinal cord and head injury patients. Memorial's program is a program accredited by the state and the unit is accredited by CARF, a national certifying organization dealing with quality of care. The average length of stay on Memorial's unit is presently just under 25 days which constitutes an increase over time due to the more complicated types of cases taken in. In 1991 the occupancy rate was between 98 and 99%. Memorial gets referrals from both in-house and other facilities. The patients are evaluated by the medical director for the potential to go through the rehab process. If inpatients at Memorial, they are evaluated by the therapy staff and a meeting is held to decide on admission. If the patient comes from another facility, he/she gets priority behind Memorial's patients. In order to be admitted, a patient must have a rehab diagnosis; be able to withstand the 3 hour sessions; be motivated; and have the potential to improve his/her own independence. The refusal to admit a patient does not necessarily indicate a Memorial was too full to accept that patient. It may just be the patient is not an appropriate candidate for rehab, or the patient may die or recover without rehab before getting through the admission process. Some may be referred to nursing home placement instead. Ms. Hellman's figures reflect that in 1990, approximately 42% of those referred to Memorial's unit were admitted. Approximately 35% of those referred were deemed inappropriate. Only 4% were refused admission due to bed unavailability. Many of the non- admittees went home without treatment, went to home care, or came back as outpatients. This witness examined Memorial's admissions records and determined that in 1990/1991, Dr. Hoche, who testified on behalf of HMC's application, referred 9 patients to Memorial of whom 6 were admitted. One went to another facility by choice, 1 was not appropriate, and 1 was not accounted for. Neither Dr. Klotz nor Dr. Pettie referred any patients during that period. Dr. Moscowitz referred 1 in 1990 who was admitted. One patient was referred in 1991 but was not admitted because the patient was not an appropriate candidate. Dr. Bennett referred 1 in 1990 but the patient was not an appropriate candidate. In 1991 he referred 2 but both went to nursing homes instead. During this period Dr. Mendelsohn was the medical director. Dr. Crastnopol referred 12 patients in 1990. Four were admitted; 2 were referred to other facilities; 2 were not considered appropriate candidates, and 2 were not accounted for. In 1991 he referred 17 patients, 8 of whom were admitted. Two of the remainder went to another facility by choice; 1 was refused due to no room; 1 went home; and the rest were unaccounted for. Dr. Manning referred 1 in 1990 who was admitted. Admittedly, according to Ms. Hellman, there is a waiting period of from 1 to 5 days from referral to admission - on the average, probably 3 days. This has decreased somewhat since the summer of 1991. The situation depicted by Ms. Hellman's figures differs radically from that described in the testimony of the physicians to whom she refers. On balance, the physicians' recollections and impressions of the situation are deemed of greater probative value than the bare statistics. Memorial staff salaries went up 9% last year across the board and are anticipated to go up again this year. The ancillary staff devotes 75% of its time to patient care and the other 25% to administration. This extra non- patient time is considered in assessing staffing to insure there is enough staff to do the full therapy load. There is a great deal of competition in the market for both nurses and therapists. A shortage exists which is nationwide and requires heavy recruitment efforts. At Memorial, no contract labor is used to assist in the unit. Benefits constitute an additional 24 - 25% of the salary cost and is not included in Memorial's determination of the salary and wage costs. Ms. Hellman reviewed HMC's proposed staffing as outlined in its application and feels that after taking out 25% clerical time and weekends, the social worker, for example, will only be able to handle 65% of the beds. Speech therapy would require additional people to take up the extra time on other therapies. Taken together, it is her opinion that the staff proposed by HMC is insufficient to provide a quality program. As to salaries, she feels the amount designated by HMC is low. The salaries proposed would be enough to get only new graduates and would force a high turnover. A CMR unit requires an experienced staff, (at least half of the therapy staff), to provide a quality program. Ms. Hellman is of the opinion this cannot be accomplished at the salaries proposed by HMC. In regard to both salaries and staffing level, however, Ms. Hellman's negative comments are offset by those in support of the application, and there is insufficient evidence to the negative to support a finding by a preponderance of the evidence as required that the proposed staffing levels and salaries are insufficient. HMC's 30 bed unit would compete directly with Memorial's existing unit. They are less than a mile apart and use many of the same physicians. They attract the same patients. In addition, Ms. Hellman does not believe HMC's unit will offer any new service not already offered by Memorial, nor will it operate services not already present or offered by existing providers in District X. It is her confirmed opinion that if HMC's unit is approved, it will be difficult for both facilities to attract and retain an adequate professional staff. The majority of patients that Memorial cannot accommodate are referred to Sunrise Hospital, also located in Broward County, which offers a good CMR program. Total referrals in 1990 exceeded 800 patients, and in 1991, in excess of 600 patients. The referral log maintained by Memorial does not include patients who were not referred because their physician felt there was no room anyway. Memorial's records supposedly indicate that in the last two years, only 80 to 90 referrals to its unit came from other institutions. The records were not introduced into evidence, however. Edward J. Maszak, Director of Financial Planning for Memorial, and an expert in health care financing and third party reimbursement, noted that Memorial is a disproportionate share provider under both Medicaid and Medicare. It is a taxing authority which uses funds received in taxes for the care and treatment of indigent patients. It gets $20 million in tax revenue but gives $23 million worth of indigent care in addition to taking $27 million of bad debt write-off. About $10 million of the indigent care cost is funded out of operations. The Hospital Cost Containment Board, (HCCB), statistics submitted by HMC for 1989- 1991 reflect no deduction for charity care in either the 89-90 or 90-91 time-frame. Mr. King, testifying for HMC, indicated there was no advantage to reporting charity care to the HCCB, and it is for that reason that the statistics show no deduction. Mr. Maszak disagrees with Mr. King on this point, and states that to the extent it provides any charity care at all, a facility can raise the prices it charges to some degree. Mr. Maszak reviewed HMC's application and the "incidental cost analysis" basis for the financial pro forma, and in his opinion, HMC's application does not contain a true feasibility study. The projected statement of revenue and expense in the omissions response reflect incremental costs only and do not include the actual, full costs. In a financial statement one looks at a lot of other revenue factors including operating projections and total margins, cash flows and the like, none of which are included in HMC's financial information. The financial feasibility study done by HMC here is not, in Mr. Maszak's opinion, consistent with generally accepted practices and standards. Memorial's CMR unit has lost money over the last 3 years due to the fact that it provides about 70% of its care to Medicare patients. Under that system reimbursement does not fully meet costs. Therefore, the loss has to be covered by income from other payees, (cost shifting). This is not specific to Memorial only, however. Most hospitals experience the same problem. As a result, it is hard to make up the losses from Medicare, Medicaid, and HMO operations from the 9% of patient mix representing full pay patients. In Mr. Maszak's opinion, if HMC gets its approval, in year 3 it would be subject to the same problems experienced by Memorial. Mr. Maszak asserts that with the new beds, HMC's overhead cost allocation will, under Medicare rules, increase by 19% in the first year and by 25% in the second year. This will add at least $570,000.00 additional costs in year 1 and $800,000.00 additional costs in year 2 to expenses. In year 2 the cost will be shifted to Medicare so the expense item in that year will be more by slightly more or less than $200,000.00. With regard to specific defects in HMC's proposal, Mr. Maszak points, with regard to managed care plans, to the HCCB documents which show that the HMC writes off about 65% of its revenue from HMO's. This was for 1991. Pinecrest, for example, wrote off somewhere around 38.5% that year. He believes, therefore, that HMC's figures are inaccurate. Regarding charges for CMR services in District X, HMC's 1993 charges, using its own projections, would be $1,077.00 per day. Sunrise would charge $1,765.00 per day, and Pinecrest, $1,683.00 per day. Memorial will charge $557.00 per day; Holy Cross, $747.00; and North Broward, $564.00 per day. Based on these figures, Mr. Maszak concludes that HMC's HMO estimated income is unreasonable. He contends it will be much less than estimated and more comparable to that of the other providers starting at a discount from $557.00, plus or minus, per day. Mr. Maszak is of the opinion that the insurance estimate indicated by HMC also is unreasonable. The 4% estimated by Mr. King is too low by far, and there are no national HMOs for HMC to contract with for rehab services in District X, he contends. He also believes that as to the salaries and benefits, in 1991 Memorial showed 57.8 full time employees, (FTEs), with an average nursing salary of $27.4 thousand per year. In that regard, benefits as a percent of salary was 32.2%. Sunrise showed an average nursing salary of $29.4 thousand with benefits at 27%. Pinecrest reflected $27.7 thousand and 41% respectively. Based on this, Mr. Maszak believes that the HMC projection of $22.5 thousand for salaries and benefits of 20% are far below current salaries at other NME facilities. It is unreasonable to assume, he asserts, that a provider can start up a competing unit in an open area and attract staff at those figure. Taken together, he considers that the difference between Memorial and HMC's salary figures is a $4 thousand difference for a total of $125 thousand low for HMC without considering inflation for 2 years to 1993. Turning to the issue of payor mix, according to Mr. Maszak, Medicare is reflected at 65% by HMC, but the HCCB data shows only 58% for 1991. The County reports for Memorial showed a rate of 60%. Mr. Maszak believes that HMC's estimate overstates a patient days percentage by 5% which could result in an overstatement of income revenue. Therefore, he believes the entire rehabilitative program, as suggested by HMC, is not feasible in the short term because of a number of expenses which are not figured in. He admits that HMC's current financial position is fair. It is reported to be slow in paying its bills and lost $1 million last year alone. In addition, the interest due NME has not been paid and is increasing. These claims were not supported by actual evidence, however. In addition, 65% of the population in the service area is under Medicare which limits increases to 3.2 % per year. Notwithstanding that, expenses are going up at a higher rate, (5%), and, therefore, he contends, HMC's program is not feasible as well over the long run. According to Mr. Maszak, the opening of HMC's facility would also affect Memorial's status. The staff is much the same for both facilities and many of the physician's on staff at Memorial are also investors in the HMC facility. If HMC gets its unit, Maszak feels many patients will be referred to that facility by its investors instead of to Memorial where they would now go. Based on the number of projected patients, however, this really should not result in a reduction in Memorial's numbers. The rehab service is not the only consideration, however. In addition, the admitting services , (neurology, neurosurgery and orthopedics), would also be impacted. Considering various potential scenarios, from a loss of all HMC business in all services, and no reduction of expense, through others including loss of all services with some expense reduction, loss of rehab only with some expense reduction, to a loss of 50% of all services with some expense reduction, the loss impact on Memorial would extend from a low of $264.5 thousand to $3.1 million. The most likely loss figure, he estimates, would be somewhere around $800 thousand. Therefore, approval of HMC's project, he contends, would have a large impact on Memorial's, operation because of its ongoing expansion plans and their attendant expenses, plus the recent sale of $40 million in revenue bonds. As to the latter, the underwriters of that issue are already unhappy with Memorial's financial picture. Any loss of income might likely result in a need to raise prices, but Memorial is constrained in that regard by the dictates of the HCCB. A second option is to raise taxes in the District, but there the District only has .4 of a mill leeway before reaching its limit of 2.5 mills. A third option is to cut services, but with the economy as it is, and the high level of charity care already being provided, that would be hard to do. Thomas R. Bayless, President of Future Health, Incorporated, a health care consultant and an expert in health care finance, also reviewed HMC's application and omissions response, its audited financial reports, the HCCB reports for HMC and others, and other documents. He believes the cost projections outlined in HMC's omissions response do not account for all contract costs. Thirty new beds would have a greater impact on costs than is estimated. The amount shown on the HCCB cost report for the whole hospital is more than the estimated costs for the whole hospital including the rehab unit in year 1. Mr. Bayless believes that the $366,308.00 figure for the unit in year 1 should be more than $1 million. In year 2 he sees it as $1.3 or $1.4 million as opposed to the $512,602.00 projected. By the same token, the general and administration costs reported at over $6 thousand for the whole hospital in 1991, with the 19% increase for the year, would be over $1 million and a great increase in year 2 over the $394,941.00 projected. Therefore, since all costs were not included to the appropriate degree, he contends in reality there would be a significant increase in the cost of operation of the rehab unit which would result in a much larger net loss than was projected, (plus or minus $2 million) in year 1. In year 2, due to the commencement of reimbursement from Medicare, the impact would be less. Nonetheless, the net income profit would not be as great as projected and might instead result in a loss of some $300 thousand to $400 thousand. Taken together, he concludes that expenses and some allowances are significantly understated. For example, the "other deductions" figure of $477,108.00 should be higher due to the percent of HMO discount which, in Bayless' estimate, should be 60% rather than the 20% utilized. This nearly doubles the amount of the deduction. He also disagrees with HMC's indicated deduction for rent, corporate overhead, salaries and wages, and other expense items, all of which, he believes, should be increased. The "benefits" aspect of salaries should be increased as well since the 20% projected is, in his opinion, insufficient. Memorial's figure, at 24.8%, is the standard for the area, he contends. Making those changes, the year 1 net loss for HMC's operation would be almost $3 million rather than $485,739.00. By the same token, year 2, even with Medicare cost reimbursement would result in a loss of almost $700 thousand rather than a profit of almost $1.4 million as projected. In further years out, ( years 3 - 5 ), due to the limits imposed by TEFRA and projected cost increases of 5%, the loss would be compounded somewhat. This would constitute a continuing loss and Mr. Bayless believes the project is not feasible in either the short or the long term, especially considering the fact that the hospital has been losing money without this unit and, it appears, will continue to do so. The hospital has been living on an infusion of money from the parent corporation, and this does not, to him, appear to be an appropriate use of capital. Mr. Bayless contends that most of what he said about the unit projections applies as well to the consolidated hospital rehabilitative unit projections. The losses from the operation of the rehab unit and the other defects show a loss of $7 million in year 1 and almost $6 million in year 2. Year 3 would also show a loss of almost $6 million. As another problem, Mr. Bayless opines that the statute requirement to provide information on costs during construction and the effect of the project on the applicant's and others' operations was not met. Considering the parties' respective positions, however, it is found that though subject to some debate, HMC's projections as to patient revenue, expenses, and its ability to attract a quality work force without seriously damaging Memorial's ability to provide quality care have not been shown to be unsupportable. They are, therefore, accepted. Morgan Gibson, a review consultant with the Department's Office of Community Medical Facilities, and an expert in health planning, reviewed the instant application in early 1991. When the application was deemed complete, he initiated the formal comparative review of this application and of Memorial's request for 4 beds; did an analysis; and completed the required State Agency Action Report, (SAAR), for each. A fixed need pool was published for this cycle, (January, 1996), showing a "0" numerical need. Gibson's review indicated the project was consistent with the 1990 District X Comprehensive Health Plan which establishes various priorities for the award of CONs. Priority 1 relates to an applicant who demonstrates a willingness to publish information. Both applicants met this priority. Priority 2 relates to applicants who agree to construct additional facilities to provide service to the unserved public. Here, neither application involved new construction, but both applicants were willing to provide charity care with HMC's to be at 1%. Priority 3 applies to those applicants who have a history of operating at greater than 85% utilization. HMC's hospital alone could not meet this level, but the proposed unit was projected to meet it by year 2. Priority 1 of the 1989 Florida State Health Plan relates to facilities which will convert excess beds to comprehensive beds. HMC proposes to do this which is cost effective and gets more beds to the patients. Priority 2 of this plan relates to those who propose specialty services not currently offered. HMC's answer was vague but it agreed to provide a wide range of rehab services, and the fact that it does not focus on a single specialty does not make it less desirable. Priority 3 relates to teaching hospitals. HMC is not a teaching hospital but it has agreed to affiliate with a school of osteopathic medicine in the area. Priority 4 relates to those facilities with a history of providing a disproportionate share of charity and Medicaid. HMC does not now do this but has agreed to provide 1% charity care. Priority 5 relates to those facilities showing a willingness to provide outpatient follow-up rehabilitation services, and HMC has agreed to do this. Mr. Gibson concluded that the HMC project would increase availability and access to services and would improve quality of care. He also reviewed the application against the Rule 10-5 criteria. Existing rehabilitation beds in the area are highly utilized, (Memorial is at a figure close to 100% and is the only provider in the service area). Because of this, he considered the establishment of new beds in South Broward to be better than forcing patients to go to existing beds in the North Broward area. He found that the 30 beds proposed by HMC met the unit size minimum of 20 beds and the projected utilization met the standard of 65% for the first year and 85% for the second year. He concluded that the utilization rates in the district support the program. All but one provider are operating at above 90%. In that regard, since there are only 22 beds currently existing in the south portion of the county, and all providers but one are utilized at over 90%, the new unit could not help but improve the availability to the service in the District. It is so found. The local health council data revealed to Mr. Gibson that while admissions generally decreased by 4.5% from 1985 to 1989, rehab admissions went up 189.4% in the same period. This indicated to him a potential need and increasing utilization. He also concluded that the information provided by HMC was reasonable and not fairly disputable. In that regard, Mr. Gibson concluded that HMC presented information to justify the beds regardless of the rule methodology showing "0" need. The supporting factors for this conclusion were: (1) the high current utilization; (2) the relationship of rehab admissions to discharges; (3) the service pattern; (4) the existing waiting period; (5) the elderly population in the service area; (6) the potential rehabilitation discharges; (7) the conversion of underutilized acute care beds; and (8) the maldistribution of beds between the north and south part of the county. Taken together, Mr. Gibson concluded that the addition of 30 new beds by HMC would have a positive effect, not an adverse one, on the provision of service in the community. HMC indicated its intention to seek CARF accreditation, and it appeared to meet the other quality of care standards. CARF accreditation is important. All the facilities operated by the proposed management corporation are accredited by CARF. In addition, Mr. Gibson saw no adequate alternative to the program. Maintaining the status quo was obviously not effective. Neither was building a new facility. As a result, the conversion of underutilized beds appeared to be the most appropriate resolution of the problem. He also concluded that the proposed plan was reasonable. There was a demonstrated need for additional beds and it appeared this project would meet that need without the necessity to expend millions of dollars to create a new facility. The project did not involve cooperative services or shared facilities, but this is not a disqualifier. By the same token, there is no teaching facility currently available. Neither factor really applies to this project, however. Mr. Gibson determined that HMC had the financial resources to accomplish the proposed project. Its financial statement showed that it and its parent company both were in good financial health. The project cost could easily be met by existing resources. The applicant indicated that staffing levels would be met and the retaining of a management company to operate the facility was a plus factor. Before rendering his opinion, Mr. Gibson consulted with the Department's financial consultants, and based on the applicant's projections and assumptions, if the utilization levels of 65% and 85% for years 1 and 2 respectively were met, the project would be financially feasible in both the short and the long term. Mr. Gibson concluded that the utilization projections were reasonable based on current utilization of existing beds. As to fostering competition and cost effectiveness, Mr. Gibson determined that based on the current high utilization rate, the new beds should have no impact on existing services provided by Memorial in the south and the other existing providers in the north. With regard to charity care, HMC admitted that up until this time it had reported little or no charity care provided. Because HMC admitted that, however, Mr. Gibson was willing to accept its assertion as to what it proposed to do in the area in the future. Turning to the criteria outlined in Section 381.705(2), Florida Statutes, Mr. Gibson found: (1) there was, practically, no less costly or more appropriate alternative to the proposed service; (2) the existing service was being utilized efficiently; (3) there were no reasonable alternatives to conversion; and (4) there was some showing of a shortage of available service and no showing of serious problems existing in providing those services. Based on all the above, Mr. Gibson recommended both this application and Memorial's application be approved conditioned on the provision of a certain percentage of charity care. Mr. Gibson admits there is, on balance, a general shortage of rehabilitation personnel, but cannot say whether or not there is a shortage in Broward County. His conclusion that staff was available to HMC was based on several other factors such as the management contract and the proposed recruitment - all representations by the applicant and not based on his own experience. By the same token, he did not test any of the tables for revenues, costs, salaries, etc. Here again he relied on representations by the applicant. In addition to those aforementioned statutory criteria Mr. Gibson evaluated this application against the Section 381.707 criteria as well, and determined it was complete. It is clear, however, that his evaluation was not done in great detail, nor did he attempt to verify much of the other information submitted in support of the 381.705 criteria. The financial aspects of the project were analyzed by an in-house departmental CPA, Mr. Bell. Gibson's involvement was limited to examining the projected admissions, utilization, charges and the like, and based on those, he relied on Mr. Bell's determination they are reasonable and his opinion on feasibility. Nonetheless, Gibson drew his own positive conclusion of feasibility which was cited above. There appears to be no legitimate reason to reject any of the findings of conclusions drawn by Mr. Gibson. Therefore, they are accepted. Elizabeth Dudek, the Chief of the Department's Office of Community Medical Facilities, met with Mr. Gibson, Mr. Bell, and the architect after reading both the applications and the SAAR and, thereafter recommended the project be approved. After considering the application, the projected utilization, the existing inventory, the state and local health plans, the area where the facility was to be located, and at the provisions of the pertinent statutes and rule, she believed the project proposed was justified. She concluded both HMC and Memorial should be awarded the beds requested. Her reasons therefore conform to the findings of Mr. Gibson regarding existing providers and the high utilization rate. The trade patterns support a division of service between the north and the south. She determined that because this application did not meet all preferences and priorities as outlined in the various health plans did not necessarily mean it should be denied. By the same token, the fact that comprehensive rehab services are considered by the Department to be a tertiary service does not mean that the service must be provided only in teaching hospitals. Ms. Dudek recognizes that Section 381.707(2)(d) requires a detailed statement of income and revenue which includes the two year pro forma assumptions, Table 25, and the list of capital projects. Her review of the matters provided by the applicant and the audit and source of funds referenced led her to the conclusion that requirement was met. There is no basis shown upon which to reject that conclusion or to conclude otherwise.
Recommendation Based on the foregoing Findings of fact and Conclusions of Law, it is, therefore recommended that NME Hospitals, Inc.'s application for a Certificate of Need, Number 6643, for a 30 bed inpatient comprehensive medical rehabilitation unit at Hollywood Medical Center be approved, but that its Motion For Attorney's Fees and Costs be denied. RECOMMENDED this 2nd day of June, 1992, in Tallahassee, Florida. 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 2nd day of June, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5698 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. Accepted and incorporated herein. 2. - 4. Accepted and incorporated herein. 5. Accepted and incorporated herein. 6. Accepted. 7. & 8. Accepted and incorporated herein 9. Accepted and incorporated herein except for last sentence of first paragraph which is rejected as contra to the evidence. The second paragraph is accepted but is considered irrelevant to the issues. & 11. Accepted and incorporated herein. Accepted. Not a Finding of Fact but a restatement of testimony. First and third sentences are restatements of terstimony. Second and fourth sentences are accepted. Accepted. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Rejected. Not a Finding of Fact but argument. Accepted as to witness' testimony but not as to an an evaluation of its worth. All but the last sentence is a restatement of the witness' testimony. Last sentence is accepted as Petitioner's position. First two sentences accepted and incorporated herein. Balance, though a restatement of testimony is fundamentally accurate and consistent with the evidence. Though consistent with Petitioner's position, and perhaps factually accurate,this ppoposed Findings is rejected as overlooking the "other basis" provisions of the need rule. Accepted as an accurate statement of the factors involved, but this position was rejected in the Findings of Fact portion of the Recommended Order. - 28. Rejected as contra to the weight of the evidence. All but last sentence accepted and incorporated herein. Last sentence rejected. Accepted and incorporated herein. Rejected as argument and contra to the weight of the evidence. Rejected as argument. - 37. Accepted as an accurate restatement of the evidence, but rejected as to the ultimate factual conclusions drawn. 38. - 40. See next above which is reiterated here. & 42. Accepted as to the testimony presented but rejected as to the efficacy of the analysis. Accepted as to content but not as to analysis. & 45. Contents accepted as an accurate restatement of the testimony but conclusions drawn are rejected. Rejected. First paragraph accepted. Second paragraph rejected as speculation. Accepted and incorporated herein. Accepted. First sentence accepted. Remainder rejected as speculative with no historical basis. FOR THE RESPONDENT, NME: - 8. Accepted and incorporated herein. Accepted and incorporated herein. - 14. Accepted and incorporated herein. - 19. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. & 23. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Not a finding of fact but a comment on the evidence. 27. - 29. Accepted and incorporated herein. 30. Accepted and incorporated herein. 31. Accepted. 32. - 34. Accepted and incorporated herein. 35. - 37. Accepted. 38. - 40. Accepted. 41. & 42. Accepted and incorporated herein. 43. Accepted. 44. - 46. Accepted and incorporated herein. 47. & 48. Accepted and incorporated herein. 49. Accepted. 50. - 52. Accepted. 53. & 54. Accepted and incorporater herein. 55. Accepted. 56. - 58. Accepted and incorporated herein. 59. Accepted. 60. Accepted and incorporated herein. 61. - 63. Accepted. 64. - 68. Accepted and incorporated herein. 69. - 75. Accepted and incorporated herein. 76. Accepted and incorporated herein. 77. Accepted. 78. Accepted. 79. Accepted. 80. Accepted and incorporated herein. 81. & 82. Accepted. 83. - 86. Accepted and incorporated herein. 87. Accepted and incorporated herein. 88. Accepted. 89. Accepted and incorporated herein. 90. Accepted. 91. Accepted and incorporated herein. 92. Accepted and incorporated herein. 93. Accepted and incorporated herein. 94. - 97. Accepted and incorporated herein. 98. - 100. Accepted and incorporated herein. 101. & 102. Accepted. 103. - 106. Accepted and incorporated herein. 107. Accepted and incorporated herein. 108. Accepted and incorporated herein. 109. Accepted. 110. Accepted. 111. - 114. Accepted. 115. Accepted and incorporated herein. 116. Accepted. 117. & 118. Accepted but more a comment on evidence than finding of fact. 119. & 120. Not a finding of fact but a comment on evidence. 121. Accepted. 122. - 125. Not findings of fact but comments on the evidence. 126. Accepted. 127. Not a finding of fact. 128. Accepted. 129. Not a finding of fact but more an argument. 130. Accepted. 131. Accepted. 132. - 133. Accepted and incorporated herein. 134. & 135. Accepted. Not a finding of fact but argument. Accepted. Not a finding of fact. Accepted. - 148. Not findings of fact but argument. 149. & 150. Accepted. 151. Not a finding of fact but argument. FOR THE RESPONDENT, DHRS: 1. Accepted and incorporated herein. 2. - 4. Accepted and incorporated herein. 5. - 11. Accepted and incorporated herein. 12. - 15. Accepted and incorporated herein. 16. - 19. Accepted and incorporated herein. 20. Accepted. 21. - 23. Accepted and incorporated herein. 24. Accepted and incorporated herein. 25. - 28. Accepted and incorporated herein. 29. - 35. Accepted and incorporated herein. 36. - 40. Accepted and incorporated herein. 41. Accepted. 42. Accepted and incorporated herein. 43. Accepted. 44. - 46. Accepted and incorporated herein. 47. & 48. Accepted and incorporated herein. 49. Accepted. 50. - 52. Accepted and incorporated herein 53. - 61. Accepted and incorporated herein. 62. & 63. Accepted. 64. Accepted and incorporated herein. 65. Accepted. 66. Accepted and incorporated herein. 67. Accepted. 68. - 75. Accepted and incorporated herein. 76. & 77. Accepted and incorporated herein. Not a finding of fact but a restatement of evidence. Accepted. - 84. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. & 89. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: R. Terry Rigsby, Esquire F. Philip Blank, Esquire Blank, Rigsby & Meenan, P.A. 204-B South Monroe Street Tallahassee, Florida 32301 Thomas R. Cooper, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 C. Gary Williams, Esquire Michael Glazer, Esquire Ausley, McMullen, McGehee, Carothers & Proctor 227 South Calhoun Street Tallahassee, Florida 32302 John Slye General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
