Findings Of Fact The application and project On October 15, 1986, Respondent, Florida Residential Treatment Centers, Inc. (FRTC), filed a timely application with the Respondent, Department of Health and Rehabilitative Services (Department), for a certificate of need to construct a 60-bed specialty hospital to be licensed as an intensive residential treatment program for children and adolescents in Broward County, Florida. On March 11, 1987, the Department proposed to grant FRTC's application, and petitioners, Florida Psychiatric Centers (FPC) and South Broward Hospital District (SBHD), timely petitioned for formal administrative review. FRTC is a wholly-owned subsidiary of Charter Medical Corporation (Charter). Currently, Charter owns, operates or has under construction 85 hospitals within its corporate network. Of these, 13 are general hospitals, and 72 are psychiatric hospitals. Notably, Charter now operates residential treatment programs in Newport News, Virginia, Provo, Utah, and Mobile, Alabama; and, is developing such a program in Memphis, Tennessee. Within the State of Florida, Charter operates psychiatric hospitals in Tampa, Jacksonville, Fort Myers, Miami, and Ocala. In connection with the operation of these facilities, Charter has established satellite counseling centers to screen patients prior to admission and to provide aftercare upon discharge. Of 20 such centers operated by Charter, one is located in Broward County and two are located in Dade County. The facility proposed by FRTC in Broward County (District X) will treat seriously emotionally disturbed children and adolescents under the age of 18. The patients admitted to the facility will have the full range of psychiatric diagnoses, with the probable exception of serious mental retardation and severe autism. FRTC will not treat patients who present themselves with a primary substance abuse diagnosis, nor will it admit patients who are actively dangerous. This distinguishes FRTC from an acute psychiatric hospital where actively dangerous patients requiring immediate medical intervention are often admitted. The anticipated length of stay at FRTC will vary depending upon the patient's responsiveness to treatment, but is reasonably expected to range between 6 months to 2 years, with an average of 1 year. The treatment programs to be offered at FRTC will be based upon a bio- psychosocial treatment model. This model assumes that the biological component of a patient's condition has been stabilized and that psychiatric medication will be administered solely to maintain this stabilized condition. The social component of the model is designed to resolve problems in interpersonal, family and peer relationships through educational groups, psychiatric co-therapeutic groups and family group therapy. The psychological component focuses primarily on developing personal understanding and insight to guide the patient toward self-directed behavior. Among the therapies to be offered at FRTC are individual, family, recreational, group and educational. Group therapy will be designed to resolve interpersonal problems and relationships, and focuses primarily on building trust among group members. Some group therapy sessions will also cover specific issues such as sex education, eating disorders, self-image and social skills. The goal of recreational therapy will be to teach patients to play appropriately, showing them how to give, take and share, and to follow and to lead. Recreational activities will be available both on and off campus. The goal of occupational therapy will be to develop skills used in work. For a child whose work is school, this often involves using special education techniques. For teenagers, occupational therapy also develops work skills, and prepares them for vocational training or employment. Family therapy is crucial because the family is she core of child development. Families will be invited to spend days with their children at FRTC where they will learn behavioral management techniques, and participate in parent education activities and multifamily groups. The school component of the program includes development of an individualized educational plan for each child. School will be conducted 4-5 hours a day. FRTC will utilize the level system as a behavioral management tool This system provides incentives for learning responsibility for one's own behavior and for functioning autonomously. The typical progress of a patient at FRTC will be as follows. First, a team which includes a psychiatrist, social worker, psychologist and teacher will decide, based upon available information, whether admission is appropriate. If admitted, a comprehensive assessment will be conducted within 10 days, a goal- oriented treatment program will be developed for each patient, designed to remedy specific problems. Discharge planning will begin immediately upon admission. A case manager will be involved to assure that the treatment modalities are well-coordinated. Finally, FRTC will provide aftercare upon discharge. Should any FRTC patients experience acute episodes, they will be referred to acute care psychiatric hospitals with which FRTC has entered into transfer agreements. Likewise, patients who require other medical attention will be referred to appropriate physicians Consistency with the district plan and state health plan. While the local health plan does not specifically address the need for intensive residential treatment programs (IRTPs) for children and adolescents, it does contain several policies and priorities that relate to the provision of psychiatric services within the district. Policy 2 contains the following relevant priorities when an applicant proposes to provide a new psychiatric service: ... Each psychiatric inpatient unit shall provide the following services: psychological testing/assessment, psychotherapy, chemotherapy, psychiatric consultation to other hospital departments, family therapy, crisis intervention, activity therapy, social services and structured education for school age patients, and have a minimum patient capacity of 20 and a relationship with the community mental health center. Facilities should be encouraged to provide for a separation of children, adolescents, adults, and geriatric patient' where possible. Greater priority should be given to psychiatric inpatient programs that propose to offer a broad spectrum of continuous care. ... Applicants should be encouraged to propose innovative treatment techniques such as, complementing outpatient and inpatient services or cluster campuses, that are designed to ultimately reduce dependency upon short term psychiatric hospital beds. New facilities should be structurally designed for conducive recovery, provide a least restrictive setting, provide areas for privacy, and offer a wide range of psychiatric therapies. Applicants should be encouraged to offer intermediate and follow-up care to reduce recidivism, encourage specialty services by population and age, engage in research, and offer a full range of complete assessment (biological and psychological). Additionally, the local plan contains the following policies and priorities which warrant consideration in this case: POLICY #3 Services provided by all proposed and existing facilities should be made available to all segments of the resident population regardless of the ability to pay. Priority #1 - Services and facilities should be designed to treat indigent patients to the greatest extend possible, with new project approval based in part on a documented history of provision of services to indigent patients. Priority #2 - Applicants should have documented a willingness to participate in appropriate community planning activities aimed at addressing the problem of financing for the medically indigent. POLICY #4 Providers of health services are expected to the extent possible to insure an improvement of the quality of health services within the district. Priority #1 - Applicants for certificate of need approval should document either their intention or experience in meeting or exceeding the standards promulgated for the provision of services by the appropriate national accreditation organization. Priority #2 - Each applicant for certificate of need approval should have an approved Patient Bill of Rights' `as part of the institution's internal policy. POLICY #5 Specialized inpatient psychiatric treatment services should be available by age, group and service type. For example, programs for dually diagnosed mentally ill substance abusers, the elderly, and children, should be accessible to those population groups. Priority #1 - Applicants should be encouraged to expand or initiate specialized psychiatric treatment services. The FRTC application is consistent with the local health plan. FRTC's program elements and facility design are consistent with those mandated by the local plan for mental health facilities, and its proposal offers a wide range of services, including follow-up care. FRTC intends to provide a minimum of 1.5 percent of its patient day allotment to indigent children and adolescents, and will seek JCAH accreditation and CHAMPUS approval. The state health plan addresses services similar to those being proposed by FRTC, and contains the following pertinent policies and statements: Mental health services are designed to provide diagnosis, treatment and support of individuals suffering from mental illness and substance abuse. Services encompass a wide range of programs which include: diagnosis and evaluation, prevention, outpatient treatment, day treatment, crisis stabilization and counseling, foster and group homes, hospital inpatient diagnosis and treatment, residential treatment, and long term inpatient care. These programs interact with other social and economic services, in addition to traditional medical care, to meet the specific needs of individual clients. STATE POLICIES As the designated mental health authority' for Florida, HRS has the responsibility for guiding the development of a coordinated system of mental health services in cooperation with local community efforts and input. Part of that responsibility is to develop and adopt policies which can be used to guide the development of services such that the needs of Florida residents are served in an appropriate and cost effective manner. Policies relating to the development of mental health services in Florida are contained in Chapter 394 and Chapter 230.2317, F.S. The goal of these services is: '... reduce the occurrence, severity, duration and disabling aspects of mental, emotional, and behavioral disorders.' (Chapter 394, F.S.) '... provide education; mental health treatment; and when needed, residential services for severely emotionally disturbed students.' (Chapter 230.2317, F.S.) Within the statutes, major emphasis has also been placed on patient rights and the use of the least restrictive setting for the provision of treatment. 'It is further the policy of the state that the least restrictive appropriate available treatment be utilized based on the individual needs and best interests of the patient and consistent with optimum improvement of the patient's condition.' (Chapter 394.459(2)(b), F.S.) 'The program goals for each component of the network are'... 'to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs.' (Chapter 230.2317(1)(b), F.S.) Additional policies have been developed in support of the concept of a 'least restrictive environment' and address the role of long and short term inpatient care in providing mental health services for severely emotionally disturbed (SED) children. These include: 'State mental hospitals are for those adolescents who are seriously mentally ill and who have not responded to other residential treatment programs and need a more restrictive setting.' (Alcohol, Drug Abuse and Mental Health Program Office, 1982) 'Combined exceptional student and mental health services should be provided in the least restrictive setting possible. This setting is preferably a school or a community building rather than a clinical or hospital environment.' (Office of Children Youth and Families, 1984) 'Alternative, therapeutic living arrangements must be available to SED students in the local areas, when family support is no longer possible, so that they may continue to receive services in the least restrictive way possible.' (Office of Children Youth and Families, 1984) 'SED students should not be placed in residential schools or hospitals because of lack of local treatment resources, either educational or residential.' (Office of Children Youth and Families, 1984). * * * Sufficient funding for the development of residential treatment and community support is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Community services have been shown to be effective in rapidly returning the majority of individuals to their productive capacity and reducing the need for costly long term, institutional mental health services. There is, therefore, a need to proceed as rapidly as possible with the development of publicly funded services in those districts which are currently experiencing problems resulting from gaps in services. * * * Services for Adolescents and Children An additional issue which has been identified as a result of increased pressures for development of hospital based programs is the need to differentiate between services for adults and those for children and adolescents. Existing policy supports the separation of services for children and adolescents from those of adults and requires the development of a continuum of services for emotionally disturbed children. The actual need for both long and short term inpatient services for children and adolescents is relatively small compared to that of adults but is difficult to quantify. Providers, however, continue to request approval for long and short term adolescent and children services as a means of gaining access to the health care market. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following pertinent goals are contained in the state health plan: GOAL 1: ENSURE THE AVAILABILITY OF MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES TO ALL FLORIDA RESIDENTS IN A LEAST RESTRICTIVE SETTING. * * * GOAL 2: PROMOTE THE DEVELOPMENT OF A CONTINUUM OF HIGH QUALITY, COST EFFECTIVE PRIVATE SECTOR MENTAL HEALTH AND SUBSTANCE ABUSE TREATMENT AND PREVENTIVE SERVICES. * * * GOAL 3: DEVELOP A COMPLETE RANGE OF ESSENTIAL PUBLIC MENTAL HEALTH SERVICES IN EACH HRS DISTRICT. * * * OBJECTIVE 3.1.: Develop a range of essential mental health services in each HRS district by 1989. * * * OBJECTIVE 3.2.: Place all clients identified by HRS as inappropriately institutionalized in state hospitals in community treatment settings by July 1, 1989. RECOMMENDED ACTIONS: 3.2a.: Develop a complete range of community support services in each HRS district by July 1, 1989. * * * OBJECTIVE 3.3.: Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1990. The FRTC application is consistent with the state health plan which emphasizes the trend toward deinstutionalization, and the importance of education, treatment and residential services for severely emotionally disturbed children and adolescents rather than the traditional approach of institutional placement. Deinstutionalization assures more appropriate placement and treatment of patients, and is less costly from a capital cost and staffing perspective. The FRTC application also promotes treatment within the state, and will assist in reducing out-of-state placements. Need for the proposed facility The Department has not adopted a rule for the review of applications for IRTPs, and has no numeric need methodology to assess their propriety. Rather, because of the paucity of such applications and available data, the Department reviews each application on a case by case basis and, if it is based on reasonable assumptions and is consistent with the criteria specified in Section 381.705, Florida Statutes, approves it. In evaluating the need for an IRTP, the Department does not consider other residential treatment facilities in the district, which are not licensed as IRTP's and which have not received a CON, as like and existing health care services because such facilities are subject to different licensure standards. Under the circumstances, the Department's approach is rational, and it is found that there are no like and existing health care services in the district. While there are no like and existing health care services in the district, there are other facilities which offer services which bear some similarity to those being proposed by FRTC. These facilities include short-term and long-term residential treatment facilities, therapeutic foster homes and therapeutic group homes. These facilities are, however, operating at capacity, have waiting lists, and do not in general offer the breath or term of service proposed by FRTC. There are also short-term and long-term psychiatric hospitals within the district that include within their treatment modalities services similar to those proposed by the applicant. The short-term facilities are not, however, an appropriate substitute for children and adolescents needing long-term intensive residential treatment and neither are the long-term facilities from either a treatment or cost perspective. Notably, there are only 15 long term psychiatric beds in Broward County dedicated to adolescents, and none dedicated to children. In addition to the evident need to fill the gap which exists in the continuum of care available to emotionally disturbed children and adolescents in Broward County, the record also contains other persuasive proof of the reasonableness of FRTC's proposal. This proof, offered through Dr. Ronald Luke, an expert in health planning whose opinions are credited, demonstrated the need for and the reasonableness of FRTC's proposed 60-bed facility. Dr. Luke used two persuasive methodologies which tested the reasonableness of FRTC's 60-bed proposal. The first was a ratio of beds per population methodology similar to the rule methodology the Department uses for short-term psychiatric beds. Under this methodology, approval of FRTC's proposal would result in 25.47 beds per 100,000 population under 18 in District X. This ratio was tested for reasonableness with other available data. Relevant national data demonstrates an average daily census of 16,000 patients in similar beds. This calculates into 24.01 beds per 100,000 at a 90 percent occupancy rate and 25.93 beds per 100,000 at an 85 percent occupancy rate. Additionally, Georgia has a category of beds similar to IRTP beds. The Georgia utilization data demonstrates a pertinent ratio of 27.05 beds per 100,000 population. The second methodology used by Dr. Luke to test the reasonableness of FRTC's proposal, was to assess national utilization data for "overnight care in conjunction with an intensive treatment program." The national census rate in such facility per 100,000 population for persons under 18 was 21.58. Multiplying such rate by the district population under 18, derives an average daily census of 52. Assuming an optimal occupancy rate of 85 percent, which is reasonable, this demonstrates a gross need for 61 IRTP beds in District X. Dr. Luke's conclusions not only demonstrate the reasonableness of FRTC's proposal, but corroborate the need for such beds within the district. This proof, together with an analysis of existing or similar services, existing waiting lists for beds at similar facilities, and the placement by the Department of 28 children from Broward County outside the county in 1986 for long-term residential treatment, demonstrates the need for, and reasonableness of, FRTC's proposal. Quality of care The parties have stipulated that Charter and its hospitals provide quality short and long term psychiatric care. All of Charter's psychiatric hospitals are JCAH accredited, and Charter will seek JCAH accreditation and CHAMPUS approval for the proposed facility. Based on Charter's provision of quality psychiatric care, its experience in providing intensive residential treatment, and the programs proposed for the Broward County facility, it is found that quality intensive residential treatment will be provided at the FRTC facility. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. The parties have stipulated that FRTC has available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. The proof further demonstrates that FRTC will be able to recruit any other administrative, clinical or other personnel needed for its facility. 1/ Accessibility to all residents FRTC projects the following utilization by class of pay: Insurance 66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. While this is an insignificant indigent load, FRTC has committed to accept state-funded patients at current state rates. FRTC's projected utilization by class of pay is reasonable. The evident purpose of FRTC's application is to permit its licensure as a hospital under Section 395.002, Florida Statutes, and thereby permit it to be called a "hospital." If a residential treatment facility is licensed as a hospital it has a significant advantage over unlicensed facilities in receiving reimbursement from third party payors. Therefore, accessibility will be increased for those children and adolescents in need of such care whose families have insurance coverage since it is more likely that coverage will be afforded at an IRTP licensed as a "hospital" than otherwise. Design considerations The architectural design for the FRTC facility was adopted from a prototype short-term psychiatric hospital design which Charter has constructed in approximately 50 locations. This design contains the three essential components for psychiatric facilities: administration, support and nursing areas. The floor plan allows easy flow of circulation, and also allows for appropriate nursing control through visual access to activities on the floor. This design is appropriate for the purposes it will serve, and will promote quality residential care. As initially proposed, the facility had a gross square footage of 31,097 square feet. At hearing, an updated floor plan was presented that increased the gross square footage by 900 square feet to 32,045, an insignificant change. In the updated floor plan the recreational component was increased from a multipurpose room to a half-court gymnasium, an additional classroom was added, and the nursing unit was reduced in size to create an assessment unit. The updated floor plan is an enhancement of FRTC's initial proposal, and is a better design for the provision of long-term residential care to children and adolescents than the initial design. While either design is appropriate, acceptance of FRTC's updated floor plan is appropriate where, as here, the changes are not substantial. Financial feasibility As previously noted, the parties have stipulated that FRTC has the available funds for capital and operating expenses, and that the project is financially feasible in the immediate term. At issue is the long-term financial feasibility of the project. FRTC presented two pro forma calculations to demonstrate the financial feasibility of the project. The first pro forma was based on the application initially reviewed by the Department. The second was based on the proposal presented at hearing that included the changes in staffing pattern and construction previously discussed. Both pro formas were, however, based on the assumption than the 60-bed facility would achieve 50 percent occupancy in the first year of operation and 60 percent occupancy in the second year of operation, that the average length of stay would be 365 days, and that the daily patient charge in the first year of operation would be $300 and in the second year of operation would be $321. These are reasonable assumptions, and the proposed charges are reasonable. The projected charges are comparable to charges at other IRTP's in Florida, and are substantially less than those of acute psychiatric hospitals. For example, current daily charges at Charter Hospital of Miami are $481, and FPC anticipates that its average daily charge will be $500. FRTC projects its utilization by class of pay for its first year of operation to be as follows: Insurance (commercial insurance and CHAMPUS) 65.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 8 percent. The projection by class of pay for the second year of operation changes slightly based on the assumption that, through experience, the bad debt allowance should decrease. Consequently, for its second year of operation FRTC projects its utilization by class of pay to be as follows: Insurance (commercial insurance and CHAMPUS) 66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. These projections of utilization are reasonable. FRTC's pro forma for the application initially reviewed by the Department demonstrates an estimated net income for the first year of operation of $97,000, and for the second year of operation $229,000. The updated pro forma to accommodate the changes in staffing level and construction, demonstrates a $102,000 loss in the first year of operation and a net income in the second year of operation of $244,000. The assumptions upon which FRTC predicated its pro formas were reasonable. Accordingly, the proof demonstrates that the proposed project will be financially feasible in the long-term. Costs and methods of construction The estimated project cost of the FRTC facility, as initially reviewed by the Department, was $4,389,533. The estimated cost of the project, as modified at hearing, was $4,728,000. This increase was nominally attributable to the change in architectural design of the facility which increased the cost of professional services by approximately $7,500 and construction costs by $139,322. Of more significance to the increased cost of the project was the increase in land acquisition costs which raised, because of appreciation factors, from $750,000 to $1,000,000. The parties stipulated to the reasonableness of the majority of the development costs and most of the other items were not actively contested. Petitioners did, however, dispute the reasonableness of FRTC's cost estimate for land acquisition and construction supervision. The proof supports, however the reasonableness of FRTC's estimates. FRTC has committed to construct its facility south of State Road 84 or east of Interstate 95 in Broward County, but has not, as yet, secured a site. It has, however, allocated $1,000,000 for land acquisition, $200,281 for site preparation exclusive of landscaping, and $126,000 for construction contingencies. The parties have stipulated to the reasonableness of the contingency fund, which is designed as a safety factor to cover unknown conditions such as unusually high utility fees and unusual site conditions. Totalling the aforementioned sums, which may be reasonably attributable to land acquisition costs, yields a figure of $1,326,281. Since a minimum of 6 acres is needed for project accomplishment, FRTC's estimate of project costs contemplates a potential cost of $221,047 per acre. In light of the parties' stipulation, and the proof regarding land costs in the area, FRTC's estimate for land acquisition costs is a reasonable planning figure for this project. FRTC budgeted in its estimate of project costs $6,000 for the line item denoted as "construction supervision (Scheduling)." Petitioners contend that construction supervision will far exceed this figure, and accordingly doubt the reliability of FRTC's estimate of project costs. Petitioners' contention is not persuasive. The line item for "Construction supervision (Scheduling)" was simply a fee paid to a consultant to schedule Charter's projects. Actual on site supervision will be provided by the construction contractor selected, Charter's architect and Charter's in-house construction supervision component. These costs are all subsumed in FRTC's estimate of project cost. FRTC's costs and methods of proposed construction, including the costs and methods of energy efficiency and conservation, are reasonable for the facility initially reviewed by the Department and the facility as modified at hearing. The petitioners FPC, a Florida partnership, received a certificate of need on May 9, 1986, to construct a 100-bed short term psychiatric and substance abuse hospital in Broward County. At the time of hearing, the FPC facility was under construction, with an anticipated opening in May 1988. Under the terms of its certificate of need, the FPC facility will consist of 80 short-term psychiatric beds (40 geriatric, 25 adult, and 15 adolescent) and 20 short-term substance abuse beds. Whether any of the substance abuse beds will be dedicated to adolescent care is, at best, speculative. The principals of FPC have opined at various times, depending on the interest they sought to advance, that 0, 5, or 20 of such beds would be dedicated to adolescent care. Their testimony is not, therefore, credible, and I conclude that FPC has failed to demonstrate than any of its substance abuse beds will be dedicated to adolescent care and that none of its treatment programs will include children. As a short term psychiatric hospital, FPC is licensed to provide acute inpatient psychiatric care for a period not exceeding 3 months and an average length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10-5.011(1)(o), Florida Administrative Code. While its treatment modalities and programs may be similar to those which may be employed by FRTC, FPC does not provide long-term residential treatment for children and adolescents and its services are not similar to those being proposed by FRTC. Notably, FPC conceded that if the patients admitted by FRTC require treatment lasting from 6 months to 2 years, there will be no overlap between the types of patients treated at the two facilities. As previously noted, the proof demonstrates that the length of stay at the FRTC facility was reasonably estimated to be 6 months to 2 years, with an average length of stay of 1 year. Under the circumstances, FPC and FRTC will not compete for the same patients. As importantly, there is no competent proof that FRTC could capture any patient that would have been referred to FPC or that any such capture, if it occurred, would have a substantial impact on FPC. Accordingly, the proof fails to demonstrate that FPC will suffer any injury in fact as a consequence of the proposed facility. SBHD is an independent taxing authority created by the legislature. Pertinent to this case, SBHD owns and operates the following facilities in Broward County: Memorial Hospital of Hollywood, 1011 North 35th Avenue, Hollywood, Florida, and Memorial Hospital Share Program, 801 S.W. Douglas Road, Pembroke Pines, Florida. Memorial Hospital of Hollywood is a general acute care hospital, with 74 beds dedicated to short-term psychiatric care. These beds are divided between three units: two closed units for acute care (42 beds) and one open unit (32 beds). There is no unit specifically dedicated to the treatment of adolescents, and Memorial does not admit any psychiatric patient under the age of 14. When admitted, adolescents are mixed with the adult population. From May 1987 through January 1988, Memorial admitted only 5-10 adolescents (ages 14-18). Their average length of stay was 12-14 days. Memorial Hospital Share Program is a 14-bed inpatient residential treatment program for individuals suffering from chemical dependency. No patient under the age of 18 is admitted to this program, which has an average length of stay of 27 days. SBHD contends that its substantial interests are affected by this proceeding because approval of FRTC's facility would result in the loss of paying psychiatric and residential treatment patients that would erode SBHD's ability to provide services to the indigent, and would, due to a shortage of nursing, recreational therapy and occupational therapists who are skilled and trained in the care of psychiatric patients, affect the quality of care at its facility and increase costs for recruiting and training staff. Due to the paucity of competent proof, SBHD's concerns are not credited, and it has failed to demonstrate that its interests are substantially affected by these proceedings. Succinctly, SBHD offered no proof concerning any staffing problems it was encountering and no proof of any disparity that might exist between wages and benefits it offers its employees and those to be offered at the FRTC facility. In sum, it undertook no study from which it could be reasonably concluded that the FRTC facility would adversely impact its staffing or otherwise increase the cost of recruiting and training staff. Likewise, SBHD undertook no study and offered no credible proof that the FRTC facility would adversely impact it financially. In fact, the FRTC facility will not treat the same patient base that is cared for by SBHD.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that FRTC's application for certificate of need, as updated, be granted, subject to the special condition set forth in conclusions of law number 12. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th day of September, 1988. WILLIAM J. KENDRICK 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 7th day of September, 1988.
The Issue The issue for determination is whether Petitioner's Medicaid provider number should be cancelled.
Findings Of Fact I.M.P.A.C.T. Institute, Inc. (Petitioner) provides primarily counseling services to residents of Broward County and the surrounding areas. The majority of the residents who receive Petitioner's services are low income, have language barriers and have little education. Petitioner provides a valuable and important service to the community that it serves. At all times material hereto, Petitioner was licensed by the Department of Health and Rehabilitative Services in accordance with Chapter 397, Florida Statutes. Petitioner was issued its regular license on December 29, 1994. At all times material hereto, Petitioner was enrolled as a community mental health provider in the Florida Medicaid program pursuant to Subsection 409.906(8), Florida Statutes. Petitioner has been enrolled in the Medicaid program for approximately three years. At all times material hereto, Petitioner has been issued a Medicaid provider number which has been continuously renewed. Petitioner is currently receiving Medicaid reimbursement for community mental health services pursuant to Subsection 409.906(8), Florida Statutes. On June 10, 1994, Petitioner executed a Medicaid Provider Agreement (Agreement). The Agreement provides in pertinent part: The provider and the Department [Depart- ment of Health and Rehabilitative Services] agree to abide by the Florida Administrative Code, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and Federal laws and regulations. The agreement may be terminated upon thirty days written notice by either party. The Department may terminate this agreement in accordance with Chapter 120, F.S. Respondent has a handbook which describes, among other things, the community mental health services program and provider participation requirements. Effective December 1995, the handbook provides in pertinent part: Community mental health services are governed . . . through the authority of Chapter 409.906(8), Florida Statutes. * * * To be eligible to be enrolled in Medicaid, a provider must have a current contract pursuant to the provisions of Chapter 394, Florida Statutes, for the provision of community mental health services; and, if applicable, a regular (i.e., not provisional or interim) license as an alcohol prevention and treatment or drug abuse treatment and prevention program from the district Depart- ment of Health and Rehabilitative Services (HRS), Alcohol, Drug Abuse and Mental Health (ADM) program office. Petitioner does not have a contract with the Department of Health and Rehabilitative Services, Alcohol, Drug Abuse and Mental Health (ADM) program office. Petitioner has been attempting to obtain a contract with the Health and Rehabilitative Services ADM program office but has been unable to do so because the Health and Rehabilitative Services ADM office has had no money to fund such a contract. Respondent is cancelling Petitioner's Medicaid provider number because Petitioner does not have a contract with the Health and Rehabilitative Services ADM program office.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order terminating I.M.P.A.C.T. Institute, Inc.'s Medicaid provider contract and cancelling its Medicaid provider number. DONE AND ENTERED on this 8th day of October, 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996. APPENDIX The following rulings are made on the parties' proposed findings of fact: Petitioner Partially accepted in finding of fact 1. Partially accepted in finding of fact 1. Partially accepted in finding of fact 4. Rejected as being argument, or a conclusion of law. Rejected as being argument, or a conclusion of law. Rejected as being argument, or a conclusion of law. Partially accepted in findings of fact 5, 8, and 9. Rejected as being subordinate, irrelevant, or unnecessary. Respondent Partially accepted in finding of fact 2. Partially accepted in finding of fact 3. Partially accepted in finding of fact 6. Partially accepted in finding of fact 5. Partially accepted in finding of fact 7. Partially accepted in finding of fact 8. NOTE: Where a proposed finding has been partially accepted, the remainder has been rejected as being subordinate, irrelevant, unnecessary, cumulative, not supported by the evidence, argument, or a conclusion of law. COPIES FURNISHED: Jason H. Clark, Esquire Post Office Box 17486 West Palm Beach, Florida 33416 Roger R. Maas, Esquire Agency for Health Care Administration 2727 Mahan Drive, Ft. Knox No. 3 Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308-5403
The Issue Whether the Petitioner is required to repay $2,269.00 to the Respondent?
Findings Of Fact The Petitioner entered into a "Noninstitutional Professional and Technical Medicaid Provider Agreement" (hereinafter referred to as the "Medicaid Provider Agreement") with the Respondent. Pursuant to the Medicaid Provider Agreement, the Petitioner agreed to participate in the Florida Medicaid Program. Pursuant to paragraph 2 of the Medicaid Provider Agreement, the Petitioner agreed to the following: The provider agrees to keep such records as are necessary to fully disclose the extent of services provided to individuals receiving assistance under the State Plan and agrees to furnish the State agency upon request such information regarding any payments claimed for providing these services. Access to these pertinent records and facilities by authorized Medicaid Program representatives will be permitted upon a reasonable request. The Petitioner also agreed in the Medicaid Provider Agreement to submit claims under the Medicaid Provider Agreement in accordance with the Florida Medicaid Program and applicable "Florida Administrative Rules, Florida Statutes, policies, procedures, manuals of the Florida Medicaid Program and Federal laws and regulations." Paragraphs 3 and 7 of the Medicaid Provider Agreement. Medicaid is essentially a mechanism by which the federal government provides funds for the payment of a part of certain medical service costs to the State of Florida. It is a federal grant under Title XIX of the Social Security Act. In Florida, community mental health services provided to persons eligible for Medicaid coverage can be paid for under the Medicaid program. Generally, the federal government provides 56 percent of the costs of Medicaid services and the State is responsible for 44 percent. As eligible services are rendered federal Medicaid funds are received and deposited in the Medical Care Trust Fund. In order for services to constitute "eligible services" they must have been rendered in compliance with Chapter 10C-7, Florida Administrative Code. If services are not "eligible services" (they do not comply with Chapter 10C-7), the State is not entitled to receive federal Medicaid funds. In order to insure that providers of Medicaid services are providing "eligible services" the Respondent conducts compliance audits. The purpose of compliance audits is to determine if federal Medicaid funds have been properly received. On June 27, 1985, the Respondent's Medicaid Program auditors conducted a compliance audit of the records of the Petitioner pertaining to Medicaid clients of the Petitioner's Bristol office. As a result of the June 27, 1985 audit, the Respondent determined that the Petitioner had improperly submitted claims for Medicaid care and that such claims had been improperly paid by the Respondent. The parties stipulated that the Petitioner was paid $2,269.00 for claims for which there was insufficient documentation to warrant payment under Chapter 10C-7, Florida Administrative Code. Petitioner claimed $2,269.00 as an amount due for Medicaid "eligible services" and was so paid by the Respondent. In fact, however, the services were not Medicaid "eligible services." The State was not entitled to federal Medicaid funds for these services. The Petitioner improperly received the amount in controversy because the Petitioner did not comply with Chapter 10C-7, Florida Administrative Code, as it was required to do pursuant to the Medicaid Provider Agreement. On May 21, 1985, the Petitioner executed an "Alcohol, Drug Abuse and Mental Health Services Contract Between State of Florida Department of Health and Rehabilitative Services and Apalachee Community Mental Health Services, Inc." (hereinafter referred to as the "Provider Contract"). The Provider Contract was executed by the Respondent on June 11, 1985. Pursuant to the Provider Contract, the Petitioner agreed to provide alcohol, drug abuse and mental health services in eight designated counties. In paragraph IC4 of the Provider Contract, the Petitioner was required to comply with Chapters 394, 396 and 397, Florida Statutes, and Chapters 10E-13 and 10E-14, Florida Administrative Code, "as appropriate." 15. Paragraph IC5 of the Provider Contract also required the Petitioner to "comply with all other applicable state standards, provided they are specified in Florida Statutes or Administrative Rules established by the department or made known in writing to the contractor." Paragraph IE1 and 2 of the Provider Contract required that the Petitioner "participate in the Community Mental Health/Alcohol Services Program as defined in Section 10C-7.525, F.A.C." and that the Petitioner "pursue and submit vouchers on all Medicaid eligible clients for Medicaid eligible services." [Emphasis added]. Paragraph IG1 of the Provider Contract required the Petitioner to provide an annual audit report by an independent certified public accountant to the Respondent. Paragraph IH of the Provider Contract required the Petitioner to permit monitoring for compliance with state and federal rules and regulations. Paragraph IIA1 of the Provider Contract provided that the Respondent will pay up to 75 percent of approved costs as determined under Chapters 394 and 397, Florida Statutes, and Chapter 10E-14, Florida Administrative Code, in an amount not to exceed $4,096,175.00. Paragraph IO of the Provider Contract required that the Petitioner secure "local match." Pursuant to the Provider Contract the Petitioner is entitled to receive payment for eligible expenditures" up to the amount of the Provider Contract and subject to the availability of funds. Services to be paid for pursuant to the Provider Contract include Medicaid eligible services and non-Medicaid services. Even though the Petitioner did not provide "eligible services" the amount in controversy may have been an "eligible expenditure" for which it may receive payment at a later date. Whether the Petitioner is entitled to payment of the amount in controversy will be determined at a later date as a result of the financial audit required by paragraph IGI of the Provider Agreement and will depend on the availability of funds and whether the Petitioner has already received the maximum amount specified in the Provider Contract. Whether the Petitioner is entitled to ultimate payment of the amount in controversy at a later date is governed by Chapters 394 and 397, Florida Statutes, and Chapters 10E-13 and 10E-14, Florida Administrative Code. A dispute arose between certain medical health providers and the Respondent over whether Medicaid funds are considered "state funds" for which local match is required pursuant to Chapter 394, Florida Statutes. The Department took the position that Medicaid funds are considered state funds and thus require local match and are subject to audit pursuant to Chapter 10E-13, Florida Administrative Code. When the dispute arose, the Respondent developed an "Issue Paper" (Petitioner's exhibit 2). The Respondent adopted one of the alternatives recommended in the Issue Paper to treat Medicaid funds as state funds for which local match is required. The Respondent also took the position that Medicaid eligible services were subject to the provisions of Chapter 394, Florida Statutes, and Chapter 10E, Florida Administrative Code. The Respondent's decision to treat Medicaid funds as state funds subject to local match was challenged by the Florida Council for Community Mental Health, Inc. Florida Council for Community Mental Health, Inc. v. Department of Health and Rehabilitative Services, 8 FALR 756 (Feb. 6, 1986). The issue in that case was whether the position of the Respondent taken in the Issue Paper was a rule.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner repay the Respondent $2,269.00 for services improperly billed. DONE and ENTERED this 17th day of March, 1987, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1500 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1381 The parties have submitted proposed findings of fact. It has been generally noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Paragraph numbers in the Recommended Order are referred to as "RO ." Petitioner's Proposed Findings of Fact: Proposed Finding RO Number of Acceptance of Fact Number or Reason for Rejection 1 RO 15-16. RO 17-19. The first and second sentences incorrectly refer to Paragraph I(C)(6) of the Medicaid Provider Agreement. The correct paragraphs are 1(0)4 (first sentence) and 1(0)5 (second sentence). The following portion of the second sentence is not supported by the weight of the evidence: "or incorporated as part of the contract. The following portion of the third sentence is not supported by the weight of the evidence: "and HRS Manual 230-31. The first sentence is accepted in RO 28. The rest of this proposed finding of fact is generally accepted in RO 28. 4-5 These proposed findings of fact are too broad and are not supported by the weight of the evidence. Irrelevant and not supported by the weight of the evidence. Too broad and not supported by the weight of the evidence. See RO 28. Too broad and not supported by the weight of the evidence. See RO 30. 9-17 These proposed findings of fact are irrelevant. Additionally, the third and fourth sentences of paragraph 16 are not supported by the weight of the evidence. RO 6. RO 9. The last sentence is irrelevant. Not supported by the weight of the evidence. Irrelevant. Respondent's Proposed Findings of Fact: 1 RO 1-3. 2 RO 10. 3 RO 11. 4 RO 12-13 5 Hereby accepted. COPIES FURNISHED: 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 Theodore E. Mack, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building 1, Room 407 Tallahassee, Florida 32399-0700 Ronald W. Brooks, Esquire Brooks, LeBoeuf & LeBoeuf 863 East Park Avenue Tallahassee, Florida 32301
The Issue Whether there is a need for an additional 31 short-term psychiatric beds for Broward County?
Findings Of Fact I. General. History of Case. In June of 1984, the Petitioner filed an application with the Respondent for a certificate of need to add 31 short- term psychiatric beds to its existing facility. The certificate of need sought by the Petitioner was assigned certificate of need #3372 by the Respondent. The Respondent denied the Petitioner's application for certificate of need #3372. On October 25, 1984, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent challenging its proposed denial of the Petitioner's application. The Petition was filed with the Division of Administrative Hearings by the Respondent and was assigned case number 84-4037. Biscayne, Memorial and Charter were granted leave to intervene by Orders dated January 28, 1985, April 26, 1985 and July 9, 1985, respectively. The final hearing was held on November 19 and 21, 1985 in Ft. Lauderdale, Florida and February 24 and 25, 1986 in Tallahassee, Florida. The Petitioner's Proposal. The Petitioner originally sought to add 31 short-term psychiatric beds to its existing facility. If approved, the additional beds would have increased its current licensed beds from 334 to 365 beds. The Petitioner proposed to meet projected need for short-term psychiatric beds in Broward County for 1989. In its original application, the Petitioner proposed to provide services to children, adolescents, adults and the elderly. No distinct psychiatric units were proposed. The total cost of the original proposal was estimated to be $209,368.00. At the final hearing, the Petitioner proposed to relinquish 31 medical/surgical beds and to add 31 short-term psychiatric beds to meet projected need for short-term psychiatric beds in Broward County for 1989. The Petitioner will end up with a total of 334 licensed beds, the same number it now has, if its application is approved. The total cost of the proposal presented at the final hearing was $337,169.00, which is accurate and reasonable. The 31 proposed beds will be divided into a 15-bed dedicated adolescent unit and a 16-bed dedicated geropsychiatric unit. Adults will generally not be treated by the Petitioner. Involuntary admissions will be treated by the Petitioner, although there was some evidence to the contrary. The sixth floor of the Petitioner's existing facility will be converted into space for the new psychiatric units. The Petitioner changed the estimated staffing for its proposal between the time it filed its original application and the final hearing. The changes were not significant. During the 1985 legislative session, the Florida Legislature enacted Section 394.4785(1)(b), Florida Statutes (1985). This,, Section requires that most adolescents be separated from other patients for purposes of psychiatric treatment. Some of the modifications of the Petitioner's application which were made at the final hearing were made in order to conform with this Section. The changes in the Petitioner's proposal which were made between the time it filed its original application with the Respondent and the time of the final hearing are not substantial enough to require that the Petitioner's application, as modified, be remanded to the Respondent for further consideration. The Parties; Standing. The Petitioner is a 334-bed, for-profit, general acute-care hospital. The Petitioner is a full service hospital providing general medical services. The Petitioner has a medical staff of more than 400 physicians, including a department of psychiatry. The Petitioner is owned by National Medical Enterprises, one of the largest health care providers in the country. The Petitioner is located in Hollywood, Florida, which is located in the southern portion of Broward County, Florida. Broward County is the only County in the Respondent's service district 10. The Petitioner's primary service area consist of the southern portion of Broward County from State Road 84 in the North to the Broward-Dade County line in the South. Memorial is a not-for-profit general acute care hospital located in southern Broward County. Memorial holds License #1737, issued on June 1, 1985, which authorizes Memorial to operate 74 short-term psychiatric beds. This license is valid for the period June 1, 1985 to May 31, 1987. Memorial was also authorized to operate 74 short-term psychiatric beds in its license issued for the 2-year period prior to June 1, 1985. Memorial is located a short distance from where the Petitioner is located in southern Broward County. Memorial and the Petitioner share the same general primary service area. Most of the physicians on the staff at Memorial are also on the Petitioner's staff. Memorial is subsidized by tax revenues for providing indigent care for southern Broward County. About 17 percent of Memorial's revenue is attributable to bad debt and indigent care. If the Petitioner's application is approved it is likely that the Petitioner will take patients from Memorial. It is also likely that the patients taken from Memorial will be other than indigent patients. If the Petitioner were to achieve a 75 percent occupancy rate and 50 percent of its patients come from Memorial, Memorial would lose a little over $1,000,000.00 in terms of 1985 dollars. It is unlikely, however, that the Petitioner will achieve an occupancy rate of 75 percent and, more importantly, it is unlikely that 50 percent of the Petitioner's patients will come from Memorial. The loss of patients from Memorial which would be caused by approval of the Petitioner's application will, however, result in a financial loss to Memorial which may effect its ability to provide quality care. Additionally, the loss in paying patients could increase the percentage of indigent patients at Memorial and, because a portion of the cost of caring for indigents is covered by paying patients at Memorial, could result in a further loss in revenue and an increase in tax support. The public may have difficulty accepting a public hospital, such as Memorial, as a high-quality hospital if the public hospital is perceived to be a charity hospital. It is therefore important for a public hospital to attract a significant number of paying patients to its facility to avoid such an image. It is unlikely that the number of patients which may be lost to the Petitioner by Memorial is sufficient to cause the public to perceive that Memorial is a charity hospital. Biscayne is a 458-bed, general acute-care hospital located on U.S. 1 in northern Dade County, Florida, just south of the Broward County line. Biscayne's facility is located within about 5 miles of the Petitioner's facility. Biscayne is about a 5 to 10 minute drive from the Petitioner. Dade County is not in service district 10. It is in service district 11. Of the 458 licensed beds at Biscayne, 24 are licensed as short-term psychiatric beds and 24 are licensed as substance abuse beds. The rest are licensed as medical/surgical beds. Ten of the medical/surgical beds at Biscayne are used as a dedicated 10-bed eating disorder (anoxeria nervosa and bulimirexia) unit. These 10 beds are not licensed for such use. A separate support staff is used for the 10-bed eating disorder unit. Approximately 60 percent of Biscayne's medical staff of approximately 400 physicians are residents of Broward County. Most of these physicians are also on the medical staff of other hospitals, principally the Petitioner, Memorial and Parkway Regional Medical Center, which is located in northern Dade County. Most of its staff have their business offices in southern Broward County. Biscayne's service area includes southern Broward County and northern Dade County. Approximately 60 percent of Biscayne's patients are residents of southern Broward County. Biscayne markets its services in southern Broward County. Eighty percent of Biscayne's psychiatric patients are elderly. Many types of psychotic and psychiatric disorders are treated at Biscayne. Biscayne offers psycho-diagnostic services, crisis stabilization services, shock therapy services, individual therapy services and group therapy services. Biscayne has had difficulty in recruiting qualified staff for its psychiatric unit. Biscayne currently has 4 vacancies for registered nurses, 4 vacancies for mental health assistants and 1 vacancy for an occupational therapist in its psychiatric unit. Biscayne recruits nurses who are certified in mental health nursing. They have not always been successful in finding such nurses. Therefore, Biscayne provides educational programs to help train its nursing staff. These programs are necessary because of the unavailability of experienced nurses for its psychiatric unit. The Petitioner has projected that most of its patients for its proposed psychiatric units will come from southern Broward County, where Biscayne gets approximately 60 percent of its patients. The Petitioner plans to try to convince psychiatrists currently using existing providers, except Hollywood Pavilion, to refer their patients to the proposed psychiatric units. Since Biscayne and the Petitioner share some of the same physicians, it is likely that many of the patients cared-for by the Petitioner will come form Biscayne and other providers in southern Broward County, including Memorial. The loss of patients at Biscayne, if the Petitioner's proposal is approved, will result in a loss of revenue to Biscayne which may affect its ability to provide quality care. Charter was an applicant for a certificate of need to construct a free-standing psychiatric facility in Broward County. In its application Charter sought approval of long-term and short-term psychiatric beds. Charter's application was filed with the Respondent in August of 1983. It was filed for review by the Respondent in a batching cycle which preceded the batching cycle in which the Petitioner's application was filed. In December of 1983, the Respondent proposed to approve Charter's application and authorize a project consisting of 16 short-term adolescent psychiatric beds, 16 long-term adolescent psychiatric beds, 16 long-term substance abuse beds and 12 long-term children's psychiatric beds. The Respondent's proposed approval of Charter's application was challenged. Following an administrative hearing, it was recommended that Charter's application be denied. Final agency action had not been taken as of the commencement of the hearing in this case. Subsequent to the date on which the final hearing of this case commenced, the Respondent issued a Final Order denying Charter's certificate of need application. This Final Order is presently pending on appeal to the First District Court of Appeal. Charter does not have an existing facility offering services similar to those proposed by the Petitioner in Broward County or anywhere near the Petitioner's facility. When the Orders allowing Memorial, Biscayne and Charter to intervene were issued by Hearing Officer Sherrill, Mr. Sherrill determined that if the Intervenor's could prove the facts alleged in their Petition to Intervene they would have standing to participate in this case. Memorial and Biscayne have in fact proved the allegations contained in their Petitions to Intervene. Based upon all of the evidence, it is therefore concluded that Memorial and Biscayne have standing to participate in this proceeding. Both Memorial and Biscayne will probably lose patients to the Petitioner if its proposal is approved resulting in a loss of revenue. This loss could affect quality of care at Memorial and Biscayne. Also, it is possible that both would lose some of their specialized nursing personnel to ;the Petitioner to staff its proposed psychiatric units. Charter has failed to establish that it has standing to participate in this proceeding. The potential injury to Charter is too speculative. II. Rule 10-5.11(25), F.A.C. A. General. Whether a certificate of need for short-term psychiatric beds should be approved for Broward County is to be determined under the provisions of Section 381.494(6)(c), Florida Statutes (1985), and the Respondent's rules promulgated thereunder. In particular, Rule 10-5.11(25), F.A.C., governs this case. Under Rule 10-5.11(25)(c), F.A.C., a favorable determination will "not normally" be given on applications for short-term psychiatric care facilities unless bed need exists under Rule 10-5.11(25)(d), F.A.C. B. Rule 10-5.11(25)(d) , F.A.C. Pursuant to Rule 10-5.11(25)(d)3, F.A.C., bed need is determined 5 years into the future. In this case, the Petitioner filed its application with the Respondent in 1984, seeking approval of additional short-term psychiatric beds for 1989. The Petitioner did not change this position prior to or during the final hearing. Therefore, the planning horizon for purposes of this case is 1989. Under Rule 10-5.11(25)(d)3, F.A.C., bed need is determined by subtracting the number of "existing and approved" beds in the service district from the number of beds for the planning year based upon a ratio of .35 beds per 1,000 population projected for the planning year in the service district. The population projection is to be based on the latest mid-range projections published by the Bureau of Economic and Business Research at the University of Florida. Bed need is determined under the Respondent's rules on a district-wide basis unless the service district has been sub- divided by the Respondent. District 10 has not been subdivided by the Respondent. Therefore, bed need for purposes of this case under Rule 10-5.11(25)(d), F.A.C., is to be determined based upon the population projections for all of Broward County for 1989. The projected population for Broward County for 1989 is 1,228,334 people. Based upon the projected population for Broward County for 1989, there will be a need for 430 short-term psychiatric beds in Broward County in 1989. The evidence at the final hearing proved that there are currently 427 licensed short-term psychiatric beds in Broward County. During the portion of the final hearing held in November of 1985, evidence was offered that proved that there were also 16 approved short-term psychiatric beds for Broward County. These short-term beds were part of the application for the certificate of need sought by Charter. Subsequently, however, a Final Order was issued by the Respondent denying Charter's application. Therefore, the 16 short-term psychiatric beds sought by Charter do not constitute "existing and approved" short-term psychiatric beds in Broward County for purposes of this case. Subsequent to the conclusion of the final hearing in this case, the First District Court of Appeal reversed a Final Order of the Respondent denying an application for a certificate of need for a free-standing 10 -bed psychiatric facility, including 80 additional short-term psychiatric beds, for Broward County. Balsam v. Department of Health and Rehabilitative Services, So.2d (Fla. 1st DCA 1986). As indicated in Finding of Fact 23, Memorial is licensed to operate 74 short-term psychiatric beds. Memorial is in fact operating all 74 of these licensed beds. Memorial filed an application with the Respondent for certificate of need #1953 in October of 1981 in which Memorial indicated that it planned to reduce the number of short-term psychiatric beds it had available by 24 beds. Memorial's certificate of need application involved an expenditure of capital and did not specifically involve an application for a change in bed inventory at Memorial. Memorial also represented that it would reduce the number of its available short-term psychiatric beds by 24 in a bond prospectus it issued in September of 1983. The Respondent approved Memorial's certificate of need application. Despite Memorial's representations that it would reduce its short-term psychiatric bed inventory, the beds are still in use in Broward County. Memorial has no plans to close any beds and the Respondent does not plan to take any action against Memorial to require it to stop using 24 of its short-term psychiatric beds. Hollywood Pavilion is licensed to operate 46 short- term psychiatric beds in Broward County. In 1985, 475 patients were admitted to Hollywood Pavilion and its occupancy rate was 62.3 percent. In fact, Hollywood Pavilion had more admissions than Florida Medical Center had to its psychiatric unit. It therefore appears that other physicians find Hollywood Pavilion acceptable. Hollywood Pavilion is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner presented the testimony of a few physicians who questioned the quality of care at Hollywood Pavilion. These physicians indicated that they did not use Hollywood Pavilion. At least one of the physicians indicated, however, that he did refer patients to other physicians whom he knew admitted patients to Hollywood Pavilion despite his feeling that the quality of care at Hollywood Pavilion was poor. This action is inconsistent with that physician's opinion as to the lack of quality of care at Hollywood Pavilion. His opinion is therefore rejected. The other physicians' opinions are also rejected because very little evidence was offered in support of their opinions and because of the contrary evidence. Based upon a consideration of all of the evidence concerning the quality of care at Hollywood Pavilion, it is concluded that the Petitioner failed to prove that the 46 short-term psychiatric beds licensed for use and available for use at Hollywood Pavilion should not be counted as existing short- term psychiatric beds in Broward County. Coral Ridge Hospital is licensed to operate 74 short- term psychiatric beds in Broward County. The average length of stay at Coral Ridge Hospital during 1984 and 1985 was almost 80 days. The average length of stay at Coral Ridge Hospital has been in excess of 40 days since 1980 and in excess of 60 days since 1983. The average length of stay at Coral Ridge Hospital is in excess of the average length of stay for which short-term psychiatric beds are to be used under the Respondent's rules. Rule 10-5.11(25)(a), F.A.C., provides that short-term beds are those used for an average length of stay of 30 days or less for adults and 60 days or less for children and adolescents under 18 years of age. Rule 10-5.11(26)(a), F.A.C., provides that long-term beds are those used for an average length of stay of 90 days or more. The psychiatric beds at Coral Ridge Hospital, based upon an average length of stay for all of its beds, falls between the average length of stay for short-term beds and long-term beds. The occupancy rate at Coral Ridge Hospital for 1985 was between 40 percent and 50 percent. Therefore, it is possible that a few patients at Coral Ridge Hospital with a very long length of stay could cause the overall average length of stay of the facility to be as long as it is. Coral Ridge Hospital will probably take short-term psychiatric patients because of its low occupancy rate. Therefore, there are at least 29 to 37 short-term psychiatric beds available for use as short-term psychiatric beds at Coral Ridge Hospital. The Petitioner failed to prove how many of the licensed short-term psychiatric beds at Coral Ridge Hospital are not being used for, and are not available for use by, short-term psychiatric patients in Broward County. It cannot, therefore, be determined how many, if any, of the licensed short-term beds at Coral Ridge Hospital should not be treated as existing short-term psychiatric beds in Broward County. Based upon the foregoing, the 427 licensed short-term psychiatric beds in Broward County should be treated as "existing" beds for purposes of determining the need for short- term psychiatric beds under Rule 10-5.11(25)(d), F.A.C. There is a net need for short-term psychiatric beds in Broward County for 1989 of only 3 additional beds under Rule 10- 5.11(25)(d)3, F.A.C. If the 80 short-term psychiatric beds approved by the First District Court of Appeal in Balsam are taken into account, there will be a surplus of 77 short-term psychiatric beds in Broward County for 1989 under Rule 10- 5.11(25)(d)3, F.A.C. Based upon an application of Rule 10-5.11(25)(d)3, F.A.C., there is no need for the additional 31 short-term psychiatric beds sought by the Petitioner. Rule 10-5.11(25)(d)1, F.A.C., provides that a minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health problems. Some patients who need psychiatric care also need other medical services which can better be obtained in an acute care hospital. This fact is taken into account by the requirement of Rule 10-5.11(25)(d)1, F.A.C. Based upon the projected population for Broward County in 1989, there should be a minimum of 184-short-term psychiatric beds in hospitals holding a general license in Broward County. There are currently 243 short-term psychiatric beds in hospitals holding a general license in Broward County. Therefore, the standard of Rule 10-5.11(25)(d)1, F.A.C., has been met without approval of the Petitioner's proposal. There is no need for additional short-term psychiatric beds in general hospitals in Broward County for 1989. Rule 10-5.11(25)(d)4, F.A.C., provides that applicants for short-term psychiatric beds must be able to project an occupancy rate of 70 percent for its adult psychiatric beds and 60 percent for its adolescent and children's psychiatric beds in the second year of operation. For the third year of operation, the applicant must be able to project an 80 percent adult occupancy rate and a 70 percent adolescent and children's occupancy rate. The beds sought by the Petitioner will be managed by a professional psychiatric management company: Psychiatric Management Services (hereinafter referred to as "PMS"). PMS is owned by Psychiatric Institutes of America, a subsidiary of National Medical Enterprises. Because of the lack of need for additional short-term psychiatric beds in Broward County, it is doubtful that the Petitioner can achieve its projected occupancy rates as required by Rule 10-5.11(25)(d)4, F.A.C. Rules 10-5.11(25)(d)5 and 6, F.A.C., require that certain occupancy rates normally must have been met in the preceding 12 months before additional short-term psychiatric beds will be approved. The facts do not prove whether the occupancy rates provided by Rule 10-5.11(25)(d)5, F.A.C., have been met because the statistics necessary to make such a determination are not available. The evidence failed to prove that the occupancy rates of Rule 10- 5.11(25)(d)6, F.A.C. have been met. The average occupancy rate for short-term psychiatric beds in Broward County for 1985 was between 64.8 percent and 68.4 percent. Occupancy rates in Broward County for short-term psychiatric beds have not reached 71 percent since 1982. These rates are well below the 75 percent occupancy rate provided for in Rule 10-5.11(25)(d)6, F.A.C. This finding is not refuted by the fact that Florida Medical Center added 59 beds in 1984 and the fact that occupancy rates at most general hospitals exceeded 75 percent in 1985. Based upon the average occupancy rate in Broward County for 1985, there were approximately 100 empty short-term psychiatric beds in Broward County on any day. Rule 10-5.11(25)(d)7, F.A.C. requires that short-term psychiatric services provided at an inpatient psychiatric hospital should have at least 15 designated beds in order to assure specialized staff and services at a reasonable cost. The Petitioner's proposal to add 31 short-term psychiatric beds meets this requirement of the rule. C. Rule 10-5.11(25)(e), F.A.C. Rule 1O-5.11(25)(e)1, F.A.C., requires that an applicant prove that its proposal is consistent with the needs in the community as set out in the Local Health Council plans, local Mental Health District Board plans, State Mental Health Plan and needs assessment data. The Petitioner has failed to meet this requirement. The Petitioner's proposal is inconsistent with the District 10 Local Health Plan, the Florida State Health Plan and State and Local Mental Health Plans. In particular, the Petitioner's proposal is inconsistent with the following: The District 10 Local Health Plan's recommendation that applications not be approved if approval would result in an excess number of beds under the Respondent's bed need methodology; The District 10 Local Health Plan's recommendation concerning occupancy standards for the district (75 percent during the past 12 months); The position of the Florida State Health Plan that inpatient psychiatric services are a setting of last resort; The recommendation of the District 10 Mental Health Plan that alternatives to hospitalization for psychiatric services should be encouraged; and The recommendation of the Florida State Mental Health Plan that less restrictive treatment alternatives should be encouraged. Rule 10-5.11(25)(e)3, F.A.C., requires that applicants indicate the amount of care to be provided to underserved groups. The Petitioner's representations concerning its plans to provide indigent care contained in its application are misleading, in that the Petitioner represented that it would not turn away indigents. At the final hearing, the Petitioner indicated that it will generally provide care to indigents only on an emergency basis. Patients who need indigent care on a non-emergency basis will be referred to Memorial. Also, once an indigent patient who needs emergency care has stabilized, that patient will be transferred to Memorial for care. The Petitioner accepts few Medicaid and indigent patients. During 1985, the Petitioner treated 21 Medicaid patients out of a total of 6,800 patients. Only 1.5 percent of its total revenue was for uncompensated care. During 1984, the Petitioner treated 22 Medicaid patients out of a total of 7,321 patients. Only 1.2 percent of its total gross revenue was for uncompensated care. Memorial is subsidized by tax revenues for providing indigent care, or southern Broward County. Because Memorial provides indigent care, indigent patients are usually referred to Memorial if they do not need emergency care or are transferred to Memorial after they stabilize if they do need emergency care. There are other hospitals in northern Broward County which provide similar indigent care. It is therefore common practice to refer patients to those hospitals. Rule 10-5.11(25)(e)5, F.A.C., provides that development of new short- term psychiatric beds should be through the conversion of underutilized beds in other hospital services. The Petitioner's proposal to convert 31 medical/surgical beds for use as short-term psychiatric beds meets this provision. Rule 10-5.11(25)(e)7, F.A.C., provides that short- term psychiatric services should be available within a maximum travel time of 45 minutes under average travel conditions for at least 90 percent of the service area's population. There is no geographic access problem in Broward County. At least 90 percent of the population of Broward County is within a maximum of 45 minutes driving time under average driving conditions to existing short-term psychiatric services in Broward County. The Petitioner's proposal will not significantly enhance geographic access in Broward County. III. Statutory Criteria. Need for Services. The Respondent has approved two certificates of need authorizing the addition of a total of 135 long-term psychiatric beds for Broward County. The addition of 135 long-term beds probably means that additional short-term beds in Broward County which have been used for patients requiring longer treatment will be available. If the additional long-term beds free up short-term beds, the occupancy rate of short-term psychiatric beds in Broward County would be even less than it has been during the past 12 months, if other things remain equal. Both Memorial and Florida Medical Center have been using short-term psychiatric beds for the care of long-term patients. Once the new long-term psychiatric beds are operational, more short-term psychiatric beds will be available in Broward County. Existing Providers. In addition to the short-term psychiatric beds available at Coral Ridge Hospital and Hollywood Pavilion, short- term psychiatric beds are available at the following existing facilities in the service district: Ft. Lauderdale Hospital: 64 beds Florida Medical Center: 74 beds Imperial Point: 47 beds Broward General Medical Center: 48 beds There is no geographic distribution problem in district 10. Generally, the Petitioner did not prove that existing short-term psychiatric beds in Broward County are not available, efficient, appropriate, accessible, adequate or providing quality of care. The Petitioner also did not prove that existing facilities are over-utilized. No new services are proposed by the Petitioner. The evidence did prove that there is usually a waiting list for short-term psychiatric beds at Memorial and that physicians have resorted to various devices to get their patients into short-term psychiatric beds at Memorial. Specialized adolescent psychiatric services are available in the service district at Ft. Lauderdale Hospital and at Florida Medical Center. Ft. Lauderdale Hospital has 24 short- term psychiatric beds dedicated to the treatment of adolescents. Florida Medical Center has 20 short-term psychiatric beds dedicated to the treatment of adolescents. Broward General Medical Center and Imperial Point also provide children/adolescent services. Treatment for eating disorders is provided and available at Imperial Point and Florida Medical Center. Florida Medical Center solicits patients from all parts of the service district. Geropsychiatric short-term psychiatric beds are available in the service district at Hollywood Pavilion, Imperial Point and Ft. Lauderdale Hospital. Florida Medical Center has a closed adult psychiatric unit and often treats persons over 60 years of age. It also has a 26-bed adult short-term psychiatric unit with 2 specialized treatment programs: one for eating disorders and the other for stress and pain management. The Petitioner has proposed to provide a dedicated geropsychiatric unit to meet the needs of geriatric patients which are different from those of adults generally. Although there are no such dedicated geropsychiatric units in the service district, the Petitioner failed to prove that geriatrics are not receiving adequate care from existing providers. Quality of Care. The Petitioner is accredited by the Joint Commission on Accreditation of Hospitals. The Petitioner has established adequate quality control procedures, including educational programs and a quality assurance department. These quality control procedures will also be used to insure quality of care in the proposed psychiatric units. The psychiatric units will be managed by PMS. PMS specializes in the management of psychiatric units in acute care hospitals. PMS has programs for adolescents and geriatrics. These programs will be available for use in the proposed psychiatric units. PMS also has a large variety of programs, services and specialists available to establish and maintain quality of care at the Petitioner. The Petitioner will be able to provide quality of care. Alternatives. The Petitioner did not prove that available and adequate facilities which may serve as an alternative to the services it is proposing do not exist in Broward County. Economies of Scale. The Petitioner's parent corporation, National Medical Enterprises has purchasing contracts available for use by the Petitioner in purchasing items needed for the proposed psychiatric units. These contracts can result in a reduction of costs for the proposed project. Staff Resources. PMS will help in recruiting staff for the proposed psychiatric units. Recruiting will be done locally but the Petitioner also has the ability to recruit specialized staff on a broader geographic scale. There is a shortage of nursing personnel for psychiatric services in southern Broward County and northern Dade County. Since the Petitioner plans to recruit locally, this could cause existing providers to lose specialized nursing personnel to the Petitioner. If the Petitioner causes vacancies at existing facilities, this could adversely affect quality of care. Financial Feasibility. The total projected cost of the project ($337,169.00) can easily be provided by National Medical Enterprises, the parent corporation of the Petitioner. The Petitioner's financial projections are unrealistic to the extent of the projected utilization and revenue for the proposed psychiatric units. Based upon the projected need of only 3 short-term psychiatric beds (or possibly a surplus of 77 beds) for 1989, the Petitioner's projected utilization and revenue for its proposal is rejected. The Petitioner has proved immediate financial feasibility but has failed to prove the proposal is financially feasible in the long-term. Impact of Proposal. The Petitioner's proposal could adversely effect the costs of providing health services in Broward County. This is especially true in light of the lack of need for additional short-term psychiatric beds in Broward County. Because of the high quality of the services the Petitioner proposes to provide, competition in Broward County could be enhanced and ultimately benefit consumers, if there was a need for the proposed additional beds. If a hospital has an image of being a charity hospital serving the needs of underserved groups, the hospital can experience difficulty in attracting paying patients and have difficulty in getting consumers to accept the high quality of the services of the hospital. Although it is likely that the Petitioner will take paying patients away from Memorial, it is unlikely that the number of patients lost could substantially affect the public's image of Memorial. The effect the Petitioner's proposal will have on Memorial is limited by the fact that the Petitioner is only seeking 31 beds and they are only short-term psychiatric beds. Memorial provides a variety of services and psychiatric services are only a small part of those services. I. Construction. It the Petitioner's proposal is approved, 11,500 square feet on the sixth floor of the Petitioner's hospital will be renovated and converted for use for the two proposed psychiatric units. The renovations can be made quickly. There will be space for 16 beds in a geropsychiatric unit and 15 beds in an adolescent unit. There will be a separate lobby for the psychiatric units and the elevators to the lobby will be strictly controlled. The two units will be separated and adequate security precautions will be taken to keep the two units separate. The ceilings in both units will be modified to insure security. Nurse stations will be provided for both units. Visibility from the nurse stations will be fair. Space is provided for a dayroom for each unit and there will be a class room and four rooms for therapy. These spaces will barely be adequate to meet the various needs of patients. With adequate planning and coordination, patients' needs can be met. There is inadequate space in the proposed facility for physical activities for patients.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by the Petitioner for certificate of need #3372 should be denied. DONE and ENTERED this 15th day of May, 1986, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of May, 1986. COPIES FURNISHED: Michael J. Glazer, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building One, Suite 407 1323 Winewood Boulevard Tallahassee, Florida 32301 James C. Hauser, Esquire MESSER, VICHERS, CAPARELLO, FRENCH & MADSEN Post Office Box 1876 Tallahassee, Florida 32302 Kenneth G. Oertel, Esquire Eleanor A. Joseph, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507 Tallahassee, Florida 32313-6507 Cynthia S. Tunnicliff, Esquire CARLTON, FIELDS, WARD, EMMANUEL SMITH & CUTLER, P.A. Post Office Drawer 190 Tallahassee, Florida 32302 Mr. William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact The Parties FRTC is a wholly-owned subsidiary of Charter Medical Corporation which proposes to construct and operate a 60 bed intensive residential treatment program (IRTP) in Bradenton, Florida, which is located in the Department's District VI. The Department is the state agency with the authority and responsibility to consider CON applications. Manatee Palms is an existing residential treatment center in Manatee County, Florida which opened in January, 1987 and is currently operating without a CON. It provides services similar or identical to those proposed by FRTC. Manatee Palms was developed by, and is a subsidiary of, Psychiatric Institutes of America. Its primary service area extends beyond District VI from Orlando to Naples. Manatee Palms is a sixty bed facility providing psychiatric, substance abuse and educational services for juveniles up to 18 years of age, and is licensed by the Department as a child caring facility, as a provider of services to the Department, and for subspecialties involving drug and alcohol programs. It is accredited by the Joint Commission on Accreditation of Hospitals as a residential treatment center. The average length of stay for patients is six months. Occupancy rates have been consistently above projections and have been as high as 97 percent in May, 1987. Manatee Memorial is a full-service acute care hospital and an existing provider of short-term psychiatric services in Bradenton, Florida, with 25 licensed short-term psychiatric beds, nine of which comprise a children's and adolescent unit. It is the Manatee County contract provider of in-patient psychiatric services to the medically indigent, and provides approximately 91 percent of the indigent care in Manatee County. Manatee Memorial does not have, and has never sought, a CON as an IRTP, but does have earlier-batched applications pending for additional short and long term psychiatric beds. Its average length of stay is 35-40 days, and its utilization rate is approaching 100 percent. Manatee Memorial provides services similar or identical to those proposed by FRTC, and its program also utilizes a "levels system" similar to that used by FRTC. The Application and Project On September 15, 1986 FRTC filed a Letter of Intent notifying the Department of its intent to file a CON application for an IRTP for children and adolescents in Bradenton, Florida. On October 14, 1986 FRTC filed CON application number 4825 to obtain specialty hospital licensure as an IRTP. This application was initially approved by the Department on March 10, 1987, after the filing of a completeness response on or about December 23, 1986 at the request of the Department. Manatee Palms and Manatee Memorial timely filed petitions for formal administrative hearings challenging the Department's intent to issue the CON. The project at issue in this case is a 60 bed IRTP situated on a 9.35 acre site. The proposed building will have total gross square footage of approximately 32,000 and has been adapted from a prototype short-term psychiatric hospital design which has been used in approximately 50 locations. The floor plan submitted by FRTC provides for 28 semi-private rooms, three of which are designed to accommodate the handicapped, and one 4- bed assessment unit. Additionally, reasonable and sufficient space is provided for five classrooms, occupational therapy, a gymnasium, three group rooms, three day rooms, a seclusion area, three consult rooms, laundry and storage rooms, a nurses' station, dining room, and an administrative wing. A parking area, multi-purpose court, pool, activities field and drainage retention area are also provided. The parties have stipulated that the building will be energy efficient. Total project cost is reasonably estimated at $4,303,020. As a result of design modifications, the square footage of the project has increased by approximately 1,000 gross square feet and project costs have increased by approximately $69,000 from FRTC's completed application. The Department's Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, testified that for a project of this size these changes are not considered to be "amendments" to the application. The changes in facility design identified at hearing represent refinements and permissible modifications, rather than application amendments. There is no architectural significance to the changes. Rather, they make the design more appropriate for an IRTP. Specifically, a multi-purpose area was converted to a half-court gymnasium, the occupational therapy and interior mechanical spaces were slightly increased for more storage area, a seclusion room was deleted, the nurses' station was reduced, a 4-bed assessment unit was added, and other minor changes were made. FRTC proposes to offer 24-hour psychiatric services to children and adolescents under the age of 18, who are severely emotionally disturbed, and who are admitted voluntarily, after screening, with a history of prior treatment. Its program elements will include occupational therapy, recreational therapy, group and individual therapy, nursing care, an educational component, psychological testing, counseling and family therapy. The FRTC program will be initiated as a locked intensive program whose goal is to return the patient to his family and to life in a natural setting. Patients who are severely retarded, autistic, or with an active diagnosis of substance abuse will not be admitted. The average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years. There are no licensed intensive residential treatment programs (IRTP) for children and adolescents in Manatee County, Florida or in the Department's District VI, which includes Manatee County as well as Hardee, Highland, Hillsborough and Polk Counties. There are also no licensed IRTPs in adjoining Districts V and VIII. Stipulations The parties have stipulated that FRTC has the ability to recruit physicians for this project, and also has funds available for FRTC's capital and operating expenditures. In addition, the parties have stipulated that review criteria concerning the need for research and educational facilities, the extent to which the services will be accessible to schools for health professional, and the special needs and circumstances of health maintenance organizations are not applicable to this CON application. Non-Rule Policy For IRTP The Department currently has no rule governing the approval of IRTP applications for a CON. However, since February 1987 the Department has followed a non-rule policy which presumes there is a need for at least one licensed IRTP of reasonable size in each Departmental service district, and which does not consider the existence of unlicensed residential treatment beds in a district in determining if the presumed need has been met. No changes or revisions in this non-rule policy of the Department are under review. The Department applied this non-rule policy in initially approving the CON application. Based upon the testimony of John Griffin, the Department's Deputy Assistant Secretary who administers the CON program and is responsible for health planning, an IRTP applicant does not have to establish "need" in a particular service district where it wants to locate a facility because the non- rule policy presumes there is a need for one IRTP of reasonable size per district. The applicant must, however, establish that there is not presently a licensed IRTP in the district and that it proposed to establish an IRTP of reasonable size. Griffin was not able to explicate this non-rule policy based upon health planning concerns, considerations or factors. Sharon Gordon-Girvin, Administrator of the Department's Office of Community Medical Services and Facilities, was also unable to articulate or explicate a health planning basis for this policy. Rather, the only basis enunciated at hearing by the Department for this non-rule policy was its statutory interpretation of Sections 395.002(8) and 395.003(2)(f), Florida Statutes, as renumbered by Section 34, Chapter 87-92, Laws of Florida. Need And Consistency With State And Local Health Plans There are no licensed IRTPs in District VI. Manatee Palms is a residential treatment center for children and adolescents located in Manatee County, but it is not licensed by the Department as an IRTP. Relevant issues identified in the District VI Local Health Plan are stated as follows: As a general policy, the least restrictive, most cost effective setting and programs should be used. The State of Florida, as a major purchaser of mental health and substance abuse services, can continue to lead the way by encouraging the development of non-hospital alternatives and by purchasing services from them preferentially. Another important issue in psychiatric care is the trend toward hospitalization of children who have behavior and conduct disorders, and who should more appropriately be served through non-hospital alternatives. . . At the present time, the severe emotionally disturbed or emotionally handicapped (SED/EH) child or adolescent is served in a broad range of programs. There are crisis stabilization units (CSUs) for stabilizing the adult client in acute crisis. Currently CSU services for children and adolescents are not adequate throughout the District. Intensive residential, day/night program, group and foster homes are for the client requiring close supervision. Relevant policies set forth in the District Local Health Plan are as follows: The multi-modality approach as expressed in the community mental health (and substance abuse) system should be considered a model of programming, staffing, facility requirements, costs, etc., against which applications for inpatient services should be reviewed. Review of applications for inpatient psychiatric and substance abuse services should include comment from the Alcohol, Drug Abuse and Mental Health Program Offices of DHRS. No additional psychiatric and/or substance abuse beds should be granted approval unless the capacity of current hospital providers is being fully utilized (75 percent occupancy rate annual). Additional psychiatric and/or substance abuse beds should be through conversion of existing beds. The State Health Plan sets forth the following relevant policies and statements: The goal of (mental health) services is (to) . . . provide educational; mental health treatment; and when needed, residential services for severely emotionally disturbed students. It is the intent of the Legislature that the least restrictive means of intervention be employed based on the individual needs of each patient within the scope of available services . . . The program goals for each component of the network are . . . to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs. Sufficient funding for the development of residential treatment and community support services is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses. In addition, the following relevant goals are contained in the State Health Plan: Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services. Bring about changes in third party reimbursement policy for psychiatric and substance abuse care which would promote the development of the most appropriate, cost-effective treatment settings . . . Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1989 . . . Develop residential placements within Florida for all SED children currently receiving treatment in out of state facilities by 1990. The FRTC application is consistent with the above cited relevant portions of the state and local health plans. It is consistent with the State Health Plan which reflects and emphasizes the trend toward deinstitutionalization and the current emphasis on education, treatment and residential services for severely emotionally disturbed students rather than what has been the traditional approach to treatment in an institutional setting, a generally more costly approach from a capital cost and staffing perspective. The FRTC application promotes treatment within the State and will assist in reducing out of state placements. Through the report and testimony of Ronald T. Luke, Ph.D., J.D., and despite the testimony of Jay Cushman, both of whom were accepted as experts in health planning, FRTC established the need for, and reasonableness of, its 60 licensed IRTP beds in District VI, with 50 percent occupancy in the first year and 60 percent in the second year, using two bed need assessment methodologies. First, using the ratio of licensed IRTP beds in other service districts to population ages 0-17 years old, a range of .07 to 1.33 beds per 1,000 population is identified. Using 1991 population projections for District VI, the 60 bed FRTC facility would result in a bed to population ratio of .17 per 1,000 population aged 0-17 years. Since there are no licensed beds in the current inventory, no adjustment of this ratio must be made to account for existing beds. Thus, the FRTC application is within the range of ratios of currently licensed IRTPs in other districts, and is therefore reasonable. Second, a utilization methodology identifies an intensive residential treatment bed need of 90 in 1987 to 95 in 1991, with target occupancy rates of 90 percent. This methodology is based upon 1987 and 1991 population projections. Using a census rate per 100,000 population of 21.58 which is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, an average daily census of 74 in 1987 and 78 in 1991 is derived. Thus, FRTC has established a need for its facility in District VI, given its projected occupancy levels, and given that there are no licensed beds currently in the District. It is important to recognize that the bed ratio analysis is based upon licensed intensive residential treatment beds in Florida, and is therefore clearly relevant and credible to the issues in this case. The utilization methodology supports and confirms the need found thorough the bed ratio analysis, although it is noted that this methodology, by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need. It is, however, persuasive and credible in confirming the bed ratio analysis. Accessibility To All Residents FRTC projects only 1.5 percent indigent care and 8 percent bad debt. Its projection for private pay patients is 25 percent and for insurance covered care is 65.5 percent. This is a marginal and insignificant indigent load. There is no provision for services to state-funded patients. FRTC's projected utilization by class of pay is reasonable. The clear purpose of this application is to enable FRTC to become licensed as a hospital under Section 395.002, Florida Statutes, and thereby enable it to be called a "hospital". It was established through the testimony of Dwight Hood, who was accepted as an expert in health care finance and health care third party payments, that if a facility is licensed as a hospital it has a significant advantage for reimbursement from third parties who more readily reimburse for care in a licensed facility than in an unlicensed residential treatment center. Therefore, accessibility will be increased for those children and adolescents in need of this care whose families have insurance coverage, since it is more likely that payments under such third party coverage will be made at an IRTP licensed as a "hospital" than otherwise. Quality of Care The applicant has clearly demonstrated its ability to provide quality care to its patients, based upon the testimony of C. Hal Brunt, M.D., Robert Friedel, M.D. and G. L. Tischler, M.D., who were accepted as experts in psychiatry, and notwithstanding the testimony of Howard Goldman, M.D., and Glen Lewis, M.D., who were also accepted as experts in psychiatry. FRTC is a wholly owned subsidiary of Charter Medical Corporation which has experience in the operation and management of a residential treatment center, Charter Colonial Institute in Virginia, and also has extensive experience in providing quality health care at five hospitals in Florida, including Charter Hospital of Tampa Bay. The treatment program at FRTC will be adapted to local community needs. In providing quality care, FRTC will assign patients to the correct level of care within the facility by insuring that they are seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee, completing appropriate patient assessments and developing integrated treatment programs which are regularly updated, making appropriate treatment outcome assessments, and providing for continuity of care for patients leaving the IRTP through the development of a community-wide continuum of care. Charter has six out-patient counselling centers located within two hours of the FRTC proposed facility. It is both reasonable and appropriate to structure psychiatric treatment and care in a hospital setting within a "levels system" that rewards and reinforces desired behavior, and FRTC will utilize a "levels system" in its highly goal oriented patient treatment programs. Quality of care is not dependent upon a hospital's environment and physical facilities, according to Dr. Goldman. The floor plan proposed by FRTC is functional and is a proto- typical design used by Charter in approximately fifty locations, although not as an IRTP. The criticisms of the floor plan and facility design to which Maxine Wolfe, Ph.D., and Glen Lewis, M.D., testified do not establish that the applicant will be unable to provide quality care in this facility. While the Petitioners might design a facility differently, and specifically provide for a different orientation of the nurses' station relative to the patient wings, a different location for the dining room, more rooms where a patient can have privacy, and more opportunity for individualized treatment, these preferences do not establish that FRTC's floor plan and design will impair the quality of care rendered at this proposed facility. It is also noted that Dr. Wolfe testified critically about residential treatment in general, and expressed the opinion that residential treatment in a hospital is not beneficial and that children should never be treated in a large facility of any kind under any circumstance. Her testimony clearly establishes her bias and impairs her own credibility and the weight to be given to her testimony in this case. Availability and Adequacy of Alternatives Although there are no licensed IRTPs in District VI residential treatment and/or psychiatric services are currently available to children and adolescents through Manatee Memorial (9 beds), Manatee Palms (60 beds), Glenbeigh (14-16 beds), Sarasota Palms (60-70 beds), Sarasota Memorial Care Center (30 beds), Children's Home in Tampa (68 beds) and Northside Center in Tampa (12 beds). The average of length of stay at the significant majority of these facilities is up to 90 days, and they also attract patients from outside District VI. FRTC proposes to serve patients who require an average length of stay of a year. Some of these facilities serve patients with a dual diagnosis that includes substance abuse whereas FRTC will not. Therefore, these facilities do not offer adequate alternatives for the patients which FRTC is seeking to serve. Further, it was not established that outpatient or ambulatory services represent an adequate and appropriate alternative to an IRTP. Availability of Resources The total project cost of $4,303,020 will be funded through an equity contribution from Charter Medical Corporation and through a conventional loan. Assuming a 50 percent occupancy rate (30 beds) in its first year of operation, the proposed facility will have a staff of 43 positions, 27 of which will represent personnel who will be direct nursing or staff support for the patients, including social workers, psychologists, staff registered nurses, mental health workers, patient care coordinator, nursing supervisors, occupational and recreational therapists and special education teachers. A part-time medical director will also be available. This results in a ratio of 1.4 positions per patient. In comparison, Manatee Palms has a 1.8 staffing ratio based on a census of 55 patients. FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients. FRTC will recruit personnel through direct advertising, community contacts, posted notices, job fairs, and school visits. It will compete with unlicensed residential treatment centers, as well as short and long term psychiatric hospitals, in attracting staff for its facility. Although only six mental health workers are identified in FRTC's list of manpower requirements, and it would be beneficial to the level of treatment and care to increase this number, nevertheless, the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation. Staff salaries proposed by FRTC are reasonable and realistic, although its proposed salaries for nurses and mental health workers are higher than that available at Manatee Memorial. Existing facilities may have to increase their salaries to the levels proposed by FRTC to continue to retain and attract qualified staff, particularly nurses and mental health workers. Recruitment difficulties have been experienced in the District VI area for nurses, social workers, mental health workers and occupational therapists. However, it appears that FRTC will be able to attract qualified applicants for all positions due to the level of salaries offered and quality of care provided. Financial Feasibility Net revenues from the first year of operation are projected to be $100,000, which represents 2.3 percent of the capital expenditure as a return on investment. In the second year of operation, net revenues are projected to be $302,000, a 7 percent return on investment. Both years show a fair return on investment, and the pro forma establishes the financial feasibility of this project. In preparing the pro forma for this project, William S. Love, who was accepted as an expert in health care finance, used the reasonable assumption of 50 percent occupancy in the first year of operation and 60 percent in the second year. Despite the testimony of Jay Cushman, who was accepted as an expert health planner, it was not established that FRTC's location will preclude these occupancy rates. Love also assumed patient revenues of $300 per day and an average length of stay of one year. Utilization by class of payor was estimated to be 65 1/2 percent insurance, 25 percent private pay, 8 percent bad debt and 1 1/2 percent indigent care. It was assumed there would be no Medicare or Medicaid. Assumptions regarding patient revenues and utilization by class of payor are reasonable based on the testimony of Love, Luke and Dwight Hood, as well as a survey of insurance benefits available through employers, and despite the testimony of Christopher Knepper, who was accepted as an expert in health care finance. Knepper's testimony is applicable to unlicensed residential treatment centers rather than an IRTP. Therefore, his criticism of the pro forma as underestimating bad debt and overestimating the private pay portion is not persuasive since it disregards the fact that a licensed IRTP, due to its status as a specialty hospital, will have an increased ability to attract patients with insurance and with an ability to pay deductibles and other unreimbursed costs for care. It was established that a residential treatment center licensed as a specialty hospital has a significant advantage in terms of an improved payor mix over unlicensed facilities because of its recognized status with insurance companies. In addition, Knepper's testimony at hearing concerning the financial feasibility of this project conflicted with estimates made during discovery, and his explanation of such discrepancy was not credible. This conflict in Knepper's position at hearing and during discovery reduces the weight to be given to his testimony. FRTC assumed it would not be subject to the indigent care tax, but even if it were subject to the tax this would only add $29,000 in expenses, and therefore not affect the financial feasibility of the project. A management fee will be charged by Charter Medical Corporation, although this is not separately shown on the pro forma. It is the position of FRTC that this fee is associated with home office costs which will exist without regard to this facility. However, this fee, as well as additional construction costs of approximately $70,000, will not affect the financial feasibility of this project since salary costs associated with administration, as well as data processing costs have been separately shown and included on the pro forma as expenses, even though they are sometimes included in a management fee. FRTC's estimate of gross patient revenue of $300 per day for the first year of operation is substantially higher than other facilities offering like services. Net revenues per day during the first year of operation are estimated to be $265.30. Total direct expenses are estimated to be $198.70 for the first year, with total expenses per patient day estimated at $250.50 in the first year. A 7 percent inflation factor was used for the second year of operation, and this is a reasonable inflation factor. Impact On Costs and Competition As previously noted, salary estimates for nurses and mental health workers for this project are above those provided at Manatee Memorial, and therefore could reasonably be expected to increase salaries in these categories for some facilities in the area. The all inclusive charge of $300 per day proposed by FRTC is greater than Manatee Palm's average gross charge of between $270 - $280 per day. It is likely that paying patients, including patients with insurance coverage, who would otherwise be treated at Petitioners' facilities, will be treated at FRTC if this application is approved. However, the extent of such a loss in paying patients due to FRTC is unclear since Manatee Palms is recently receiving greater acceptance by insurers for reimbursement purposes, and Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC. Reasonableness of Costs The equipment cost estimate of $360,015 is reasonable. This finding is based on the testimony of Susan Hickman, who was accepted as an expert in health care facility equipment. The equipment and beds are appropriate for an IRTP of this size. The total cost of $707,897 for telephones, signage, graphics, interior design and equipment is also reasonable. The construction cost estimate of $2,010,823 is reasonable. This finding is based on the testimony of Patrick A. Regan, who was accepted as an expert in health care facility construction budgeting. Due to the conservative nature of the cost figures, a 2 1/2 percent contingency is adequate, rather than the normal 5-6 percent contingency. The contingency could be used for unbudgeted items such as stucco siding and hard ceilings. FRTC owns the facility site, which was purchased for $664,000.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order approving FRTC's application for CON 4825. DONE AND ENTERED this 22nd day of December, 1987 in Tallahassee, Florida. DONALD D. CONN 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 22nd day of December, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2036, 87-2049 Rulings on the Joint Proposed Findings of Fact filed by FRTC and the Department: 1 Adopted in Findings of Fact 1, 27. 2-4 Adopted in Finding of Fact 6. 5 Rejected as irrelevant and unnecessary. 6-9 Adopted in Findings of Fact 8, 29, but otherwise rejected as cumulative and unnecessary. 10-11 Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted in Findings of Fact 8, 47. Adopted in Finding of Fact 8. 15-16 Adopted in Finding of Fact 46, Adopted in Finding of Fact 27. Adopted in Finding of Fact 28, but otherwise rejected as irrelevant and unnecessary. Adopted in Findings of Fact 9, 10 but otherwise rejected as unnecessary. Rejected as irrelevant and unnecessary. 21-22 Adopted in Finding of Fact 9. Adopted in Finding of Fact 28, but otherwise rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 9, 10, 27. Adopted in Finding of Fact 9. 27-30 Adopted in part in Findings of Fact 27, 28, but otherwise rejected as unnecessary. 31 Adopted in Finding of Fact 9. 32-34 Adopted in Findings of Fact 27, 28, but otherwise rejected as unnecessary. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary. Adopted in Findings of Fact 33, 35. Adopted in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Finding of Fact 12. Rejected as unnecessary. Adopted in part in Finding of Fact 39, but otherwise rejected as unnecessary. Adopted in Finding of Fact 40. Adopted in Finding of Fact 42. Adopted in Finding of Fact 39. Adopted in Finding of Fact 40. Adopted in Finding of Fact 38. Adopted in Finding of Fact 39. 50-57 Adopted in Findings of Fact 26, 39, but otherwise rejected as cumulative and unnecessary. 58 Rejected as unnecessary. 59-61 Adopted in Finding of Fact 15, but otherwise rejected as irrelevant, unnecessary or as a conclusion of law. 62 Adopted in Finding of Fact 16. 61 Adopted in Findings of Fact 6, 15, 16. Rejected as unnecessary and irrelevant. Rejected in Finding of Fact 17. Rejected in Finding of Fact 17, but adopted in part in Finding of Fact 26. Rejected as irrelevant and unnecessary. Rejected as unnecessary. 69-72 Adopted in part in Finding of Fact 24, but otherwise rejected as irrelevant since the Department's non-rule policy was not explicated and therefore cannot be relied upon. Rejected as unnecessary and irrelevant since the "reasonableness" of the facility's size is not at issue, the Department having failed to explicate its non-rule policy. Adopted in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary. Adopted in Findings of Fact 9, 31, but otherwise rejected as unnecessary. Rejected in Findings of Fact 24, 33, 35, 39. The proposed average length of stay of one year is found to be reasonable in Finding of Fact 10. Adopted in Findings of Fact 21, 22. 79-81 Adopted in Findings of Fact 19, 23, but otherwise rejected as unnecessary and cumulative. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 11, 18, but otherwise rejected as unnecessary. Adopted in Finding of Fact 31. Rejected as unnecessary. Adopted in part in Findings of Fact 11, 26 but otherwise rejected as unnecessary. 87-88 Adopted in Finding of Fact 3. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 3, 44, but otherwise rejected as unnecessary and cumulative. Rejected as simply a summation of testimony and therefore unnecessary. Adopted in part in Finding of Fact 4, but otherwise rejected as unnecessary. Rejected as simply a summation of testimony and not a Finding of Fact. Rejected as unnecessary and simply a summation of testimony. 95-96 Rejected as irrelevant, unnecessary and in part simply a summation of testimony. 97-98 Rejected as a summation of testimony and otherwise as speculative and irrelevant. 99 Rejected as simply a summation of testimony. 100-103 Rejected as irrelevant. 104 Rejected as a summation of, and argument on, the evidence rather than a Finding of Fact. Rulings on the Proposed Findings of Fact filed by Manatee Palms: Adopted in Findings of Fact 1, 27. Adopted in Finding of Fact 2. Adopted in Finding of Fact 3. Adopted in Finding of Fact 4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 6, but otherwise rejected as irrelevant. Adopted in part in Finding of Fact 7. Rejected as unnecessary, and as simply a statement of position. 9-11 Rejected as unnecessary and as otherwise covered in preliminary procedural matters. Adopted in Finding of Fact 8. Adopted in Finding of Fact 5, but otherwise rejected as unnecessary. Adopted in Finding of Fact 8. Adopted in Findings of Fact 9, 31, but otherwise rejected as simply a summation of testimony and position of the parties. Adopted in Finding of Fact 8. Adopted in Findings of Fact 10, 25, 39, 44. Adopted in Finding of Fact 14, but rejected in Finding of Fact 24. Adopted in Finding of Fact 17, but rejected in Finding of Fact 24. Rejected in Findings of Fact 21, 22, 23. Rejected as simply argument and a statement of position rather than a Finding of Fact. Adopted in part in Findings of Fact 25, 39. Rejected in Findings of Fact 21, 22, 23. 24-26 Rejected in Findings of Fact 19, 20, 23. Adopted in Findings of Fact 19, 44, but rejected in Finding of Fact 23. Rejected in Findings of Fact 23, 24. Adopted in Finding of Fact 17. Adopted in Findings of Fact 16, 17. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17. 34-42 Rejected as irrelevant and unnecessary. This is a de novo proceeding through which final agency action will be taken, and therefore preliminary agency findings are irrelevant to a determination of the issues in this case which must be decided based upon evidence presented at hearing. Rejected as simply a statement of position without any citation to the record. Adopted in Finding of Fact 24. 45-46 Rejected in Finding of Fact 24. 47-48 Adopted and rejected in part in Finding of Fact 24. 49-60 Rejected in Finding of Fact 24. Rejected as simply a conclusion of law. Rejected as without citation to the record and as simply a statement of position rather than a Finding of Fact. Rejected as irrelevant. Adopted in part in Finding of Fact 3. Adopted in Finding of Fact 3. 66-70 Rejected as unnecessary and cumulative, since it is established that services are similar or identical to those proposed by FRTC. Adopted in Findings of Fact 3, 44. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 3, but otherwise rejected as cumulative and unnecessary. Rejected in Findings of Fact. 26, 39 and otherwise as irrelevant. Rejected as irrelevant and otherwise not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 30. Rejected as simply a statement of position, without citation to the record. Rejected as simply a conclusion of law. 80-81 Adopted in part in Finding of Fact 8, but otherwise rejected as not based on competent substantial evidence. 82 Rejected as unnecessary. 83-84 Rejected in Findings of Fact 33 and 35, and otherwise as irrelevant. Rejected as simply a conclusion of law. Rejected in Finding of Fact 34. Adopted in Finding of Fact 37. Adopted in Findings of Fact 34, 36. 89-90 Rejected in Findings of Fact 35, 37. Rejected as simply a conclusion of law. Adopted in Finding of Fact 39. Rejected as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. Rejected as irrelevant. Adopted in part in Finding of Fact 39, but otherwise rejected as irrelevant and unnecessary. 98-100 Adopted in Finding of Fact 39. 101-102 Adopted in Findings of Fact 38, 39. 103-109 Rejected in Finding of Fact 39, and otherwise as not based on competent substantial evidence. Rejected in Findings of Fact 26, 29. Rejected in Finding of Fact 39. Rejected in Finding of Fact 35, and otherwise as irrelevant. Rejected in Findings of Fact 38, 39, 42. Adopted in Finding of Fact 39. 115-117 Adopted and rejected in part in Finding of Fact 40, but otherwise rejected as irrelevant. Adopted and rejected in part in Findings of Fact 8, 40, but otherwise rejected as not based on competent substantial evidence. Rejected in Findings of Fact 38-42. Rejected as a conclusion of law. Rejected as not based on competent substantial evidence. Adopted in Findings of Fact 34, 37. Adopted in Finding of Fact 36. Rejected as not based on competent substantial evidence. Adopted in part in Finding of Fact 45. Rejected as not based on competent substantial evidence and without citation to the record. Rejected as a conclusion of law. 128-129 Rejected as simply a comment on the evidence and not a Finding of Fact. Adopted in part in Finding of Fact 8. Rejected in Finding of Fact 47. Rejected as irrelevant. Adopted in part in Finding of Fact 8, but otherwise rejected as irrelevant and not based on competent substantial evidence. Rejected as simply a statement of position and argument. Rulings on Proposed Findings of Fact filed by Manatee Memorial: 1-2 Adopted in Finding of Fact 1. 3-4 Rejected as irrelevant. 5 Adopted in Findings of Fact 8, 29. 6-7 Rejected as irrelevant to a determination of the issues in this case. 8-10 Adopted in Finding of Fact 3. Adopted in part in Findings of Fact 34, 36, 45. Adopted in Finding of Fact 2. 13-22 Adopted in Finding of Fact 4, but otherwise rejected as irrelevant or unnecessary. Rejected in Finding of Fact 24 and otherwise rejected as not based on competent substantial evidence. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 34, 36. Rejected as speculative and not based on competent substantial evidence. Rejected as irrelevant. Adopted in Finding of Fact 6. Adopted in Findings of Fact 1, 5, 10, but rejected in in Finding of Fact 44. 30-32 Adopted in Finding of Fact 6. 33 Adopted in Finding of Fact 7. 34-39 Rejected as unnecessary. Adopted in Finding of Fact 15. Adopted in Finding of Fact 14. Adopted in Finding of Fact 17. 43-45 Adopted in Finding of Fact 16. Rejected as unnecessary and irrelevant. Since Mr. Griffin is the highest level departmental representative who testified at hearing, his statement of the non-rule policy is presumed to be correct. Rejected in Finding of Fact 16. Rejected in Finding of Fact 16 and otherwise as unnecessary and irrelevant. 49-51 Rejected as irrelevant since this is a de novo hearing by which final agency action will be taken. Rejected as simply a conclusion of law. Rejected in Findings of Fact 21-23. Adopted in Finding of Fact 39. 58-60 Rejected in Findings of Fact 21-23 and otherwise as irrelevant. 61-63 Rejected in Findings of Fact 19, 20, 23. Adopted in Finding of Fact 30, but rejected in Finding of Fact 31. Rejected in Finding of Fact 39 and otherwise as irrelevant. Adopted in Finding of Fact 25 and rejected in Finding of Fact 26. Rejected in Findings of Fact 26, 39, 42. Adopted in part in Findings of Fact 38, 39, 44. Rejected in Findings of Fact 24 and 39. Rejected as speculative, and not based on competent substantial evidence. 71-79 Rejected in Findings of Fact 26, 38, 39 and otherwise rejected as not based on competent substantial evidence. 80-83 Rejected in Findings of Fact 33, 35. Rejected in Findings of Fact 33, 35, 38, 39, 42. Rejected in Findings of Fact 39, 40. Rejected in Findings of Fact 38-42. Rejected in Finding of Fact 37. Adopted in Finding of Fact 33. Rejected in Finding of Fact 33. Rejected in Finding of Fact 35. Rejected in Findings of Fact 27, 33, 35. Rejected in Finding of Fact 37. Rejected as unnecessary. 94-95 Rejected in Finding of Fact 37. 96 Adopted in Finding of Fact 36. 97-100 Rejected in Findings of Fact 28, 29. 101-102 Adopted in Finding of Fact 8. 103-105 Rejected in Finding of Fact 29. 106 Rejected in Finding of Fact 8. 107-109 Rejected in Findings of Fact 27, 28, 29 and otherwise not based on competent substantial evidence. 110 Rejected as irrelevant. 111-112 Rejected in Finding of Fact 9. Rejected in Findings of Fact 9, 27, 28, 29. Adopted in Finding of Fact 8. 115-116 Rejected as irrelevant. Adopted in Finding of Fact 8. Adopted in Finding of Fact 47. Adopted and rejected in Finding of Fact 47. Adopted in Finding of Fact 8 and rejected in Finding of Fact 47. Rejected as irrelevant. Adopted and rejected in Finding of Fact 47. Adopted in part in Findings of Fact 3, 4. Adopted in Findings of Fact 25, 39, 45. 125-127 Rejected as speculative and not based on competent substantial evidence. 128-130 Rejected as irrelevant and unnecessary. COPIES FURNISHED: John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302 Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302 William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Co. Tower 25 Park Place Atlanta, Georgia 30303 Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 John T. Brennan, Jr., Esquire 900 Seventeenth Street, N.W., Suite 600 Washington, DC 20006 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Fl 32399-0700 =================================================================
Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
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
The Issue The issue presented herein is whether or not a CON to construct a 60-bed short-term psychiatric hospital in District XI should be issued to Florida Medical Center (FMC).
Findings Of Fact FMC seeks a CON for a 60-bed free-standing psychiatric facility to be located in the Key Largo area of Monroe County in HRS District XI. FMC intends to provide 6.25 percent of its patient days at no charge to indigent patients. It further intends to provide another 6.25 percent of its patient days to HRS' clients and Baker Act patients at 50 percent of its projected charge, or $200 per day. (FMC Exhibit 2, Table 7). FMC proposes to build this facility at a cost of $6,060,000. Dr. Richard Matthews, Ph.D., has been executive director of the Guidance Clinic of the Upper Keys since 1973 and is a clinical psychologist. He is responsible for the overall administration and supervision of mental health, alcohol, drug abuse and out-patient services provided under contract with HRS. Dr. Matthews was qualified as an expert in clinical psychology and the mental health delivery health system in Monroe County. (FMC Exhibit 13). There are three guidance clinics in Monroe County, one each for the upper, lower and middle Keys. HRS contracts through each of these clinics to provide mental health care for its clients. There are no community mental health centers in Monroe County and the clinics are the sole means of delivering mental health care on behalf of HRS' clients within the county. Currently, the guidance clinic of the upper Keys places its in- patients in Harbor View Hospital in Dade County at a cost of $236 per day. Neither Harbor View nor any other hospital provides free days to any of the guidance clinics for in-patient psychiatric care. (FMC Exhibit 13, P. 9) Jackson Memorial Hospital does not accept indigent or charity psychiatric patients from Monroe County. There have been occasions where patients without resources have been unable to be hospitalized although hospitalization was indicated. The middle Keys has a crisis hospitalization unit with a limited number of beds. Patients needing hospitalization longer than three days must be transferred to Harbor View or some other facility in the District. The 15 beds at Depoo Hospital in Key West are not readily accessible to residents of the upper Keys. Residents needing psychiatric services usually go to hospitals in Dade County. Coral Reef Hospital, the nearest psychiatric facility to Petitioner's proposed facility, has in the past refused to negotiate a discounted rate with the guidance clinic. Dr. Matthews, on one occasion, sent a patient to Coral Reef who was refused treatment. Currently, no psychiatrist practices in Key Largo because there are no psychiatric beds to which a psychiatrist could admit patients. The discounted rate of $200 per day quoted by FMC is some $36 per day less than the guidance clinic currently pays to providers for referrals of its patients for psychiatric care. Additionally, the 6.25 percent of free care that Petitioner proposes is greater than the free care which the guidance clinic currently receives from any facility since no facility presently gives any free care to the clinic. The guidance clinic supports Petitioner's CON application and will contract with Petitioner who provides services for in-patients. Grant Center is a long-term 140-bed psychiatric hospital specializing in the treatment of children and adolescents. It is the nearest facility to Petitioner's proposed facility. Grant Center has agreed to refer adult patients to Petitioner. Grant Center treats 2-3 adults a month who need psychiatric care. (FMC Exhibit 14). There is one hospital providing psychiatric care in Dade County which was surveyed by the Health Care Finance Administration (HCFA) in March, 1988. Currently, a third party insurance carrier no longer utilizes Grant Center because of price. If a facility has prices which carriers consider too expensive, utilization will go down. (FMC Exhibit 14, P. 7). Grant Center currently contracts with HRS to provide its clients care at a rate of approximately $350 per day, a rate one half of Grant Center's normal rate. Jackson Memorial is the only Dade County hospital which will treat an indigent psychiatric patient. Grant Center intends to assist Petitioner with staffing or programmatic needs. It has 80-100 professional staff, most of whom live in close proximity to Key Largo. Robert L. Newman, C.P.A., is the chief financial officer at FMC. He testified, by deposition, as an expert in hospital accounting and finance. Newman analyzed the Hospital Cost Containment Board (HCCB) reports for each hospital in District XI which provides psychiatric care. There is no free standing psychiatric hospital in the District which reports any indigent or uncompensated care. Among area acute care hospitals which have psychiatric units, Miami Jackson rendered 38.89 percent indigent care, Miami Children's rendered 6.5 percent indigent care, and no other facility reported that it rendered more than 1.75 percent indigent care. (FMC see Exhibit 11, disposition exhibit 1). Jackson provides no free care to Monroe County residents and Miami Children's care is limited to treating children while Petitioner is seeking adult beds. Jayne Coraggio testified (by deposition) as an expert in psychiatric staffing and hiring. She is currently Petitioner's director of behavioral sciences. The ideal patient to staff ratio is 4 to 5 patients per day per professional staff member. During the evening shift, the ideal patient ratio per professional staff member is 7 to 8 patients. (FMC Exhibit 12, PP. 6-7). Petitioner's facility is adequately staffed based on the above ratios. FMC is considered overstaffed in the psychiatric unit by some of the other area hospitals since they do not staff as heavily as does Petitioner. Lower staffing ratios can affect quality of care since patients and their families would not receive as much therapy. Family therapy is important because the family needs to know about changes in the patient in order to make corrective adjustments. The family that is required to travel in excess of 45 minutes or more one way is less likely to be involved in family therapy. Islara Souto was the HRS primary reviewer who prepared the state agency action report (SAAR) for Petitioner's CON application. (FMC Exhibit 15). District 11 has subdivided into five subdistricts for psychiatric beds. Florida is deinstitutionalizing patients from its mental hospitals. To the extent that private psychiatric hospitals do not accept nonpaying patients, their existence will not solve the problem of caring for such patients. Souto acknowledged that the local health councils conversion policy discriminates against subdistrict 5 because there are so few acute care beds in the subdistrict. In fact, the conversion policy actually exacerbates the maldistribution of beds in the district. (FMC 15, page 26). The psychiatric facility nearest the proposed site (Coral Reef), had an occupancy of 90.3 percent. Souto utilized a document entitled Florida Primary Health Care Need Indicators, February 1, 1986, and determined that Monroe County has not been designated as a health manpower shortage area, nor a medically underserved area. This information is relied upon by health planners to determine the availability of health manpower in an area. This report refers both to physicians and R.N.'s. The average adult per diem for free-standing hospitals in District 11 range from $430 at Charter to just over $500 at Harbor View. Although districts have established subdistricts for psychiatric beds, no psychiatric bed subdistrict in any district has been promulgated by HRS as a rule. The access standard that is relevant to this proceeding is a 45-minute travel standard contained in Rule 10-5.011(1)(o)5.G. That standard states: G. Access Standard. Short-term inpatient hospital psychiatric services should be available within a maximum travel time of 45 minutes under average travel conditions for at least 90 percent of this service area's population. Here, the standard refers to the service area which is determined to be an area different than a service district. Applying the travel time standard on a service area basis makes the most sense since the subdistrict is established by the local health council and not the applicant. Analyzing this access standard on a sub-district level, 90% of the sub-districts population is not within 45 minutes of any facility anywhere in sub-district V since the sub-district is more than two hours long by ordinary travel and the population is split two-thirds in lower Dade County and one-third in Monroe County, the bulk of which is in Key West. (FMC Exhibit 17). Therefore, a facility located on either end of this sub-district is not readily accessible by the applicable travel standards to citizens at the other end of the sub-district. This access standard must however be measured and considered with the needs for psychiatric services of the kind Petitioner is proposing to provide. Petitioner has not presented any access surveys or assessments of the caliber relied upon by the Department in the past. Petitioner's facility which would be located in the Key Largo area will no doubt provide better geographic accessibility to residents of District XI who live in the Key Largo area. HRS has in the past used a sub-district analysis to determine geographic accessibility for psychiatric beds even though it has not promulgated a rule for sub-districts for psychiatric beds. See, for example, Psychiatric Hospital of Florida vs. Department of Health and Rehabilitative Services and Pasco Psychiatric Center, DOAH Case No. 85-0780. Likewise, the Department has approved the conversion of acute-care beds to psychiatric beds even though it found that there was a surplus of psychiatric beds in the district. (Petitioner's Exhibit 7). The Department has in the past used a geographic access analysis to approve psychiatric beds in District XI and has used the sub- district analysis or a time travel analysis in its review of Cedars, Coral Reef, Depoo (for psychiatric beds) and the Glenbiegh case (for long term substance abuse). The bed need calculations for the January, 1992 planning horizon shows a surplus of 180 short-term in-patient psychiatric beds. (HRS Exhibit 2). The occupancy level for short-term psychiatric beds in the district is below 70%. (HRS Exhibit 2, pages 11-12). Additionally, the occupancy standards of the local and state health plan, of which the department is required to review CON applications, have not been met in this instance. (HRS Exhibit 2, Pages 6-7). Petitioner has not submitted any documentation to HRS regarding special circumstances need. Petitioner's proposal at final hearing for a staff referral agreement with another local hospital was not contained in the CON application filed with HRS. (FMC Exhibit 14, pages 11-12). Although Petitioner has alluded to some unspecified access problem for residents in the Florida Keys, Petitioner has not documented a real access problem and certainly not a demonstration of inaccessibility under the rule access standard. (Florida Administrative Code Rule 10-5.011(1)(o)5.g.)(HRS Exhibit 2, pages 14-15). Although the proposed project would increase availability and access for underserved groups in the district, the percentage of total patient days for "indigents" is not substantial and certainly not to the point to warrant deviation from the usual access criteria. 2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, IT IS RECOMMENDED THAT: Petitioner's application for a Certificate of Need to build a 60-bed free- standing psychiatric hospital in District XI be DENIED. DONE and ENTERED this 28th day of February, 1989 in Tallahassee, Florida. JAMES E. BRADWELL 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 28th day of January, 1989.
