The Issue The issue for determination is whether the Petitioner is liable to the Agency for Health Care Administration ("Agency") for Medicaid reimbursement overpayments and related fines, costs, and interest.
Findings Of Fact The Agency is the single state agency charged with administration of the Medicaid program in Florida under Section 409.907, Florida Statutes. The Petitioner provides physician services to Medicaid beneficiaries pursuant to a contract with the Agency under provider number 037381800. The Agency sent the Petitioner a Preliminary Agency Audit report on June 30, 1998, notifying him of a preliminary determination of Medicaid overpayments in the total amount of $21,156.35. The Agency sent the Petitioner a Final Agency Audit Report on October 28, 1998, confirming the Agency's determination of Medicaid overpayments in the total amount of $21,156.35. The Agency's determination of overpayment was based upon findings that obstetrical echography services "were billed and paid in violation of Medicaid policy governing those services." The Agency performed an audit of the Petitioner for the period January 1, 1993, through October 31, 1996. According to the Agency audit report, the Petitioner's records contained violations of two billing policies outlined in the Medicaid Physician Provider Handbook. The first violation was that the Petitioner billed and received payment for more than one initial ultrasound procedure per pregnancy, and the second was that the Petitioner failed to submit documentation of medical necessity for additional procedures. During the years examined by the audit, Medicaid policy allowed providers to bill for more than one complete initial procedure per patient, so long as providers filed supporting documentation of medical necessity. However, the documentation submitted by the Petitioner indicated that the additional ultrasound procedures he conducted were mere follow-up procedures, instead of medically necessary complete procedures. According to the terms of the Medicaid Physician Provider Handbook, "[i]f more than two (or any combination of two) ultrasounds are performed during a pregnancy, they must be billed with modifier-22 and a report documenting the medical necessity for the procedure." The Petitioner submitted bills for more than two ultrasound treatments per recipient without explaining why the procedures were medically necessary. The Agency audit report established that the Petitioner has been overpaid as a result of the Petitioner's erroneous billings. The total overpayment to the Petitioner was calculated as "the difference between what he got paid for a complete procedure and the amount that he should have gotten paid for the follow-up." The Agency records received in evidence and the testimony of the Agency's witness establish that the amount overpaid to the Petitioner totaled $21,156.35. The Petitioner, as an authorized provider of Medicaid services, had signed a Medicaid Provider Agreement. That agreement states, among other things, that the "provider agrees to submit Medicaid claims in accordance with program policies." When the Petitioner became a certified Medicaid provider, he received a handbook outlining billing procedures for the performance of diagnostic ultrasounds. The Petitioner admitted that he knows "little about billing," that he "didn't involve [himself] in the billing at all," and that he has never read the Physicians' Current Procedural Terminology book, which sets forth the universally used billing codes.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that the Agency issue a final order requiring the Petitioner to reimburse the Agency for overpayments in the total amount of $21,156.35, plus such interest as may accrue as of the date on which payment is made. DONE AND ENTERED this 3rd day of January, 2001, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of January, 2001.
The Issue The parties have stipulated that these cases are properly before the Division of Administrative Hearings for de novo review of the Petitioners' applications for a certificate of need and that this action is controlled by the provisions of Chapters 120 and 381, Florida Statutes, and Chapters 10-5 and 28- 5, F.A.C. The parties have further stipulated that portions of Section 481.494(6)(c), Florida Statutes (1984 Suppl.), and its counterparts under Section 10-5.11, F.A.C., have either been met or are not applicable. The portions of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), which the parties have stipulated have been met or do not apply and the parties' summary of the content of those subsections are as follows: (3) both applicants have the ability to manage and operate facilities such as those applied for; (6) need in the services district for special equipment and services not reasonably and economically accessible in adjoining areas; (7) need for research and training programs; (8) health and management manpower and personnel only. The remaining parts of (8) remain in issue; (10) special needs and circumstances of health maintenance organizations; (11) needs and circumstances of those entities which provide a special portion of their services or resources, or both, to individuals not residing in the service district. The parties stipulated that the remaining portions of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), remain in issue. Based upon the stipulations of the parties, the following issues require resolution: Is there a need for a 100-bed acute care hospital in Orange County, Florida? Do the Petitioners' proposals meet the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), which have not been stipulated to as having been met or as not being applicable? If a need exists for only one proposal and both Petitioners meet the appropriate criteria, which of the Petitioners should be granted a certificate of need? Should a certificate of need for a computerized axial tomography scanner (hereinafter referred to as a "CAT Scanner") be issued to AMI? Does Florida Hospital and/or OGH have the requisite standing to take part as parties in these proceedings?
Findings Of Fact AMI is a publicly traded for-profit Delaware corporation which owned, managed or operated 103 hospitals in the United States and 29 hospitals outside the United States as of January, 1985. AMI also owns, manages or operates a number of other health care facilities, i.e., psychiatric care facilities and freestanding outpatient surgery centers. AMI also owns a number of subsidiary corporations which provide a variety of technologies and services in support of its hospitals. In Florida, AMI owns 100 percent or a majority interest of 9 hospitals. In its proposed findings of fact AMI has indicated that it "operates" these 9 hospitals. The record supports this finding, although the record also supports a finding that the 9 hospitals are separate legal entities. AMI initially filed a letter of intent to file a certificate of need application with the Department for a 175-bed hospital in Orange County, Florida, for review in the August 15, 1983, batching cycle. The letter of intent was rejected because it had not been timely submitted to the local health council. On October 12, 1983, AMI filed a second letter of intent with the Department in which it informed the Department that AMI "or a to-be-formed wholly-owned subsidiary of AMI intends to file a Certificate of Need application for a 175-bed hospital to be located along Highway 50 in the vicinity of the University of Central Florida in Orange County, Florida." On October 19, 1983, seven days after the letter of intent was filed, Articles of Incorporation were filed for University Community Hospital of Orlando, Inc. (hereinafter referred to as "UCH, Inc."). UCH, Inc., is a for-profit Florida corporation. It currently owns no assets. AMI's application, which was reviewed in the November 15, 1983, batching cycle, was denied by the Department. AMI subsequently reduced the number of beds it had requested in its application from 175 to 100 beds. No change in the application with regard to the services to be provided has been made by AMI. Based upon its amended application AMI has proposed to construct and operate a 100-bed "full-service" acute care hospital to be located in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposed hospital will include a separate outpatient unit, an on-site stationary CAT Scanner, a 24-hour a day emergency room and birthing rooms and will provide therapeutic and diagnostic inpatient services, and community outreach and wellness programs. Tertiary care services will not be provided at the proposed hospital but AMI intends to contract with existing providers of tertiary care services to provide those services to its patients. AMI has projected that the total cost of its proposal will be $19,698,831.00. This figure includes $566,700.00 for architectural and engineering fees, $6,268,747.00 for equipment, $1,025,000.00 for the acquisition of land, $10,095,000.00 for construction, $250,000.00 for start-up costs and $1,285,385.00 for capitalized interest. The proposed AMI facility will include separate entrances for outpatient surgery and the emergency room. The facility has been designed to take into account the trend in health care to provide outpatient and ambulatory services. Two of the four proposed operating rooms in the facility will be used primarily for outpatient surgery. The 8 birthing rooms to be included in the facility are designed in recognition of the trend in health care to provide a room in which the family can participate in the birthing process. A delivery room will also be provided. Finally, classroom space will be provided in the facility for allied health services training and continuing education. Winter Park. Winter Park Memorial Hospital Association, Inc., is a not for-profit Florida corporation. It operates Winter Park, a 301 bed hospital in Winter Park, Orange County, Florida. The hospital provides a full range of medical services including a full-body CAT Scanner. Winter Park Memorial Hospital Association, Inc., qualifies for exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1954, as amended (hereinafter referred to as the "Code"), because it is an organization designated in Section 501(c)(3) of the Code. On October 31, 1983, Winter Park filed its letter of intent to file an application for a certificate of need with the Department in the same batching cycle as AMI. In its application Winter Park proposed to build a 100-bed acute care hospital in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposal does not include a CAT Scanner. Winter Park has projected that the total cost of its proposed facility will be $16,015,000.00. This amount includes $75,000.00 for project development, $50,000.00 for financing, $685,000.00 for professional services, $10,395,900.00 for construction, $4,457,700.00 for equipment and $351,400.00 for other related cost. Florida Hospital Florida Hospital is a not-for-project hospital owned by Adventist Health Systems Sunbelt, a division of the Adventist Church. Florida Hospital presently consists of 3 campuses: the main campus in Orlando and satellite campuses in Altamonte Springs, Seminole County, Florida and Apopka, Orange County, Florida. In the 75 years since the hospital was begun it has grown from a 20 bed hospital to its present size of 959 beds. Florida Hospital is a tertiary acute care hospital providing a full range of services including ambulatory surgery, a stationary full-body CAT Scanner, general inpatient medical and surgical services, obstetrics, pediatrics, psychiatric services, substance abuse treatment, open heart surgery, oncology and other services. Florida Hospital is involved in a number of teaching programs and internship programs. It is a teaching hospital with a number of positions dedicated to teaching, including a director of education. Florida Hospital would be substantially affected if a certificate of need is granted to either Petitioner. Florida Hospital has standing to intervene. OGH OGH is a not-for-profit 171-bed hospital located in Orlando, Orange County, Florida. It was founded in 1941 and has operated as a not-for-profit facility since 1945. OGH is licensed by the State of Florida as an acute care general hospital. The services provided by OGH include obstetrics, outpatient services, general inpatient medical and surgical services, pediatrics, a mobile CAT Scanner and other services. OGH would be substantially affected if a certificate of need is issued to either Petitioner. OGH has standing to intervene. THE NEED FOR ACUTE CARE HOSPITAL BEDS. Section 10-5.11(23), F.A.C. Pursuant to Section 381.494(6)(c), Florida Statutes (1984 Suppl.), the Department is responsible for determining whether health care facilities and services are needed in the State of Florida. To fulfill its responsibility with regard to acute care hospital beds, the Department has promulgated Section 10 5.11(23), F.A.C. Section 10-5.11(23)(b), F.A.C., provides the following Department goal: The Department will consider applications for acute care hospital beds in context with all applicable statutory and rule criteria. The Department will not normally approve applications for new or additional acute care hospital beds in any departmental service district if approval of an application would cause the number of beds in that district to exceed the number of beds calculated to be needed according to the methodology included in paragraphs (f),(g) and (h) below. A favorable Certificate of Need determination may be made when the criteria, other than bed need, as provided for in Section 381.494(6)(c), Florida Statutes, demonstrate need. An unfavorable Certificate of Need determination may be made when a calculated bed need exists but other criteria specified in Section 381.494(6)(c), Florida Statutes, are not met. Based upon this Department goal, the need for acute care hospital beds is first determined by service district based upon the methodology included in Section 10-5.11(23)(f)-(h), F.A.C. (Hereinafter referred to as the "Formula"). For purposes of the Formula, acute care beds include general medical and surgical, intensive care, pediatric and obstetrical beds. Section 10 5.11(23)(c), F.A.C. The Petitioners are proposing to build a hospital with general medical and surgical, intensive care and obstetrical beds. Therefore, the Formula must be applied to determine if there is a need for their proposed hospitals. Under the Formula, acute care bed need is to be determined five years in the future: 1990 in these cases. Generally, acute care bed need is determined under the Formula based upon two age cohort population projections, statewide service-specific discharge rates, statewide service-specific lengths of stay, statewide service-specific occupancy standards and patient flow adjustments. See Section 10-5.11(23)(f), F.A.C. The bed need for the service district determined in accordance with Section 10-5.11(23)(f), F.A.C., is adjusted based upon the service district's historical use rate and projected occupancy rate. Section 10-5.11(23)(g), F.A.C. The historical use rate to be used under the Formula is for the three most recent years and is based upon utilization of hospitals located in the service district. After applying the adjustment of Section 10-5.11(23)(g), F.A.C., one final adjustment is required to complete the determination of acute care bed need under the Formula. Section 10-5.11(23)(h), F.A.C. provides for an adjustment to reflect peak demand in the service district. Based upon the evidence presented at the final hearing of these cases, application of the Formula results in a net acute care bed need of 89 beds or 146 beds, or an excess of 464 beds. These projections are all for the Department's District 7, which consists of Orange, Seminole, Osceola and Brevard Counties, The Petitioners are proposing to build new hospitals in Orange County. The Formula projection of a net acute care bed need in District 7 of 89 beds is an outdated Department application of the Formula. The 146 net acute care bed need projection for District 7 is the Department's most current application of the Formula, dated March 12, 1985. The Department's most recent application of the Formula is not based upon a proper application of the adjustment for the District 7 projected occupancy rate and historical use rate under Section 10-5.11(23)(g), F.A.C. In making this adjustment, the Department relied upon utilization data in determining the District 7 historical use rate from 1981, 1982 and 1983. Section 10-5.11(23)(g), F.A.C., requires that the historical use rate be based upon the most recent three years available. In these cases 1982, 1983 and 1984 utilization data was available to the Department. The fact that incorrect utilization data was used in determining the District 7 historical use rate was confirmed by Mr. Eugene Nelson, the Director of the Office of Community Medical Facilities of the Department, Mr. Steve Windham, the Executive Director of the Local Health Council of East Central Florida, Inc., and Mr. Lawrence W. Margolis, an expert health planner. Mr. Nelson also indicated that if 1982, 1983 and 1984 utilization data had been used by the Department in applying the Formula a more "contemporary picture of what's actually happening" would have be given. Mr. Margolis did apply the Formula using the most current utilization data to calculate the historical use rate of District 7. Based upon the data used by the Department in its most recent projection of acute care bed need for District 7, but substituting the current utilization data of 1982, 1983 and 1984, an application of the Formula results in a projected total acute care bed need in 1989 for District 7 of 4,416 beds. There are currently 4,880 licensed and approved beds in District 7. Therefore, a proper application of the Formula based upon the most current data indicates that District 7 will have an excess of 464 acute care beds in 1989. A finding that District 7 will have an excess of acute care beds in 1989 is supported by the trend toward reduced utilization of hospitals in District 7. This reduction in hospital utilization, which began in 1982, has been evidenced by reductions in occupancy rates, average lengths of stay and admissions. This trend is likely to continue for an additional two to four years. The trend is sufficient to cause an excess in acute care beds despite increases in population. To add another 100 acute care hospital beds to Orange County would further reduce utilization. The reduced utilization of hospitals could become worse when new hospital beds are opened by Florida Hospital (210 beds) and Holmes Regional Medical Center in Brevard County (81 beds). The opening of these beds could create a further excess of beds in District 7. There are a number of factors which have contributed to the decline in the use of hospitals: (1) there has been an increase in the use of health maintenance organizations and preferred provider organizations; (2) the introduction of Diagnostic Related Groups, a method of reimbursement now being used by Medicare; and (3) there has been an increase in the use of outpatient medical services. Health maintenance organizations in Orange County alone could decrease patient days in hospitals from 800 days per 1,000 population to 350 days per 1,000 population. Because of the introduction of Diagnostic Related Groups by Medicare, hospitals are trying to discharge patients as quickly as possible. Finally, there are 8 to 10 freestanding ambulatory surgery centers approved for Orange County which are, or will be, providing outpatient medical services. All of these factors have reduced hospital utilization in District 7. The current trend of reduced utilization of hospitals was recognized by Mr. Mark Richardson, AMI's expert in health planning. Mr. Richardson therefore recommended that AMI reduce its application for a certificate of need to construct and operate a hospital in Orange County from 175 acute care beds to 100 beds, which AMI did. Based upon the foregoing, it is concluded that District 7 will have an excess of at least 464 acute care beds in 1989 according to a proper application of the Formula of Section 10 5.11(23), F.A.C. Although insufficient evidence was presented at the final hearing to forecast the exact acute care bed need for District 7 under the Formula for 1990, it does not appear that there will be any need for acute care beds in District 7 in 1990 in light of the fact that the trend toward decreased utilization of hospitals will probably continue for 2 to 4 more years. In fact, the evidence supports the conclusion that District 7 will continue to have an excess of beds in 1990. AMI has proposed findings of fact to the effect that there has been too much concern with "over-bedding" based upon computations such as those provided in the Formula. AMI further proposed findings of fact to the effect that a more rational approach to health planning "should be assuming adequate supply as opposed to considering a negative approach." These proposed findings of fact are rejected. The Department's rules and in particular, the Formula, are the law and will be followed in these cases. Whether "over-bedding" is over emphasized, the Formula clearly indicates that District 7 will be greatly overbedding in 1990. In addition to requiring an application of the Formula to determine acute care bed need for each Department service district, Section 10-5.11(23), F.A.C., requires that local health councils adopt acute care service subdistricts as an element of their local health plans. Section 10-5.11(23)(d), F.A.C. District 7 has been divided along county lines into four subdistricts: Orange, Seminole, Osceola and Brevard Counties. Section 10-17.008, F.A.C. Prior to this proceeding AMI challenged the validity of Section 10- 17.008, F.A.C., the rule establishing subdistricts along county lines in District 7. The rule was upheld as valid in American Medical International, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83- 3092R, September 28, 1984. Therefore, Orange, Seminole, Brevard and Osceola Counties constitute the only recognized subdistricts in District 7 for purposes of allocating acute care bed need in District 7. Section 10-5.11(23)(e), F.A.C., further provides that the district acute care bed need as determined by application of the Formula is to be allocated to each subdistrict established pursuant to Section 10-5.11(23)(d), F.A.C. This allocation of acute care bed need to the subdistricts is to be made consistent with Section 381.494(7)(b), Florida Statutes (1984 Suppl.), which provides that the local health council is to develop a district health plan and submit it to the Department. Elements of the district health plan necessary in the Department's review of certificate of need applications are required to be adopted by the Department as a part of its rules. Section 381.494(7)(b), Florida Statutes (1984 Suppl.). The Local Health Council of East Central Florida, Incorporated (hereinafter referred to as the "Council"), has developed a district health plan which includes the methodology it employs to allocate the District 7 acute care bed need to the subdistricts of District 7. That plan has also been submitted to the Department. The Department, however, has not adopted the district health plan for District 7 in its rules. This does not mean, however, that evidence pertaining to the Council's method of allocation is not relevant to, or should be ignored for purposes of, this proceeding. Based upon the evidence presented at the final hearing, Orange County has an excess of acute care beds. This is true even if it is assumed that the Department's determination under the Formula that there is a need for 89 or 146 acute care beds in District 7 is correct. According to Mr. Windham, application of the Council's subdistrict allocation methodology to the Department's determination under the Formula that there is a need in District 7 for 89 acute care beds indicates that Orange County ",4 will have an excess of 81 acute care beds and that Seminole County will have an excess of 36 acute care beds. Mr. Windham's application of the Council's methodology for allocating bed need to the subdistricts of District 7 was based upon the Department's application of the Formula without the benefit of the more current utilization data. Therefore, if the most current data had been used, the projected excess beds for Orange County would be even greater. In light of the foregoing, it is clear that the Petitioners have failed to prove that there is any need under Section 10-5.11(23), F.A.C., for additional acute care beds in District 7 or in Orange or Seminole Counties. In fact, under Section 10- 5.11(23), F.A.C., there is a significant excess of acute care beds projected for Orange and Seminole Counties and District 7 as a whole. Winter Park has conceded this conclusion. AMI has in essence argued that any evidence as to the application of the Formula based upon the most current utilization data should be ignored because the Department has not yet officially applied the Formula based upon such data. Mr. Margolis, an expert in health planning, was clearly capable of applying the Formula based upon the most current information. His conclusions were also supported by Mr. Nelson's and Mr. Windham's testimony. AMI has in essence also argued that any evidence as to how acute care bed need in District 7 under the Formula should be allocated to the properly designated subdistricts should be ignored because the Council's methods of allocation have not been adopted as part of the Department's rules. Mr. Windham's unrebutted testimony, however, supports a finding that the Council's method of allocating the District 7 acute care bed need to the subdistricts is a reasonable method for health planning purposes. The determination that there is no need for additional acute care beds in Orange County does not necessarily preclude the issuance of a certificate of need for a new hospital to either or both of the Petitioners. Section 10- 5.11(23)(b), F.A.C., provides that the Department will "not normally" approve an application if such an approval would result in acute care beds in excess of those needed as determined under the Formula. The rule goes on to provide that an application may be approved "when the criteria, other than bed need, as provided in Section 381.494(6)(c), Florida Statutes, demonstrate need." Bed Need Based upon the Petitioner's Alternative to the Formula. AMI has suggested in its proposed recommended order that there is a need for 146 acute care beds in District 7 based upon an application of the Formula. That finding of fact has been rejected, supra, because it was based upon the use of outdated utilization data. The Petitioner also failed to prove that there is a need for beds in Orange County based upon an application of the Formula. Winter Park's position throughout this proceeding and AMI's alternative position has been essentially that the population of east Orange County where the Petitioners propose to locate their facilities and parts of Seminole County do not have adequate accessibility to acute care hospital beds. In determining whether an application for a certificate of need should be issued for acute care hospital beds, Section 381.484(6)(c)2, Florida Statutes (1984 Suppl.), provides that the accessibility . . of like and existing health care services and hospitals in the service district of the applicant" should be considered. The Petitioners have attempted to prove that like and existing health care services are not accessible in portions of Orange and Seminole Counties and therefore there is a need for their proposed hospitals. The Petitioners' Medical Service Areas. AMI has identified and proposed to serve portions of Orange and Seminole Counties which purportedly have an access problem which it has designated as a "medical service area." AMI projects that the majority of its patients will be attracted from its medical service area (hereinafter referred to as an MSA) AMI's MSA consists of most of east Orange County and southeastern Seminole County. Generally, the MSA boundary runs south along most of the western shore of Lake Jessup in Seminole County, to and along Tuscawilla Road (Seminole and Orange County), to and along Highway 436 in Orange County, south to the Bee Line Expressway, east along the Bee Line Expressway to Highway 15, south along Highway 15 to the Orange-Osceola County line, east and then north along the Orange County line to the Seminole County line and along the Seminole County line north and then west to Lake Jessup. Winter Park has also identified and proposed to serve a MSA very similar to, although a little smaller than, AMI's MSA. The difference in size amounts to only a difference of 1000 less population in Winter Park's MSA. The portion of east Orange County included in the MSAs represents a distinct geopolitical and economic base. Each of the Petitioners and Florida Hospital presented testimony by experts in the field of demographics. Frederick A. Raffa, Ph.D., for AMI, William J. Serow, Ph.D, for Winter Park and Stanley Smith, Ph.D., for Florida Hospital. Based upon their testimony, it is clear that the MSAs have experienced a great deal of population and economic growth since 1970 and that this growth will probably continue through 1990. During the period 1980 to 1985, the rate of population growth for Orange and Seminole Counties was 16 percent (23 percent for Seminole County alone). The rate of growth in Winter Park's MSA during this same period was 32 percent. For the period 1985 through 1990 the projected rate of growth for Orange County is 12 percent. The projected rate of growth from 1985 through 1990 for Winter Park's MSA is 23.3 percent. These figures indicate that the rate of growth for Orange County and the MSAs is slowing down. The figures also show that the MSA rate of growth is twice that of Orange and Seminole Counties. Looking at only the rate of growth of an area can be misleading. For example, a 50 percent rate of growth may not be as significant when applied to a population base of 10 as when applied to a larger population base. In terms of actual growth, the evidence proves that Orange County's population growth in terms of additional people is greater than the population growth of the MSAs. The evidence also establishes that population growth in the MSAs is projected to be greater for young adults and women of child bearing age (15 to 44 years of age), that there will be larger families and a greater number of children under 18 years of age in the MSAs than in Orange County as a whole and that the projected population of the MSAs will be newer to the area and generally more mobile than Orange County as a whole. Florida Hospital has suggested that "logic" leads to the conclusion that some of these projected trends will cause a decrease in utilization. No evidence was presented at the hearing to support such a finding of fact. The evidence clearly establishes that population growth in the MSAs will be concentrated between the western boundary of the MSAs at Highway 436 and Alafaya Trail (Highway 419), which is located in the western portion of the MSAs, during the next five years. In fact, more than half of the projected growth of east Orange County will occur in a one and a half mile corridor between Highway 436 and Goldenrod. It will be 5 to 10 years before population growth will begin to expand into any area east of Highway 419. Accessibility under Section 10-5.11(23)(i), F.A.C. The Department has promulgated Section 10-5.11(23)(i)1 and 2, F.A.C., for purposes of determining accessibility: Acute care hospital beds should be available and accessible within an automobile travel time of 30 minutes under average travel conditions to at least 90 percent of the population in an urban area subdistrict. Acute care hospital beds should be available and accessible within a maximum automobile travel time of 45 minutes under average travel conditions to at least 90 percent of the population residing in a rural area subdistrict. The terms "urban area" and "rural area" are defined in Section 10- 5.11(23)(a)4 and 5, F.A.C., as follows: Urban Area. Urban area means a county designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, and having 50,000 or more persons residing in one or more incorporated areas. Rural Area. Rural area means a county not designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, or a county so designated but having fewer than 50,000 persons residing in one or more incorporated areas. Orange County meets the definition of an "urban area." It has been designated as part of a Standard Metropolitan Statistical Area and has 50,000 or more persons residing in one or more incorporated areas. Orange County is not also a "rural area" as defined above as suggested by OGH although it does have some incorporated areas with less than 50,000 persons. AMI has suggested in its proposed recommended order that Section 10- 5.11(23)(i), F.A.C., is to be used only by local health councils in determining subdistrict allocations of acute care bed need and where a subdistrict allocation reveals a surplus of beds in a subdistrict. Although Section 10 5.11(23)(i), F.A.C., is to be used in the manner suggested by AMI, Section 10- 5.11(23)(i), F.A.C., is not clearly limited to such use. This section of the rule is titled "Geographic Accessibility Considerations." Its provisions are applicable in determining whether a geographic accessibility problem exists in District 7 or in the subdistricts of District 7. AMI, Winter Park and Florida Hospital presented testimony of expert traffic engineers: Mr. William A. Tipton for AMI, Mr. R. Sans Lassiter, P.E., for Winter Park and Mr. Sven Kansman for Florida Hospital. All three of these gentlemen based their travel studies on travel times to and from certain control points. The travel times were then averaged. Florida Hospital has suggested in its proposed recommended order that this method of determining travel times to and from control points and Mr. Tipton's testimony that "you probably wouldn't get as far in a given time going outbound [east" is significant because travel times from the MSAs west into Orlando, where the majority of the existing hospitals are presently located, would be shorter. This conclusion is reasonable. Therefore, travel times for the population of the MSAs to existing Orange County hospitals would be less than indicated by the traffic engineers. Also, the 30 minute contour lines on the traffic engineers' exhibits would extend farther into the MSAs. The studies performed by all three traffic engineers were performed in the same general manner as to the speed of the test vehicles. Test vehicle drivers were instructed to drive at average speed employing the "average car method," the "floating car technique" or the "moving car method." All three methods are essentially the same. The test runs were conducted in November and February by AMI'S expert, in the fall by Winter Park's expert and during the last two weeks of January by Florida Hospital's expert. January to March is the most congested time of the year in Orange County. Only two of the traffic engineers testified that their tests were conducted under "average travel conditions" as required by Section 10- 5.11(23)(i), F.A.C.: Winter Park's and Florida Hospital's traffic engineers. These traffic engineers properly conducted their tests during off-peak and peak hours. Mr. Tipton, AMI's traffic engineer, conducted his tests only during the peak hours of 4:00 p.m. to 6:00 p.m. and only on week days (Monday to Thursday). According to Mr. Tipton, average travel conditions "doesn't mean anything" to a traffic engineer. Average travel conditions does mean something under the rule and to the other two traffic engineers. Mr. Tipton also indicated that the peak hours he conducted his tests during would not show "average travel conditions." Mr. Tipton also admitted that he averaged what amounted to the "worst case scenario" because it represented "real world conditions." Mr. Tipton's "real world conditions," however, is not the test of Section 10-5.11(23)(i)1, F.A.C. Mr. Tipton's tests have been given little weight because of his failure to take into account average travel conditions. None of the exhibits prepared by the three traffic engineers and accepted in evidence (AMI'S composite exhibit 8, Winter Park's exhibit 11 and Florida Hospital's exhibit 10) are totally consistent with the requirements of Section 10-5.11(23)(i), F.A.C. AMI's composite exhibit 8 includes 30 minute contour lines representing Mr. Tipton's 30 minute drive times from only three hospitals in Orange County and one hospital in Seminole County and only shows the travel times to the east of those hospitals. Winter Park's exhibit 11 shows the 30 minute contour lines for seven hospitals in Orange County and two hospitals in Seminole County and generally only showns the travel times to the east. Florida Hospital's exhibit 10 shows the location of eight hospitals in Orange County, three in Seminole County and three in Brevard County but only shows the total 30 minute contour line for Florida Hospital's Orlando campus. The test under Section 10-5.11(23)(i)1, F.A.C., is whether existing acute care hospital beds are available and accessible within 30 minutes by automobile by 90 percent of the subdistrict's population. In order for AMI and Winter Park to prove that acute care hospital beds are not available and accessible within 30 minutes in Orange County, they needed to prove that more than 10 percent of the population of Orange County cannot access on existing acute care hospital bed within 30 minutes by automobile. In order to prove this crucial fact it is necessary to show the travel time based upon average travel conditions of the entire population of Orange County to all existing acute care hospitals. AMI and Winter Park have failed to do so. The evidence fails to show that more than 10 percent of Orange County's population is more than 30 minutes by automobile from existing Orange County hospitals. The evidence does not support a conclusion that there is an accessibility problem under Section 10-5.11(23)(i), F.A.C. Only 1 percent of the population of Orange County residing in the MSAs is located more than 30 minutes by automobile from existing hospitals in Orange and Seminole Counties. This is based upon the 1985 population and the projected 1990 population. In 1985 there are 4,232 people residing in the MSAs more than 30 minutes from existing Orange and Seminole County hospitals. By 1990, there will only be 5,276 people projected to live more than 30 minutes from existing hospitals. These figures are maximum numbers. As indicated, supra, the evidence with regard to population growth in the MSAs proves that the projected population growth will be concentrated in the western portion of the MSAs--the portion of the MSAs closest to where existing hospitals are located. Most of the projected population growth through 1990 in the MSAs will clearly be within 30 minutes of existing hospitals. The projected 1990 population of 5,276 people who will reside more than 30 minutes from an existing Orange County or Seminole County hospital is well below 10 percent of Orange County's total projected population of 596,713. Additionally, the people in the MSAs who reside more than 30 minutes from existing Orange and Seminole County hospitals are probably within 30 minutes of Jess Parrish Hospital in Titusville, Brevard County, Florida. There are no natural obstacles in Orange County which impede or prevent access to existing health care facilities. Well over 90 percent of Orange County's population can access a hospital within 30 minutes driving time. OGH has proposed findings of fact pertaining to the availability of motor vehicle and air ambulance services in Orange County. The accessibility test of Section 10-5.11 (23)(i), F.A.C., requires a consideration of automobile travel times under "average travel conditions," not emergency services. Therefore, these proposed findings of fact and OGH's proposed findings of fact as to the requirements of obtaining a trauma level designation are unnecessary. The evidence also clearly establishes that there are acute care hospital beds available in Orange County. The average occupancy rates in District 7, Orange County and Seminole County for 1982, 1983 and 1984 were as follows: 1982 1983 1984 District 7 71.8% 70.34% 61.71% Orange County 69.5% 68.68% 60.80% Seminole County 76.0% 74.20% 59.39% Florida Hospital and OGH have experienced similar declines in utilization similar to those evidenced by these figures. Florida Hospital's utilization rate dropped from 86.3 percent in 1982 to 78.6 percent in 1984 and OGH's rate dropped from 88.5 percent in 1982 to 44.4 percent in 1984. There are currently 4,880 licensed and approved acute care hospital beds in District 7. Based upon the 1984 utilization rate for District 7, over 1,800 acute care beds were empty on an average day in District 7 during 1984; In Orange County, approximately 1,000 acute care beds were empty on average during 1984. As indicated, supra, the decreasing acute care bed utilization rate is expected to continue for 2 to 4 years. Therefore, there are acute care hospital beds available in Orange County at existing hospitals and there will be in 1990. Additionally, new acute care hospital beds have been approved for Orange County and Seminole County which are not yet open: 134 acute care beds to be opened by Florida Hospital at its Orlando campus and 76 acute care beds to be opened by Florida Hospital at its Altamonte Springs campus. Also 81 new beds will be opened in Brevard County. These additional beds will further increase the number of available acute care hospital beds in Orange and Seminole Counties and in District 7. Based upon the foregoing and the fact that there is a large number of unoccupied acute care beds available on average in Orange County, there is no geographic accessibility problem in Orange County or Seminole County under Section 10-5.11(23)(i), F.A.C. Other Accessibility Considerations. Despite the evidence with regard to geographic accessibility under Section 10-5.11(23)(i), F.A.C., the Petitioners have argued that accessibility to acute care beds is a problem in the MSAs. Mr. Willard Wisler, Winter Park's administrator, although agreeing that "planning studies" indicated no need for additional acute care beds in Orange County, stated: But our posture has been that they have been misallocated, and that the east Orange County [sic) is a greatly underserved area on the basis of the number of hospital beds that are available to the people that live there. The evidence does establish that the majority of the hospitals in Orange County are located in the center of the County, in the City of Orlando, where the majority of the population is located and that there is only one hospital currently located in the MSAs. Currently, 6 percent of Orange County's acute care hospital beds are located in the MSAs at OGH while 19 percent of Orange County's population is located in the MSAs. The Petitioners have characterized this geographic distribution of acute care beds and population as a "maldistribution" of acute care beds. The disparity between the precentage of population and acute care beds in the MSAs will increase in the future because the projected rate of growth in the MSAs is greater than that of Orange County. It is projected that by 1990 22 percent of the Orange County population will be located in the MSAs. The centralization of acute care beds in Orange County, according to Mr. Van Talbert, Winter Park's expert health planner, constitutes irresponsible health planning: "It tends to perpetuate the old patterns of centralization, and I think that is inconsistent with contemporary thought in American society." Mr. Talbert also testified that the MSAs and particularly east Orange County, are greatly underserved based upon the number of hospital beds conveniently available to the people who live there. Even if Mr. Talbert's conclusions are correct and even if there is a "maldistribution" of acute care beds as defined by the Petitioners, this does not mean there is an accessibility problem in the MSAs sufficient to conclude that additional acute care beds are needed in District 7, Orange County or the MSAs. The fact that 22 percent of the population of Orange County may reside in the MSAs by 1990 with only 6 percent of the County's acute care beds is not the test. Even if it is true that "contemporary planning may indicate that centralization of acute care beds is poor planning," the pertinent statutes and rules only require a determination of whether acute care beds are available and accessible. The evidence in these cases clearly indicates that the population of the MSAs can access available acute care hospital beds in District 7. All the Petitioners have shown is that some residents of the MSAs "will be forced to make inconvenient drives to downtown hospitals," as stated in Winter Park's proposed recommended order. Likewise, AMI's proposed finding of fact that ",the realities of the situation reveal that the residents of the MSA and their physicians perceive serious access problems due to excessive travel distance, traffic congestion, the lack of convenience for patients who have to go to hospitals for tests, and the lack of convenience for families and friends having to make several trips a day to see a person in a hospital" does not prove there is an access problem. The perception of patients and physicians as to the inconvenience in accessing acute care beds does not prove there is an access problem sufficient to warrant a new hospital. In conjunction with the Petitioners' position with regard to "maldistribution" of acute care beds, the Petitioners have proposed findings of fact to the effect that previous Department responses to shifts in population growth away from where hospitals are located have been to authorize new hospitals. New hospitals in Altamonte Springs and Longwood in Seminole County, and in southwest Orange County (Sand Lake) have been cited as examples. Although Mr. Talbert's testimony supports these proposed findings of fact to some extent, there is insufficient evidence to conclude why those hospitals were authorized by the Department. If the evidence showed that additional acute care beds were needed in Seminole and Orange Counties when those hospitals were approved it would be consistent with the Department's rules to locate the additional acute care beds where population growth had occurred. In these cases, if there was an established need for an additional acute care hospital in Orange County, the evidence would probably justify placing it in east Orange County. The facts, however, do not indicate any need for additional acute care beds in Orange County. Other MSA Considerations. It is not essential to identify a MSA for purposes of considering an application for a new acute care hospital as suggested by AMI. As discussed, infra, the designation of a MSA by an applicant may be helpful for some purposes, but not to determine whether there is a need for a new hospital. AMI has proposed a finding of fact that Orlando Regional Medical Center and Florida Hospital's Orlando campus, both of which are located in Orlando, are tertiary care facilities providing services of higher complexity for patients; they therefore attract a substantial number of referral patients in need of more extensive, complex services which are not available from primary care hospitals. The existence of these tertiary facilities has justified the allocation of more acute care beds to Orange and Seminole Counties in the past. Although these facts were proved at the hearing, the overriding fact remains clear that there is no need for additional acute care beds in Orange County. AMI attempted to prove through Mr. Mark Richardson an expert in health planning, that there is a need for acute care beds in AMI's MSA based upon the characteristics of the MSA. Mr. Richardson testified that his projections were not based or contingent on the Formula of Section 10-5.11(23), F.A.C., and acknowledged the decline in utilization of acute care hospital beds in Orange County. Mr. Richardson did state that the Department's projection of a net acute care bed need of 89 beds under the Formula supported his projections. The projection of a need for 89 beds was clearly based upon outdated data. Use of current utilization data indicates an excess of 464 acute care beds. Therefore, if application of the Formula resulting in a bed need of 89 beds supports Mr. Richardson's projections, an application of the Formula which results in an excess of 464 acute care beds must indicate that Mr. Richardson's projections are suspect. Mr. Richardson's projections were clearly based primarily on the characteristics of AMI's MSA. Because of the narrow scope of Mr. Richardson's analysis, the trend in Orange County and District 7 as to reduced occupancy rates did not affect his projections. In particular, Mr. Richardson used an 80 percent occupancy rate for all beds except obstetric beds, for which he used a 75 percent rate. These occupancy rates are excessive when compared to the occupancy rates for District 7, and Orange and Seminole Counties. Additionally, Mr. Richardson failed to consider the effect of unopened acute care beds in Orange County on occupancy rates. On average, there are over 1,800 unoccupied acute care beds in District 7 and 1,000 unoccupied beds in Orange County. This does not include 134 acute care beds to be opened at Florida Hospital's Orlando campus, 76 acute care beds to be opened at Florida Hospital's Altamonte Springs campus or 81 acute care beds to be opened at Holmes Regional Medical Center in Brevard County. When opened, these additional acute care beds will further decrease occupancy rates in Orange County and District 7. Even if Mr. Richardson's projections were totally accurate, such a finding would not be relevant to the question of whether there is a need for additional acute care beds in Orange County. That is the crucial question in these cases. Mr. Richardson and AMI have attempted to justify Mr. Richardson's projections by suggesting that the Department does not consider itself precluded from assessing the need for acute case beds on an area within a subdistrict based upon Mr. Nelson's testimony. Mr. Nelson's testimony clearly does not support the use of a MSA to determine if there is a need for additional acute care beds in Orange County. Mr. Nelson, when asked whether an applicant could determine bed need based upon the character of a part of Orange County replied: There's nothing to preclude an Applicant from doing that, from carving out what I would call an Applicant's service area, running their own calculations of bed need, and doing whatever they feel they want to do in that regard. And we're not ,precluded from looking at it, either. But our position is that that has no official basis in determinations of bed need. We do look at those subdistricts but not to determine bed need. We look at them to get a better understanding of an application, because we get a sense, from looking at the unique service areas, what they' re trying to accomplish. That would be number one. Number two, and from having worked on the private side, I know one of the reasons why this is done, this is an attempt to define a market share or market area and a percent of all the considerations of what the existing hospitals that are already in the area have in the way of markets and market shares, and so on. So on the second hand, looking at the subdistricts is very important, from the standpoint of helping us to assess the financial feasibility of these proposals, which is another criterion, of course, altogether, specifically in the longer term. Because, you know, you have to know who is getting patients from where in order to be able to fully understand that. And I think the third way in which these subdistricts, these Applicants -- pardon the expression, subdistricts, that's not what these things are -- the Applicant's medical services areas are useful is in those cases where we may have a need helping us to decide where, within, let's say a subdistrict that need should be met. For example, let's suppose in this case, we were showning a need of sufficient magnitude to approve a hospital. But instead of having two applications within a few miles of each other, we had one for east Orange County, and one in west Orange County, and portions of other counties, each of which had carved out their own service area, then it would be very important for us, in that case, to look at these things very carefully, to consider them to help us determine which location was preferable. But in terms of calculating bed need from the Department's perspective, we don't put any stock in those whatsoever from that perspective. ,Emphasis added. Based upon the above testimony, it is clear that MSAs may be looked at if an applicant uses one in order to provide a better understanding of the applicant's proposal, to assess financial feasibility and, where there is an established need for acute care beds, to decide where in the subdistrict the need is the greatest. MSAs are clearly not relied upon to determine the initial question of whether there is a need for acute care beds. To determine acute care bed need based upon a MSA without considering `the' entire subdistrict of Orange County is not appropriate. The Department, as the statute and rules require, determines need at the district level and allocates the district bed need to the subdistricts. In fact, the Department has ruled that it is improper to divide a district into subdistricts smaller than those designated by a local health council for purposes of determining need as pointed out by Winter Park in its proposed recommended order. Southeastern Palm Beach County Hospital District v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1091A (1983). For purposes of determining whether there is a need for additional acute care hospital beds in Orange County, Mr. Richardson's testimony is of very little value. STATUTORY CRITERIA. Section 10-5.11(23)(b), F.A.C., provides that a certificate of need may be issued when the criteria, other than bed need, as provided in Section 38l.494(6)(c), Florida Statutes (1984 Suppl.), demonstrate need. The Petitioners have attempted to prove that there is an accessibility problem in Orange County which demonstrates acute care bed need under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). The facts do not support such a conclusion as discussed, supra. This section of the Recommended Order contains findings of fact with regard to the other criteria contained in Section 381.494(6)(c) and (d) Florida Statutes (1984 Suppl.). Consistency with the State and Local Health Plan: Section 381.494(6(c)1, Florida Statutes. The applications of the Petitioners are only partly consistent with the State Health Plan and the Council's Local Health Plan. The Council's Local Health Plan establishes the following occupancy levels for acute care beds which should be met before new acute care beds are approved: TYPE OF BEDS OCCUPANCY LEVEL Medical - Surgical 80% Obstetrical 75% As already discussed, occupancy levels for acute care beds in District 7, and in Orange and Seminole Counties were below 70 percent in 1984. The declining utilization of acute care beds will continue for the next 2 to 4 years and therefore it does not appear that the occupancy level goals in the Local Health Plan will be met by either applicant. These occupancy level goals are intended to be used as checks on the bed need methodologies. The importance of existing occupancy levels in determining whether to add additional acute care beds to a district is recognized in Section 10-5.11(23)(g), F.A.C. The Petitioners have projected that they will achieve an occupancy rate of 45-50 percent after one year of operation. South Seminole Community Hospital, which was opened in May of 1984 in Longwood, Seminole County, Florida, achieved only a 27 percent occupancy rate after 8 months of operation. In light of the fact that South Seminole Community Hospital is located in Longwood, it is doubtful the Petitioners will achieve their projected occupancy rate. The Petitioners have projected that their proposed hospitals will achieve an 80 percent occupancy rate, which is an optimal occupancy rate. Their projections, based upon the findings of fact as to acute care bed need in Orange County and current occupancy levels, are highly unlikely to be reached. Especially in light of the fact that the average occupancy rate in Orange County was only 60.80 percent in 1984. The proposals are also inconsistent with the Local Health Plan goal that a proposal be consistent with the state's acute care bed need methodology. Based upon an application of the Formula, using current data, District 7 and Orange County will have an excess of acute care beds in 1990. Winter Park's proposal is consistent with several other portions of the Local Health Plan. Winter Park's facility will have an active outpatient program, its beds can be available within 24 hours and it will meet several priorities under the Local Health Plan such as being accredited and licensed, and being willing to serve indigents and other patients without regard to payment source. AMI's proposal also meets some of these goals. The Local Health Plan also contains a provision to the effect that "needed" beds should be approved at existing hospitals unless the addition of a new hospital would substantially improve access by at least 15 minutes for 25,000 or more residents. Winter Park has suggested a finding of fact that this provision has been met. If there was a need for additional acute care beds in Orange County such a finding would be appropriate. There is, however, clearly no need for additional acute care beds in Orange County. This portion of the Local Health Plan therefore does not apply. Finally, the Local Health Plan provides that applicants should be able to document community and provider support for their proposals. Community support for the proposals has been demonstrated. Provider support, however, has not been demonstrated. In fact, there is opposition from some providers to the proposed new hospitals, i.e., Florida Hospital and OGH. The proposals are also partially consistent with the State's health plan. The evidence does not clearly establish, however, that the proposals are totally consistent with the goals of the State health plan. Mr. Talbert did testify that Winter Park's proposal is consistent with the goals of the State health plan. It was not clear, however, whether all of the goals were met. Also, Mr. Talbert's testimony was inconsistent with other evidence in this proceeding in some respects. For example, Mr. Talbert testified that one goal of the State health plan is to provide adequate access to acute care resources. The evidence clearly shows that adequate access is already available in Orange County. To the extent it can be inferred that Mr. Talbert's testimony also applies to AMI's proposal, the same problems exist. The evidence does not support a finding that AMI's proposal is totally consistent with the State health plan. Based upon the foregoing, it does not appear that either proposal is totally consistent with the Local Health Plan or the State health plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services in the Service District; Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires that the availability, quality of care, efficiency, appropriateness, extent of utilization and adequacy of like and existing health care services in the service district be considered. The service district for this purpose is District 7. The designation of subdistricts in District 7 is specifically for purposes of allocating district bed need to the subdistricts. The parties, to the extent they addressed this criterion, presented evidence primarily for Orange County only, however. The availability, accessibility and extent of utilization of like and existing acute care hospitals in Orange County has been discussed and findings of fact with regard thereto have been made, supra. To summarize, like and existing services in Orange County are available and accessible and are underutilized. The Petitioners have not shown that like an existing services in District 7 do not provide quality of care or that they are not efficient, appropriate or adequate. Winter Park has argued that like and existing services are not accessible. The evidence does not support such a finding of fact. AMI has argued that there are no like and existing services accessible in the MSAs. That is not the test. The determination to made under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), is whether there are like and existing services in the service district. The service district in these cases is all of District 7, not the MSAs. There are currently seven acute care hospitals in Orange County: Florida Hospital, OGH, Orlando Regional Medical Center, Brookwood Hospital, Humana Lucerne, Winter Park Hospital and West Orange Memorial Hospital. Additionally, Orlando Regional Medical Center - Sand Lake is expected to be opened before 1990. These district. The evidence does not support a finding that some or all of these facilities or others in District 7 are not available, providing quality of care, efficient, appropriate, accessible, over utilized or adequate. AMI and OGH spent an inordinate amount of time and effort presenting evidence on the issue of whether OGH is a like and existing service. The evidence supports a finding that OGH is a like and existing service. Even if OGH was not a like and existing service, such a conclusion would only be relevant if it were concluded that like and existing services must exist within the boundaries of the MSAs or that OGH was the only accessible acute care hospital to the residents of the MSAs. As stated, supra, the pertinent area is not the MSA but District 7 and there are clearly other acute care hospitals in District 7 and some of those hospitals are accessible. If Orange County alone is the appropriate service area for purposes of applying this criterion, the evidence clearly proves that the Petitioners do not meet the criterion. The evidence proves that there are available, quality, appropriate, efficient and adequate like and existing health care services in Orange County and District 7. The Ability of the Applicants to Provide Quality of Care; Section 381.494(6)(c)3. Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion has been meet. 113.. The Availability and Adequacy of Other Health Care Facilities and Services in the Service District which may Serve as Alternatives: Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.). There are clearly other health care facilities in Orange County providing like and existing services. The evidence does not, however, establish that there are other health care facilities and services in Orange County which are alternatives to a 100 bed acute care hospital. Transferring beds from existing facilities has been suggested as an alternative to the proposed new hospitals. This suggested "alternative" could be achieved as easily by approving a new hospital and closing some existing beds. The cost would be essentially the some. Transferring beds is not an alternative. Use of existing beds which are not being occupied is not a viable alternative either, as suggested by OGH in its proposed findings of fact. Probable Economies and Improvements in Service that may be Derived from Operation of Joint, Cooperative or Shared Health Care Resources; Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.). AMI's proposed facility may eventually share some services with Brookwood Community Hospital in the area of administrative management. Brookwood Community Hospital (hereinafter referred to as "Brookwood") is a 157 bed general acute care hospital owned and operated by a limited partnership. The general partner and owner of 82.5 percent of the partnership is Brookwood Medical Center of Orlando, Inc., which in turn is owned by AMI. AMI presented its proposal assuming that there would not be any shared services with Brookwood. Through AMI, UCH, Inc., can receive price discounts for its purchases, typically 15 percent to 20 percent lower than the lowest price available in the market generally. UCH, Inc., will also be able to participate in Brookwood's preferred provider organization agreement. This could result in enhanced utilization of UCH, Inc., which could result in decreased health care costs. Winter Park will share some resources with its new hospital. The resources to be shared include Winter Park's incinerator, CAT Scanner, cardiac catheterization ion laboratory, and certain personnel. Centralized accounting, centralized purchasing and some centralized management would also be employed. Both proposals will have joint, cooperative or shared health care resources which would result in probable economics and improvements in service. The Need in the Service District of the Applicant for Special Equipment and Services not Reasonably and Economically Accessible in Adjoining Areas; Section 381.494(6)(c)6, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Need for Research and Educational Facilities: Section 81.494(6)(c) 7, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Availability of Resources; the Effects on Clinical Needs of Health Professional Training Programs in the Service District: Accessibility to Schools for Health Professionals: the Availability of Alternative Uses of Resources: Extent Accessible to All Residents; Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.). The parties have stipulated that Section 81.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met to the extent it deals with "health and management manpower and personnel only." The other factors to be considered under this criterion were not stipulated to. The first factor to be considered is the availability of resources, including physicians and funds for capital and operating expenditures. The availability of funds will be discussed, infra. As to the availability of physicians, the weight of the evidence supports a finding that physicians are available to staff either of the proposed facilities. AMI proposed a finding of fact that ", unlike WPMH, AMI demonstrated that the major medical specialty areas will be represented by various physicians who will joint the UCH medical staff." AMI did demonstrate that various medical specialty physicians would be willing to work at UCH, Inc. It is also true that Winter Park did not demonstrate that all of the medical specialty physicians would be willing to work at its proposed facility. Despite these facts, several physicians testified that they would use Winter Park's proposed facility if it were approved instead of UCH, Inc., and Mr. Willard Wisler's unrebutted testimony establishes that Winter Park would have no difficulty staffing its proposed hospital. Both Petitioners have established that physician resources are available for project accomplishment and operation. The second and third factors to be considered are the effect the projects will have on clinical needs of health professional training programs in Orange County and, if available in a limited number of facilities, the extent to which services will be available to schools for health professionals in Orange County. The weight of the evidence does not establish that professional training programs are available in a limited number of facilities. In fact the evidence establishes that the University of Central Florida (hereinafter referred to as "UCF"), which is located in east Orange County, has fifty-two affiliation agreements with hospitals and other medical facilities. These affiliation agreements include agreements involving clinical training of radiology technicians at Florida Hospital and, in Brevard County, at Halifax Hospital. Approximately 32 radiology students are currently involved in hospital training programs. AMI presented evidence proving the existence of a proposed "affiliation agreement" between its proposed hospital and UCF. AMI and UCF have in fact entered into an Agreement of Intent. The Agreement of intent essentially provides, in relevant part, that AMI's proposed hospital, if approved, would provide clinical training to UCF radiology technician students. Approximately three to six UCF students per semester would receive training at the new hospital. The program with UCF will clearly have a positive effect on "clinical needs of health professional training programs" in Orange County. The agreement also provides for certain other benefits to UCF in the form of certain gifts. Those benefits, however, are not relevant in considering whether a certificate of need should be issued to AMI. The portion of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), at issue in this proceeding requires only that the effect on "clinical needs of health professional training programs" be considered. AMI's gifts will not meet the "clinical needs" of health professional training programs. AMI's proposed findings of fact with regard to its gifts to UCF are unnecessary. Florida Hospital and Winter Park have proposed several findings of fact concerning AMI's motive in entering into the agreement with UCF. Those proposed findings are not supported by the evidence and are not relevant. Florida Hospital also has proposed findings of fact concerning whether a tertiary hospital would be a better facility for training, the effect of patient mix on training, the lack of any study by UCF to assess the benefits of the agreement and the fact that AMI's proposed facility will not be a teaching hospital or have full-time teachers. Those proposed findings are unnecessary. The fact is, the clinical training to be provided by AMI's facility will be a benefit to the clinical needs of health professional training programs in District 7. Because of the substantial amount of gifts to be made to UCF, which will be paid for by patients of AMI's facility, the costs of AMI's clinical program will be substantial. Winter Park is currently involved in meeting clinical needs of health professional training programs at a number of educational institutions, including UCF. Winter Park's involvement includes radiology and several other programs. Although no agreements have been entered into, programs to meet such clinical needs will be provided at Winter Park's new facility. Because Winter Park has not committed to make any gifts to educational institutions, the costs of its programs will probably be less than AMI's program. The fourth factor to be considered is the availability of alternative uses of resources for the' provision of other health services. The evidence presented at the hearing does not establish that there are not alternative uses of resources. The petitioners failed to present evidence sufficient to conclude that there are not alternative uses for available resources. Finally, the extent to which the proposed services will be accessible to all residents of the service district is to be considered. Both Petitioners are willing to accept all patients regardless of age, sex, race, color or national origin, and medically underserved groups. The Petitioners have met most, but not all, of the requirements of this criterion. Immediate and Long-Term Financial Feasibility; Section 1.494(6)(c)9. Florida Statutes (1984 Suppl.). Immediate Financial Feasibility. AMI's proposed facility will be financed by a 50 percent equity contribution from AMI to UCF, Inc., and 50 percent debt financing from AMI at a maximum interest rate of 12 percent amortized over 30 years. AMI has sufficient lines of credit to cover the amount needed for debt financing. AMI also has sufficient cash and unrestricted liquid assets (almost $300,000,000.00 by the end of its 1984 fiscal year) and generates enough capital ($300,000,000.00 to $400,000,000.00 a year) to fund its equity contribution and the debt. AMI also has sufficient funds to provide working capital needs of UCF, Inc. Exactly how Winter Park's proposed facility will be financed is less clear. Both of the Petitioners have suggested that the other has not proved that it has "committed" itself to funding their respective proposals. Although the evidence does raise questions as to whether AMI or Winter Park has finally committed the total funds necessary to complete their proposals, the weight of the evidence supports a finding that both Petitioners are committed to funding their proposals. More importantly, the test is whether the Petitioners have available financing sources. University Community Hospital, et ala v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1346-A, 1360-A (1983). AMI clearly proved that its Executive Committee had approved its proposal. One of its witnesses, however, testified that the approval of capital expenditures of over $1,000,000.00 took approval of the full AMI Board of Directors. Winter Park clearly proved that its Board of Trustees had approved only $4,000,000.00 of the costs of its facility. Despite these facts, the evidence establishes that, although final approval of all the funds necessary to fund the proposals may not have been given, the funds necessary to insure the immediate, financial feasibility of both proposals are available. Where the funds will come from in Winter Park's case and the total amount of funds needed by Winter Park is far from being crystal clear. Winter Park failed to take into account several expenses it will incur, including sewer capacity reserve fees (approximately $160,500.00), telephone lease costs ($20,000.00) and possibly some interest expenses. There may also be an underestimate of the cost of debt financing, depending upon whether tax-exempt loans are available to Winter Park. The costs of sewer capacity reserve and the telephone lease can probably be covered by the contingency funds projected by Winter Park. AMI's proposed findings of fact with regard to equipment costs underestimates are rejected as unsupported by the weight of all of the evidence. Even with the understatement of project costs, the evidence supports a conclusion that Winter Park's proposal is immediately financial feasible. Winter Park currently has set aside "over $7,000,000.00" which can be applied to fund its proposal. (Although Winter Park has certain planned or ongoing capital improvements, the evidence does not prove that these improvements will be funded out of the funds set aside for the proposed new hospital, as suggested by AMI)'. Winter Park also has lines of credit with Barnett Bank and Sun Bank of $5,000,000.00 each. Neither line of credit has been used in the past. The Sun Bank line of credit was recently renewed and is available for one year. The Barnett Bank line of credit is also good for only one year. Both lines of credit have been renewed in the past. These lines of credit will have to be renewed before construction of Winter Park's facility begins. Winter Park presented no evidence as to whether the lines of credit would be renewed by either bank, however. Therefore, the record does not contain evidence as to whether the lines of credit will be available. Winter Park is also the sole beneficiary of the Winter Park Memorial Hospital Association Foundation, a not-for-profit foundation set upon to receive donations for the support of Winter Park. The Foundation "would make funds available to it [Winter Parka when needed." (Although testimony concerning Winter Park's alleged ability to "request" funds from the Foundation was struck, the quoted testimony was not objected to). The Foundation currently has $2,000,000.00 which could be provided to Winter Park. Finally, Winter Park has a commitment from Barnett Bank for a loan of $9,181,648.00. The loan has been committed whether interest on the loan is tax- free or taxable to Barnett Banks. Whether the loan is tax-free will affect the immediate and long- term financial feasibility of the proposal. If the loan is not tax-free, additional interest expense will be incurred; instead of being financed at a 7.696 interest rate, Winter Park will be charged approximately 11.5 percent interest if the loan is not tax- free. If the loan is tax-free, Winter Park may have failed to take into account costs associated with obtaining tax-free financing, i.e., underwriter's fees. AMI has proposed a number of findings of fact concerning additional costs associated with whether the Barnett Bank loan is tax-free. Those findings of fact are not relevant, however, in determining immediate financial `feasibility of Winter Park's proposal. The evidence establishes that the funds available to Winter Park are sufficient to cover Winter Park's projected costs and the costs it failed to include in its proposal (including the $1,20 0,000.00 of working capital which will be needed by the and of 1988). Both proposals are financially feasible in the short-term. Long Term Financial Feasibility. The Petitioners have failed to prove that their proposals are financially feasible in the long run. The projections of the Petitioners with regard to expected gross revenue depends upon whether their utilization projections are correct. Based upon the conclusion that there is no need for the proprosed facilities it is unrealistic to expect the facilities to be financially feasible. AMI's projections as to gross revenue depend on Mr. Richardson's need analysis for AMI's MSA. As discussed, supra, Mr. Richardson's projections were based upon unrealistic occupancy rates. Winter Park's projected utilization is based upon Winter Park's historical experience with its MSA for 1983. Mr. Talbert's and Mr. John Winfrey's reliance on this data in light of the trend toward reduced utilization of hospitals in Orange County is misplaced. Determining utilization of Winter Park's proposed hospital in future years based on utilization of an existing hospital in light of the trend toward reduced utilization of hospitals is very suspect. The fact that east Orange County is expected to grow in terms of population does not eliminate the concern with regard to utilization. Orange County has been growing since 1980 and before. Despite that growth, hospital utilization has declined. As to the projected expenses of the proposed hospitals which effect the financial feasibility of the proposals, it appears that AMI's projections are reasonable. A number of questions concerning Winter Park's expenses were raised, however, by the evidence. The evidence supports a finding that Winter Park has failed to take into account some expenses which will affect the long term financial feasibility of its proposal. Expenses not taken into account include phone lease expenses ($15,000.00 to $20,000.00), indigent care assessments ($58,000.00 in the second year of operation) and start-up costs ($22,680.00 a year). The evidence, however, also supports a finding that Winter Park's estimate of medicare contractual allowances was $318,900.00 too high and that depreciation expense was $130,000.00 too high. These overstatements of expenses are more than sufficient to cover the understatements of expenses discussed in this paragraph. The primary problem with Winter Park's estimate of expenses is that Winter Park has projected interest expense at a tax- exempt rate of 7.6 percent. The evidence does not prove that Winter Park can, however, obtain tax-exempt financing. Winter Park only presented evidence that Barnett Bank is willing to loan funds on a tax-exempt or taxable basis. Winter Park must, however, obtain approval of its proposed tax-exempt financing from the Orange County Health Facilities Authority. See Chapter 154, Florida Statutes (1983). No evidence that such approval could be obtained was presented at the hearing. Winter has therefore failed to prove that its estimated interest expenses can be achieved. The evidence also shows that if Winter Park cannot obtain tax-exempt financing, it will have to borrow funds at an 11.5 percent interest rate. This rate of interest can be obtained, but the additional interest expense would result in a net loss for the second year of operation. Based upon the foregoing, Winter Park has failed to prove that its proposal is financially feasible in the long-term. Winter Park has proposed findings of fact to the effect that it could charge a higher rate for its services to cover understated expenses. No evidence was presented, however, that proves that Winter Park would be willing or committed to a higher charge for its services. AMI's proposed findings of fact with regard to expenses for utilities, food and drugs, other operating expenses, incinerator costs and equipment costs are rejected. AMI's proposed findings of fact with regard to the goal of Winter Park to achieve an optimum profit margin of 5 percent to 7 percent are rejected because that goal does not apply to the proposed facility. The projected profit margin of the proposed facility is only seven-tenths of one percent. AMI's proposed findings of fact as to the years projections were made for (two years instead of five), the manner of making those projections (no balance sheet, no cash flow statements and no quarterly breakdowns) and the lack of a feasibility study are not necessary. AMI's remaining proposed findings of facts concerning "soft spots" in Winter Park's projections are also rejected. Special Needs and Circumstances of Health Maintenance Organizations; Section 381.494(6)(c)10, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Needs and Circumstances of Entities which Provide Services or Resources to Individuals not Residing in the Service District or Adjacent Service Districts; Section 381.494(6)(c)11, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Probable Impact of the Proposal on the Costs of Providing Health Services; Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.). The weight of the evidence clearly supports a conclusion that if either of the proposed hospitals is approved, the probable impact on the costs of providing health services would be negative. The only real question raised by the evidence is the degree of the negative impact. It has already been found that there will be an excess of beds in Orange County in 1990 and that utilization rates are decreasing and will continue to do so. To add 100 acute care beds to an already over-bedded subdistrict can only further add to the number of excessive beds. Patients who would occupy 100 new acute care beds would have access to other hospitals in Orange County if a new hospital is not approved. If it is assumed that patients could be attracted to a new hospital in the MSA's it necessarily follows that those patients will not use an existing, already underutilized, hospital in Orange County, Seminole County or the rest of District 7. Additionally, the evidence clearly shows that some patients who currently use existing Orange and Seminole County hospitals would be attracted to a new hospital in the MSAs. AMI has suggested that such a loss of patients would be "minimal." Minimal or not, the loss of any number of patients would result in a loss of patient days and revenue to existing hospitals which are on average already underutilized. If patients are lost by existing hospitals, the ability to serve indigents could be adversely affected. The projected population growth for the MSA's does not solve the problem either. Orange County has been experiencing population growth during the 1980's, as well as prior to 1980. Despite this population growth, utilization rates have been decreasing. Even Mr. Richardson, AMI's expert health planner, admitted there would be an impact on existing hospitals. Mr. Richardson indicated that there would a "1.5 percent occupancy impact on the system" by 1990 based upon Mr. Margolis' analysis. Mr. Richardson indicated that such an impact would be "minimal." Whether a 1.5 percent impact is minimal is not the issue. The issue is what effect such an impact would have. The weight of the evidence clearly supports the finding that the impact would be negative and the citizens of Orange County would suffer the consequences of that "minimal" impact. Florida Hospital's expert health planner, Mr. Margolis, was the most credible witness with regard to this criterion. His testimony proves that Florida Hospital and OGH could lose 5,400 to 6,000 patient days if a new 100 acute care hospital is approved. How much the dollar loss would be as a result of such a decrease in patient days is not clear. There was testimony that OGH could lose $1,000,000.00 to $3,500,000.00 in gross revenue. AMI has again suggested that the loss in patient days and revenue to OGH would be minimal and that OGH's testimony as to the amount of loss was misleading. Mr. Patrick Deegan, who testified as an expert in finance for OGH, did fail to take into account any reduction in expenses which might be associated with a loss in revenue and also failed to take into account increases in revenue as a result of growth. Although these factors could influence the amount of projected losses in revenue, the fact remains that a new acute care hospital could and probably would have a negative impact on OGH. AMI has also suggested that OGH could and should reduce its staff. This suggestion is based upon a comparison of OGH's staffing patterns and UCH Inc's proposed staffing. The record does not support AMI's proposed findings of fact. The record does not prove that UCH, Inc's, proposed staff will be at a more appropriate staffing level. Nor does the record establish that a reduction in staff at OGH would be detrimental, as suggested by OGH. As to Florida Hospital, AMI also suggests that any impact to its campuses would be minimal, if any. It is true that there probably would be no impact on Florida Hospital's Apopka campus. Florida Hospital's Orlando campus, however, gets 20 percent of its admission from the MSAs and its Altamonte Springs campus gets 3 percent of its admissions from the MSAs, as AMI points out in its proposed findings of fact. If any of those patients utilize a new hospital in the MSAs, Florida Hospital will lose patients and will be adversely affected. AMI suggested several findings of fact with regard to the financial well-being of Florida Hospital, the addition of beds at its Altamonte Springs and Orlando campuses and its motives in intervening in these cases. These proposed facts do not support a finding that Florida Hospital would not be negatively affected by the opening of a new 100 acute care bed hospital in Orange County. Finally, Winter Park has proposed findings of fact to the effect that a new Winter Park hospital in the MSAs will foster competition and thereby lower costs in Orange County for hospital services. The record does not support these proposed findings of fact in light of the excess of beds in District 7 and the underutilization of existing beds. Based upon the foregoing, Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), has not been met by the Petitioners' proposals. Costs and Methods of Construction; Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.). The Petitioners only partially proved that Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), will be met. This section requires proof as to the costs and methods of construction, including methods of energy provision and the availability of alternative, less costly or more effective methods of construction. The Petitioners only proved that the costs of construction would be reasonable. AMI's proposed facility will have 99,000 square feet. The total cost of construction will be $10,095,000.00 including $650,000.00 for site preparation, $8,161,000.00 for labor, materials, overhead and profit, $406,000.00 for contingencies and $878,000.00 for inflation. Architectural and engineering fees will cost an additional $566,700.00. AMI's costs of construction do not include the $236,800.00 cost of reserving sewage capacity or the costs of obtaining appropriate rezoning of its property. These costs will add to the total cost of construction and the total cost of the proposal. AMI's contingency funds are sufficient to cover these amounts. AMI's additional findings of fact concerning construction costs are cumulative or unnecessary for purposes of determining if this criterion has been met. Winter Parks's proposed facility will have 98,763 square feet. Total cost of construction projected by Winter Park is $10,415,000.00, consisting of $375,000.00 for site preparation, $9,000,000.00 for labor, materials, overhead and profit, $468,700.00 for contingencies and $552,200.00 for inflation. Winter Park's projections do not include the costs of reserving sewage capacity which will add approximately $150,000.00 in costs. This additional amount can be covered by the contingency amount. Although the evidence was contradictory, Winter Park did not inadvertently leave out the cost of an incinerator--there will be no incinerator at the new hospital. Although the Petitioners presented testimony to the effect that their projected costs of construction are reasonable, no consideration was given to whether the proposed facilities would be developments of regional impact (hereinafter referred to as "DRI") under Chapter 380, Florida Statutes (1983), and the costs associated with such a determination. The evidence supports conclusion that there will be some costs associated with the determination of whether the proposals are DRIs. The additional cost, however, does not appear to be significant. The Petitioners have failed to prove that the methods of construction are reasonable. They have also failed to prove that the provision of energy will be reasonable or that there are not alternative, less costly, or more efficient methods of construction available. Section 381.494(6)(d). Florida Statutes (1984 Suppl.). In addition to considering the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), Section 381.494(6)(d), Florida Statutes (1984 Suppl.), requires findings of fact in cases of capital expenditure proposals for new health services to inpatients as follows: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. The existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, that the addition will be consistent with the plans of other agencies of the state responsible for the provision and financing of long-term care, including home health services. The facts concerning the first three items quoted are favorable to the Petitioners. The last one does not apply. The fourth item has not been proved to be true in this case. Summary. In summary, the evidence proves that an application of the criteria of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate the need for either of the proposed facilities. The Petitioners have only proved that they can provide quality of care, that there are not alternatives to their proposals, that they will have shared resources, that personnel are available, that they have the capital to create the facilities, that they will improve the clinical needs of health professional training programs, and that their proposals are `financially feasible in the short-run. The Petitioners, however, have failed to prove any need for the facilities. Their proposals are not consistent with the local health plan or the State health plan. There are sufficient, underutilized existing hospitals to meet any need for hospital care and they will be adversely affected by the proposed facilities. The proposed facilities are not financially feasible in the long run. THE NEED FOR A CAT SCANNER AMI is also seeking a certificate of need for a CAT Scanner in this proceeding. The determination of whether such a certificate of need should be issued is governed by Section 10-5.11(13), F.A.C. In order to qualify for CAT Scanner, AMI must first obtain approval of its proposed hospital. Because it has been concluded that a certificate of need for a new hospital should not be granted, AMI should not be granted a certificate of need for a CAT Scanner; it will not qualify under Section 10- 5.11(13), F.A.C. In an abundance of caution, the following findings of fact are made as to whether a certificate of need for a CAT Scanner should be issued if AMI's application for a certificate of need for an acute care hospital is approved by the Department. Section 10-5.11(13)(b), F.A.C., provides that a favorable determination will not be given to applicants failing to meet the standards and criteria of Section 10-5.11(13)(b)1-10, F.A.C. The evidence clearly establishes that AMI's CAT Scanner application meets the standards of Sections 10- 5.11(13)(b) 1-3 and 7-9, F.A.C. Section 10-5.11(13)(b)4, F.A.C., does not apply. Section 10-5.11(13)(b)5, F.A.C., requires that an applicant document that there is a need for at least 1,800 scans to be accomplished in the first year of operation and at least 2,400 scans per year thereafter. Mr. Richardson testified that this standard is intended to apply to existing providers and that for a new hospital the need should apply to a five year horizon (1990 in this case). Mr. Richardson indicated that in 1990, this standard can be met. The language of Section 10-5.11(13(b)5, is clear; there must be a need documented for the first year of operation and each year thereafter. In this case, the first year of operation will be 1987. AMI has not documented that there is a need for 1800 scans in 1987 or 2,400 scans per year thereafter. Section 10-5.11(13)(b)6, F.A.C., requires that the applicant document that the number of scans per existing scanner exceeded 2,400 during the "preceding 12 months." The evidence establishes that during the 12 months preceding the hearing all of the fixed CAT Scanners located at hospitals except two were being used for more than 2,400 scans. Again, Mr. Richardson indicated that this standard should be applied to the 12 months preceding 1990. That is not what the rule specifies. The standard applies to the 12 months preceding the hearing. The two units that have not been used for 2,400 scans just started operation, however. Because the rule requires that in the first year of operation only 1,800 scans need to be performed, those units should not be considered in determining if AMI meets this standard. Therefore, AMI meets the requirements of Section 10-5.11(13)(b)6, F.A.C. The last standard, Section 10-5.11(13)(b)10, F.A.C., provides that extenuating circumstances pertaining to health care quality or access problems, improved cost benefit consideration or research needs may be considered. The facts do not support a finding that there are extenuating circumstances in this case. The facts do prove that any hospital such as the AMI proposed hospital should have access to a CAT Scanner. This need, however, can be met by a mobile CAT Scanner or by transferring patients to a facility with a CAT Scanner, although the latter alternative is less desirable. The evidence clearly proves that there is not access problem with regard to obtaining the services of a CAT Scanner. AMI has not met the requirements of Section 10-5.11(13)(b), F.A.C. Taking into account the factors to be considered under Section 10-5.11(13)(a)1- 8, F.A.C., also supports a finding that a certificate of need for a CAT Scanner should not be issued to AMI even if there is a need for its proposed hospital.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need applications for a 100-bed acute care hospital and CAT Scanner filed by AMI, case number 84-1819, be denied. It is further DONE and ENTERED this 26th day of July, 1985, 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 26th day of July, 1985. COPIES FURNISHED: Fred Baggett, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302 Michael Von Eckhardt, Esquire American Medical International, Inc. 414 Camden Drive Beverly Hills, California 90210 Kenneth F. Hoffman, Esquire OERTEL & HOFFMAN, P.A. Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A. P.O. Box 880 Winter Park, Florida 32790-0880 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 E. G. "Dan" Boone, Esquire Stephen K. Boone, Esquire E.G. BOONE, P.A. P.O. Box 1596 Venice, Florida 34284 Steven R. Bechtel, Esquire Brain D. Stokes, Esquire MATEER & HARBERT, P.A. 100 East Robinson Street P.O. Box 2854 Orlando, Florida 32802 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 LIST OF WITNESSES AMI NAME EXPERTISE Jim Palmer Phillip L. Coppage Hospital administration including staffing. Thomas C. Wohlford Patient group and insurance programs in the health care industry. J.D. Garland Health care facilities, including hospital construction management and budgeting and cost estimating. Manuel Viamonte, M.D. Radiology. Dick Chadbourne Manpower staffing requirements for health care facilities. Jan Stirrat Health care facility equipment planning and equipment cost budgeting. Preston Thompson Physician relations and recruiting. Joseph Akerman, M.D. Peter Hiribarnc, M.D. Louis Trefonas, Ph.D. Need, development and operation of sponsored research projects at UCF. Thomas S. Mendenhall, Ph.D. Need, development and operation of health education and affiliation programs. Alan Denner, M.D. Louis C. Murray, M.D. Joseph Sandberg, M.D. Myles Douglas, M.D. Robert D. Fennell Corporate health facilities planning, processing, implementation and development. Manuel J. Coto, M.D. Jerold J. Faden, M.D. Zivko Z. Gajk, M.D. Don Steigman Hospital operations and administration. William A. Tipton Traffic and transportation. Neal B. Hiler Civil engineering and property site analysis. Trevor Colbourn Ben E. Whisenant Frederick A. Raffa, Ph.D. Demographics and socioeconomic forecasting. Nilo Regis, M.D. Richard Pajot Mark Richardson Health planning. Richard Altman Hospital management engineering. Walter Wozniak Armond Balsano Health care facility financial feasibility and analysis and third- party reimbursements. Rick Knapp Health care facility financial feasibility and analysis, third- party reimbursement and rate-setting for health care facilities. Richard Anderson Edward E. Weller Real estate appraisal. John Winfrey Health care accounting and financial feasibility analysis. Van Talbert Health care planning. Margo Kelly Financial management, analysis and feasibility. WINTER PARK NAME EXPERTISE Katherine J. Brown Florida Hospital Cost Containment Board procedures; hospital costs and charges, data gathering and review; and hospital costs and charges comparisons. Karl Schramm, Ph.D. Hospital cost and charges and comparisons thereof and health care financing, including the impact upon the health care consumer. Willard Wisler Hospital administration including staffing and operating hospitals. John H. Roger Construction design and costs, including site preparation, and analysis thereof, in central Florida; including health care facilities construction. R. Sans Lassiter Traffic engineering, travel times and access in central Florida. Richard Anderson Sarah Mobley Equipment and cost of equipment. William J. Serow, Ph.D. Demographics. Van Talbert Health care planning. John Winfrey Health care accounting and financial feasibility analysis. Robert C. Liden Investment banking, including tax-exempt financing of health care facilities. Lewis A. Siefert Hospital accounting and Medicare Reimbursement. FLORIDA HOSPITAL NAME EXPERTISE Steven Windham Health planning. W. Eugene Nelson Health planning, CON administration and transportation planning. Ronald J. Skantz Radiology training and management. Sven Kansman Traffic engineering and travel time studies. John Crissey Stan Smith, Ph.D. Demographics. Gabriel Mayer, M.D. Physician. Larry Margolis Health care planning, hospital administration, facility planning, HMO's and PPO's. Scott Allen Miller Health care accounting and financial feasibility. OGH NAME EXPERTISE Patrick J. Carson, D.O. Medical emergencies and operation of an emergency room. Tracey Watson Michael Sherry B. Jean Martell Walter J. Wozniak Lawrence Kramer, O.D. Family practice. Patrick Deegan Accounting, hospital finance and budgeting. Andrea Walsh DEPARTMENT NAME EXPERTISE W. Eugene Nelson Health planning, CON administration and transportation planning. PUBLIC WITNESSES Mike Baumann Bob Mandell Luddy Goetz Martin Goodman Yvonne Opfell Martin Lebnick
The Issue Whether the Petitioner is qualified for licensure as a medical doctor in Florida by examination.
Findings Of Fact Petitioner graduated from the School of Medicine at the University of Pennsylvania in 1955, following which he did a rotating internship at Abington Memorial Hospital before reporting for active duty in the U.S. Navy. Upon release from active duty in the Navy in 1959 he entered a residency program in general surgery at Hospital of University of Pennsylvania followed by thoracic surgery which he completed in 1965. Petitioner was certified by the American Board of Surgery in 1965 and by the Board of Thoracic Surgery in 1966. From 1965 to 1986 Petitioner was engaged in the practice of general, cardiac, thoracic and vascular surgery. In the latter part of this period, he headed a cardiothoracic surgery team at Lankenau Hospital, Philadelphia, which performed some 700-800 open-heart surgeries per year. It was during this period that most of the malpractice suits were filed against Petitioner, the hospital and other doctors on his team. As head of the surgical team Petitioner did the definitive surgery (bypass grafts) while other members of the team opened and closed the chest cavity. Petitioner is currently licensed to practice medicine in Pennsylvania, New York, New Jersey, Delaware and Arizona. At the time he first applied for licensure in Florida in 1988, he was licensed in Pennsylvania, New Jersey and Arizona. No licensing agency has brought any charges against Petitioner's license. Petitioner took and passed the FLEX examination in 1988 scoring 84 and 83 on the two parts of the exam. In the past twenty years, 19 malpractice suits have been filed against Petitioner. Of those suits 9, have been dismissed by Plaintiffs without any recovery from Petitioner, and two were settled on behalf of Petitioner, one in 1979 for $50,000 and one in 1989 for $25,000. Those settlements represented little more than nuisance value. The hospital defendant settled one case for $225,000 and another for $2,500. Of the remaining eight suits the complete medical records of those cases were reviewed by another cardiothoracic and vascular surgeon who opined that five are without merit. For the remaining three, additional evidence is needed to fairly appraise the merits of those suits. This additional information will not be available until discovery is completed. Petitioner's testimony, that these remaining three cases did not involve a failure on his part to practice medicine with that level of care, skill, and treatment which is recognized by a reasonable prudent similar physician as being acceptable under similar conditions and circumstances, corroborates the Affidavit of the risk manager (Exhibit 3) and letters in the file (Exhibit 1) stating those cases are deemed to be without merit and will be vigorously defended. All of these suits were brought in Pennsylvania where the backlog of civil cases is such that civil cases are not scheduled for trial until approximately seven years after the suit is filed. Furthermore, the complaints filed in these cases contain general allegations that the Respondent's negligence, inattention, failure to adequately apprise the plaintiff of possible complications of the surgery, along with the negligence of the hospital and others involved with the surgery, directly resulted in the plaintiff's death, injury, etc. These are catch- all allegations and the specific nature of the malpractice claim cannot be discerned from these pleadings. Cardiothoracic and vascular surgery is a high risk field of medicine in that the patients are frequently very sick and elderly. Accordingly, the success rate for this type surgery is lower than for most surgeries, and this leads to a higher incidence of suits alleging malpractice. Many of these earlier suits were brought before the doctors began paying attention to documenting that they fully explained the risks of the surgery to the patient and thereafter the patient gave informed consent to the operation. Petitioner has been more assiduous in this regard in recent years than he was several years ago. This practice will have the effect of reducing the incidence of malpractice suits against surgeons. It is noted that several of the suits alleged the plaintiffs were not adequately advised regarding the risks involved and, therefore, they did not give informed consent to the surgery.
Recommendation It is RECOMMENDED that Horace MacVaugh III be granted a license to practice medicine in Florida. DONE and ENTERED this 19th day of December, 1990, in Tallahassee, Leon County, Florida. K. N. AYERS 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 19th day of December, 1990. APPENDIX Petitioner's proposed findings are accepted, except: 8. Accepted only insofar as consistent with HO #5 and 6. 15. Rejected. No evidence was presented in this regard. Respondent's proposed findings are accepted except: 17. Second and third sentences rejected as not supported by any competent evidence. COPIES FURNISHED: Roger Lutz, Esquire Robin Uricchio, Esquire HOLLAND & KNIGHT Post Office Box 1526 Orlando, Florida 32802 Allan Grossman, Esquire The Capitol, Suite 1602 Tallahassee, Florida 32399-1050 Dorothy Faircloth, Executive Director Florida Board of Medicine Northwood Centre, Suite 60 1940 North Monroe Street Tallahassee, Florida 32399-0750 Kenneth E. Easley, Esquire General Counsel Department of Professional Regulation Northwood Centre, Suite 60 Tallahassee, Florida 32399-0792
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: In November of 1982, Morton Plant filed with HRS an application for a Certificate of Need to construct and operate a mental health facility containing 110 psychiatric beds. The project proposed included the construction of a multistory, freestanding facility containing 84,646 square feet at a total project cost of $15,985,000. On or about February 28, 1983, HRS gave notice of its intent to deny the project in its entirety. Morton Plant thereafter petitioned for a formal administrative hearing regarding the denial of its application (DOAH Case No. 83-1275). Horizon Hospital petitioned to intervene in opposition to the application on May 19, 1983, and this petition was granted by Order dated June 1, 1983. A motion for reconsideration of the Order allowing intervention was denied by Order dated June 23, 1983. On July 6, 1983, Medfield filed a petition to intervene in opposition to the Morton Plant application. Morton Plant opposed the petition to intervene, and a motion hearing was scheduled for 10:00 a.m. on September 6, 1983. After hearing oral argument from the parties, the Medfield petition to intervene was granted by Order dated September 6, 1983. At 3:52 p.m. on September 6, 1983, a "Stipulation for Voluntary Dismissal" dated September 6, 1983, was filed with the Division of Administrative Hearings. While the caption of the Stipulation includes Horizon as an intervenor, the Stipulation bears the signatures of representatives from only HRS and Morton Plant. The Stipulation notes that subsequent to the original denial of Morton Plant's application, HRS adopted a new psychiatric bed need rule and that the application of that rule justifies the partial granting of Morton Plant's application. HRS therefore agreed to grant Morton Plant a Certificate of Need for the construction and equipping of: "(a) psychiatric inpatient nursing facilities containing a maximum of sixty-four (64) beds including twenty-two (22) additional beds and forty-two (42) replacement beds; psychiatric outpatient treatment facilities; and psychiatric residential treatment facilities. Units (a), (b), and (c) above shall be contained within a total area of 66,246 GFT 2/ at a total project cost not to exceed $12,756,526." Morton Plant agreed to voluntarily dismiss Case No. 83-1275, and further agreed to "provide DHRS, within thirty (30) days of the effective date of these stipulations, the following information: (a) schematic drawings (minimum scale 1/16" = 1' - 0"), delineating and identifying all spaces related to the psychiatric inpatient, outpatient, and resi- dential treatment units proposed under this application, and (b) an "existing bed relo- cation schedule" identifying: the building/ wing or unit floor location, room number, present bed capacity of each room, the number of beds to be relocated, and a description of proposed use of vacated bed spaces." By Order to Show Cause dated September 8, 1983, the intervenors were informed of the Stipulation and were ordered to show cause why Case No. 83-1275 should not be dismissed. An extension of time to respond to the Order was granted and a hearing was ultimately scheduled for November 4, 1983. As a result of that hearing, the undersigned Hearing Officer ruled that Case No. 83- 1275 would not be dismissed pursuant to the Stipulation and the parties were ordered to file amended petitions with regard to the issues in dispute so that this cause could proceed to hearing. In the meantime and subsequent thereto, two further occurred. On or about September 21, 1983, HRS and Morton Plant entered into an "Amended Stipulation for Voluntary Dismissal," amending the total square footage of the facility to 84,646 and amending the total project cost to "not to exceed $15,985,000." Attached to the Amended Stipulation were schematic diagrams showing the proposed bed use plan of the Roebling Building's second and third floors, and the site plan and floor plans for the proposed new mental health facility. The proposed facility plans attached to the Amended Stipulation are identical to those contained in the original 110-bed application with respect to the number of floors, the configuration of the building and the total square footage. The ground floor remains the same. The first floor is changed from the original application's provision for "alcohol - 20 beds" and "geriatric - 20 beds" to a "day hospital." The second floor plan is changed from "adult - 30 beds" and "intake - 10 beds" to a "30 bed adult unit" and a "14 bed geriatric psychiatric unit." The third floor plans were changed from "adolescents - 20 beds" and "pediatrics - 10 beds" to "adolescent/pediatric beds (20)" and a "communicative and learning disorders department." The floor designated "Penthouse/Mechanical" contained no changes. The last procedural event occurring prior to the hearing was the issuance on December 21, 1983, of Certificate of Need Number 2438 to Morton Plant for a short-term sixty-four bed (to include 42 beds currently licensed) psychiatric hospital at a project cost of $15,985,000. The project description attached to the Certificate of Need is as follows: "construct a sixty-four bed short-term specialty psychiatric hospital to include forty-two replacement beds licensed and located in Morton F. Plant Hospital. Total construction involves 84,646 GFT 2/ also to include psychiatric outpatient treatment facilities and psychiatric residential treatment facilities. Psychiatric care will be provided to indigents." In light of the issuance of Certificate of Need Number 2438 to Morton Plant, and in order to insure that their rights to an administrative hearing were protected, both Horizon (Case No. 84 0296) and Medfield (Case No.84-0699) filed separate petitions for a formal administrative hearing, and moved to consolidate the three cases. The motions to consolidate were granted. Morton Plant, chartered in 1914, is a 745-bed not-for profit general acute care hospital composed of an 11-building campus located in Clearwater, Florida. The hospital is governed by a 16-member Board of Trustees, which is appointed by the Morton Plant Association. The Association consists of 9,000 members from the community who have donated $10 or more. The book value of its net assets are approximately $52 million, and it has in excess of $12 million in either cash or fund depreciation and less than $4 million in long-term indebtedness. Morton Plant is committed to providing a wide range of medical services to all patients of Pinellas County regardless of ability to pay. It carries the largest Medicaid and charity load of any hospital in Northern Pinellas County. According to recent Hospital Cost Containment Board reports, Morton Plant charges less per day and less per stay than any other acute medical surgical hospital in Pinellas County. There are presently 42 licensed short-term psychiatric beds at Morton Plant. These beds are currently located on two floors of the Roebling Building, and consist of a 30-bed adult unit and a 12-bed pediatric/adolescent unit. While utilization of the adult psychiatric unit has declined, the 42-bed psychiatric unit as a whole experienced an average daily census of 57 in the eight-month period preceding the hearing. Two additional beds are designated and utilized by Morton Plant in its pediatric/adolescent unit. These beds are licensed as psychiatric beds. There is often a waiting list at Morton Plant for psychiatric beds for adolescents and children, and these patients must sometimes be placed in the adult unit. In December of 1983, Morton Plant began operating a 28 bed "liaison unit" on the same floor as the pediatric/adolescent psychiatric unit. This unit shares some of its services and personnel with the psychiatric units. The "liaison unit" is a mixed medical/surgical and psychiatric unit and was established to group medical patients with psychiatric problems for treatment. Most of the patients assigned to the "liaison unit" have a primary psychiatric diagnosis. Prior to the establishment of this unit, patients with psychiatric diagnoses were placed throughout the hospital, thus creating problems of patient safety and more expensive treatment. Any medical doctor with staff privileges may admit patients to the "liaison unit" and placement there does not require a psychiatric consult, as do the adult and children's psychiatric units. The Roebling Building contains five floors and was built in 1959. It has been recommended that this building be phased out in the future. In addition to the psychiatric units and the "liaison unit" located on the top two floors, the Roebling Building presently contains rehab services in the basement, a clinical laboratory on the ground floor and obstetrical services, including labor, delivery, nursery and post partum, on the first floor. Morton Plant does not currently offer services or facilities for adolescent residential treatment or a day hospitalization program for psychiatric patients. Such programs are designed primarily to provide a transition from or an alternative to inpatient hospitalization. It is currently not the practice of HRS to require a Certificate of Need for psychiatric day hospitalization or residential treatment programs. Morton Plant currently seeks the issuance of a Certificate of Need to construct and operate a freestanding mental health facility containing 64 short- term psychiatric beds to be comprised of its existing 42 licensed beds and 22 new additional beds. The 64 beds are to be divided into units of 20 adolescent/pediatric, 30 adult and 14 geriatric. The plans for constructing this facility which were submitted in support of the issuance of a Certificate of Need indicate a four-story building (with a fifth story penthouse) consisting of 84,646 square feet. The building is to contain a kitchen, cafeteria, recreational rooms, a gymnasium and administrative offices on the ground floor, the first floor is to be utilized primarily for a day hospital, the second floor will be devoted primarily to the adult and geriatric units (44 beds), and the third floor will be utilized for the 20 adolescent and pediatric beds, as well as a 10-bed residential treatment center. Morton Plant believes that the provision of inpatient hospital beds, residential treatment center beds and a day hospital for psychiatric patients in one facility would allow for the development of a step-down program in a continuum of care. While these combined psychiatric services are to be located in a separate building on the Morton Plant campus, the facility is to be operated as an integral service component under Morton Plant's general hospital license. A patient from the psychiatric hospital requiring medical care will not be required to go through readmission procedures to the hospital. The bed need methodology for short-term psychiatric beds is contained in Rule 10-5.11(25), Florida Administrative Code. Need is calculated by subtracting the number of existing and approved short-term psychiatric beds from the number of beds calculated by applying a ratio of .35 beds per 1,000 population projected for a given year. Applying the Rule's bed-to population ratio results in a total need for 392 psychiatric beds in District 5 for the year 1988 and 400 beds for the year 1989. In order to arrive at the number of additional beds needed for those years, it is necessary to subtract the number of psychiatric beds currently in existence or approved. The inventories utilized by both HRS 1/ and the Health Council of Pasco-Pinellas, Inc. indicate that there are 372 licensed and/or approved short-term psychiatric beds in District 5. Utilizing the methodology contained in Rule 10-5.11(.25), there is a need in District 5 for 20 additional psychiatric beds in 1988 and a need for 28 such beds in 1989. Based upon historical utilization of Morton Plant's existing psychiatric service, the granting of staff privileges to three new psychiatrists and the fact that at least some of the patients currently occupying beds in the "liaison unit" will occupy psychiatric beds at the new facility, Morton Plant projects that its new 64-bed facility will achieve occupancy levels of 95.8 percent for each month in its first year of operation and 97.9 percent for each month in its second year of operation. With these utilization projections, Morton Plant predicts that it will operate at a deficit of revenues over expenses of $320,000 in its first year of operation and a profit of $59,000 in its second year. These figures include revenues derived from at least an 80 percent occupancy of its 10-bed adolescent residential treatment unit and a patient census of approximately 50 in its day hospitalization program, with a 40 day average length of stay. While the expansion of an existing facility will generally have a higher rate of utilization than a new facility, projected occupancy levels of 95.8 percent and 97.9 percent for every month of the year are unreasonably high. Such projections do not account for start-up requirements from both a clinical and support services perspective, considerations of patient mix and seasonal fluctuations in occupancy levels. At a more realistic occupancy level of 90 percent, Morton Plant's proposed mental health facility would operate at deficits of $482,000, $261,000 and $182,000, respectively, during the first three years of operation. However, if Morton Plant were to increase its projected charges by 6.4 percent for the first year, the deficit could be eliminated. The Blue Cross/Blue Shield voluntary rate increase limit for the year 1985 is 8.4 percent. When HRS examines the financial feasibility of a project proposed by an existing facility, it looks at the financial viability of the institution as a whole. Morton Plant is dedicated to the concept of providing services needed by the community and does not limit its services in terms of their individual financial feasibility. Morton Plant desires to expand its provision of psychiatric services whether or not it is profitable, and has the ability to finance the project either from cash on hand or long-term indebtedness. Though the original Morton Plant application listed and this was the figure contained in the Amended Stipulation as well as Certificate of Need No. 2438 issued on December 21, 1983, Morton Plant presented evidence at the hearing that its total project cost was $11,066,279.00, with $8,924,339.00 of that amount attributable to construction costs for the proposed 84,646 square foot building. The average cost per bed in Florida for a psychiatric hospital is between $75,000.00 and $85,000.00. Even after removing 25 percent of the total project cost as that portion being attributable to a day hospital, the average cost per bed for this facility would be over $112,000.00 if 74 beds are counted and $129,000.00 if 64 beds are counted. The average gross size of a complete psychiatric hospital is approximately 700 square feet per bed. At 64 beds, this proposal has 1,322 square feet per bed and, at 74 beds, 1,143 square feet per bed results. Even if 17,500 square feet were to be removed from the total as being that portion of the facility attributable to the day hospital, this proposal would have 1,049 square feet per bed based on 64 beds and 907 square feet per bed based on 74 beds. Morton Plant considered several alternatives to the construction of a new facility. The alternatives involved the conversion and use of existing space in the Roebling Building and several other buildings. Each of the options considered started with the assumption that a similar amount of space -- 84,646 square feet -- would be required. In other words, each option considered started with the question: what would it involve and cost to put the planned freestanding facility, including space for the day hospital and the residential treatment center, into Morton Plant's existing buildings? The options involved the renovation on five levels of four different buildings. The alternatives included both the relocation and the displacement of 100 medical/surgical beds now located in the existing buildings. The costs of the various options ranged between $9,921,963 and $13,716,187, with the low figures accounting for the displacement of the 100 medical/surgical beds. If Morton Plant were to lose 100 of its 603 medical/surgical beds, it could experience occupancy rates of 98 percent or 99 percent, at least during its peak demand seasons. This is true only if one assumes that Morton Plant's new ambulatory surgery center and the effect of DRG(s) will have no impact upon current utilization of medical/surgical beds. Many of the 100 beds located in the buildings selected for renovation are not currently being utilized by Morton Plant as medical/surgical beds. As previously found, 30 such beds are presently utilized in connection with the existing psychiatric service -- 2 in the pediatric/adolescent unit and 28 in the "liaison unit." Facilities for a day hospital and a residential treatment center can be built less expensively per square foot if not housed within a psychiatric hospital, primarily due to the more stringent building code requirements for a hospital. Neither a day hospital nor a residential treatment facility require as many square feet per patient as an inpatient bed requires per psychiatric patient. The estimated costs of construction for this proposed project, as well as the estimated costs of the alternatives considered by Morton Plant, are entirely dependent upon the plans submitted, to wit: a requirement of 84,646 square feet to house 64 psychiatric beds, a residential treatment unit containing 10 beds and a day hospital. If any part of these plans change, the construction cost estimates will change, as they were prepared based upon the number of square feet in each department or unit as depicted on the schematic plans submitted into evidence. Yet, the evidence is undisputed that the freestanding facility plans submitted into evidence in support of the issuance of a Certificate of Need will be changed by Morton Plant if a Certificate of Need is granted. The person now responsible for designing and recommending space allocations for the proposed mental health facility predicts that the shape and configuration of the building, and even the number of buildings and total square footage, will be different than the plans submitted into evidence in this proceeding. While the new plans will contain the same basic elements with respect to the number of rooms and types of rooms, a change in the actual layout of the facility will be recommended. The changed design will not have more than 84,646 square feet and the total project costs will not exceed $15,985,000.00. Morton Plant does have contingency plans to convert the space designated for the day hospital and the residential treatment program to space for additional inpatient psychiatric beds should there be a greater need for inpatient psychiatric services. In fact, Morton Plant presently has pending an application for a Certificate of Need to add 46 short-term psychiatric and substance abuse beds and to convert its approved (pending) psychiatric outpatient services to psychiatric inpatient services. Medfield Center is a 32-bed short-term specialty psychiatric hospital located about five miles from Morton Plant. It provides many of the same psychiatric services offered and proposed to be offered by Morton Plant, and the two service areas overlap. As a specialty hospital, it does not receive Medicaid reimbursement. Medfield Center does not have, within its facility, either a day hospital or a residential treatment center. Its 32-bed facility operates at utilization rates exceeding 80 percent. Horizon Hospital is a licensed 200-bed specialty psychiatric hospital 2/ located in Largo, Florida. It is the designated Baker Act receiving facility in Pinellas County, but it, too, is not eligible to receive Medicaid reimbursement payments. While its service area is predominantly southern and central Pinellas County, it does receive some patients from Morton Plant's primary service area. Horizon has experienced a decrease in occupancy rates and, for the three months prior to the hearing, its average daily census fluctuated between 110 and 130. Horizon does not provide either a day hospital or a residential treatment center within its facility. The average of the overall 1983 utilization of short term psychiatric beds in District 5 exceeds 75 percent.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Morton F. Plant Hospital for a Certificate of Need to construct a freestanding mental health facility and to add additional short term inpatient psychiatric beds be DENIED in its entirety. Respectfully submitted and entered this 27th day of March, 1985, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 1985.
The Issue This case arises out of Orlando Regional Medical Center's objection to the issuance of a Certificate of Need to Surgical Services of Orlando, Inc., for the construction and operation of an ambulatory surgical center in Orlando, Florida. At the formal hearing, Orlando Regional Medical Center called as witnesses, Herbert E. Straughn, Norton Baker, Terry Weibley, Marlene Mariani, Michael L. Schwartz, Janice Smith, Richard Douglas Signer, Cathy Canniff Gillam, Jack Bradley, Barbara W. Miner, John Bozard and Stephen Haar. The Intervenor, Surgical Services of Orlando, Inc., called as witnesses, Steven Haar, Janice Smith, John Bozard, Michael Means, Jerry Senne, James Leveretee, Stephen Foreman, John S. Lord, Robert C. Klettner, Albert S. Bustamante, Pedro Diaz- Borden, Alberto J. Herran, Marianna Johnson, Richard Toole, Don Newton, Hank Gerken, Gordon Kiester, Leonard J. Levine, Rufus Holloway, Brenda Brinkman, Betty Barker, Wayne Deschambeau, Mark Richardson and Rick Knapp. Department of Health and Rehabilitative Services called as its only witness, Mr. Thomas Porter. Surgical Services of Orlando, Inc., offered and had admitted into evidence 33 exhibits. At the formal hearing, the Hearing Officer reserved ruling upon SSO Exhibit No. 14 and that exhibit is admitted. Orlando Regional Medical Center offered and had admitted into evidence, 9 exhibits. At the formal hearing, the Hearing Officer reserved ruling upon SSO Exhibit No. 14 and that exhibit is admitted. Orlando Regional Medical Center offered and had admitted into evidence, 9 exhibits. At the formal hearing, Orlando Regional Medical Center was given permission to file a late-filed exhibit with Surgical Services of Orlando, Inc., and the Department having the opportunity to object to said exhibit. That exhibit has been filed as Orlando Regional Medical Center Exhibit No. 9 and consists of excerpts from the Department of Health and Rehabilitative Services file relating to this application. That exhibit is admitted. The Department of Health and Rehabilitative Services offered and had admitted into evidence one exhibit. A map of Orlando reflecting the location of the various hospitals in Orange County was admitted as joint exhibit 1. Subsequent to the formal hearing, each of the parties submitted proposed findings of fact and conclusions of law for consideration by the Hearing Officer. To the extent that those proposed findings of fact and conclusions of law are inconsistent with this order, they were considered by the Hearing Officer and rejected as being unsupported by the evidence or as unnecessary to the resolution of this cause.
Findings Of Fact Surgical Services of Orlando, Inc., (hereafter referred to as SSO), is a Florida corporation based in Orlando, Florida. The stock of the corporation is owned in equal shares by Steven Foreman, Dr. Rufus Holloway and Randall Phillips. Mr. Steven Foreman is a life underwriter and financial consultant, and real estate investor in the Orlando area. He is secretary and director of SSO. Dr. Rufus Holloway is an otolaryngologist in the Orlando area and is treasurer and a director of SSO. Randall Phillips is a hospital administrator presently employed by American Medical International, Inc. Orlando Regional Medical Center, Inc. (hereinafter referred to as ORMC) is an existing hospital located in Orlando, Florida. It is a not-for-profit regional tertiary care center with 1035 beds and 24 operating rooms. ORMC has two main divisions, the Orange Division and the Holiday Division and is presently constructing a new facility, Sand Lake Division, which will open sometime in mid 1985. The Sand Lake Division will have 4 operating rooms and 150 beds. Dr. Rufus Holloway and Steven Foreman have committed their personal resources to provide financial support for the complete development and operation of the applicant's proposed ambulatory surgical center. The facility will be constructed by a partnership, the Kaley Avenue Medical Partnership of Dr. Holloway, Mr. Foreman and Richard Toole, a citrus owner in the Orlando area, and will be leased to SSO. Two banks in the Orlando area have given commitments to provide the necessary financing for the proposed facility and start-up expenses. Pan American Bank has committed to provide a $2.5 million loan for the construction and equipping of the building and $750,000 line of credit. Dr. Holloway and Mr. Foreman, and the parties of the Kaley Avenue Partnership have sufficient financial resources to fulfill their commitments to the proposed project. The proposed building will be a one floor building containing 15,000 square feet. The total cost for the project will be $2,737,636. The building is to be constructed and equipped by the Kaley Avenue Medical Partnership and leased to SSO at $16 per square foot. The proposed site of the facility is on Kaley Avenue within two or three blocks of ORMC. Its service area will include all of Orange County. The facility will contain five operating rooms with only three of the rooms being completely equipped initially. These rooms will be used for general and local anesthesia. The remaining two rooms will be equipped as demand requires. The applicant has budgeted $743,000 for initially equipping the facility with an additional $160,000 required to equip the two remaining operating rooms. The equipment proposed by the applicant is adequate to perform those procedures which the applicant proposed to perform at its facility. In addition to the five operating rooms, the center will include laboratory, x-ray, administrative areas, as well as holding and recovery areas for the patients. The applicant projects a total number of procedures in the first year of 1,800 and 2,760 in the second year of operation. Based upon a Medicare utilization rate of 15 percent SSO projects an operating loss in the first year of $223,000 with the facility making a profit in the second quarter of the second year and generating a total profit of $766,000 in the second year. The projected break-even point is 2,448 procedures within a year. Projected revenues are based upon an average charge per case of $575. SSO also intends to accept Medicaid patients. Presently, Medicaid does not reimburse freestanding ambulatory surgical centers. Medicaid charges would be included as charity cases in the projected bad debt of 6 percent of gross revenues. Based upon an inflation rate of 8 percent per annum when SSO begins operation in January, 1986, its average charge per case will be competitive with other facilities in the area providing ambulatory surgical services. Medicare now reimburses 100 percent of the facility charges in a freestanding ambulatory facility and 80 percent for outpatient surgery in a hospital setting. Prior to opening, SSO will implement a marketing program directed to four different target groups: physicians, consumers (patients), employers and insurance carriers. SSO has retained a marketing expert who has prior experience in marketing ambulatory surgical care in Florida. Similar marketing has proven successful for other freestanding ambulatory surgical centers in Florida. SSO has budgeted $20,000 for pre-opening marketing expenses and $35,000 for the first year of operation. It is difficult upon this record to make a truly accurate comparison of outpatient surgical rates in existing facilities to the proposed average charge of SSO. ORMC presented evidence that the present average charge in ORMC and three other hospitals per outpatient case is as follows: ORMC $417.19 Florida Hospital $469.86 Winter Park $512.21 Orlando General $560.81 No average charges were presented into evidence for West Orange Hospital, Lucerne Hospital, or Brookwood Hospital. The evidence established that 8 percent is a reasonable inflation or increase rate for health care charges over the next two years. Applying an 8 percent inflation rate to the above average charges these charges for 1986, SSO's first year of operation would be: ORMC $486.61 Florida Hospital 548.04 Winter Park 597.44 Orlando General 654.13 In calculating its present average charge of $417.19, ORMC did not include those outpatient surgeries performed at the Orange Division which are charged at inpatient rates. A memo dated January 19, 1984, to John Bozard, ORMC Vice President for Finance, from Steve Horr, ORMC Assistant Controller/Reimbursement, reflects that Holiday Division had 484 outpatient surgical cases which are estimated to generate gross revenues of $228,547. This results in an average charge per case for the month of December 1983 of $472.20. It is concluded that in 1986 the SSO projected average charge of $575 will be competitive with those existing facilities in the Orange County area. There is presently no rule which contains a specific methodology for determining need for ambulatory surgery centers. HRS uses a methodology which is based upon policy but has not been proposed or promulgated as a formal rule. The present methodology utilizes the total surgery cases for the most recent 12 month period to determine a surgical utilization rate per 1,000 population. By separating inpatient and outpatient surgeries for the same 12-month period, a percentage ratio of outpatient surgery cases to total surgeries is established. Applying the utilization rate to future projected population, HRS then determines the total projected surgeries for future years and from this number calculates the projected outpatient surgeries which will be performed in existing facilities. Literature relating to ambulatory surgeries projects that 18 to 40 percent of all surgical procedures performed could be performed in an outpatient setting. In calculating total potential surgeries HRS utilizes 29 percent as the potential surgeries that can be performed in an outpatient setting. The 29 percent factor is the mean of 18 percent to 40 percent and appears reasonable in light of the fact ORMC, Holiday Division, Winter Park Memorial and Orlando General had outpatient surgery of 29.4 percent, 30.1 percent and 30.6 percent respectively for 1983. Applying the 29 percent factor to projected total surgeries, HRS calculates the projected potential ambulatory surgery for a given year in the future. Subtracting those outpatient surgeries which will be performed in existing facilities from the total potential outpatient surgeries provides the unmet need for outpatient surgical care. This need is reflected in total cases. In evaluating ambulatory surgical applications, HRS utilizes a two year planning horizon. It is projected that SSO would begin operation January 1, 1986, and therefore under the HRS methodology, 1986 and 1987 become the relevant years for the HRS methodology, 1986 and 1987 became the relevant years for looking at projected need. Using the methodology described above, HRS projects the potential number of outpatient surgical cases which could be performed in other than a hospital setting to be 7,203 and 7,347 for 1986 and 1987, respectively. HRS projects the break-even level of the SSO facility at 2,693 surgical cases per year. Subtracting the SSO break-even factor from 7,203 and 7,347 results in an unmet need even after the SSO facility is in operation of 4,510 and 4,654 surgical cases in 1986 and 1987. HRS calculated the outpatient utilization rate in existing hospitals in 1983 to be 15.3 percent. If the unmet need of 4,510 and 4,654 in 1986 and 1987 was met by these existing facilities, that utilization rate would increase to 24 percent or approximately 1 1/2 times the 1983 rate. The projected utilization for the SSO facility for 1986 and 1987 will constitute only about 20 percent and 30 percent respectively of the unmet need for outpatient surgery in those years. The applicant in projecting need used a five year planning horizon to project need for ambulatory surgical services in Orange County for the year 1989. Under SSO's methodology, an outpatient utilization rate of 30 percent, 35 percent and 40 percent was used to project the total potential outpatient or ambulatory surgeries for the year assuming a total surgical utilization rate of 101.45 cases per thousand. Using these assumptions, the applicant projected unmet need for ambulatory surgeries in Orange County in 1989 as: Percentage of Ambulatory Surgery Unmet Need 30% 6,357 35% 9,246 40% 12,136 Although the projected unmet need is somewhat lower than that projected by HRS, it does reflect a need for the SSO facility. The methodology used by ORMC utilizes what ORMC's experts described as the "excess capacity theory." This methodology is based upon the assumption that no need exists for an ambulatory surgical center until such time as all excess capacity in the existing operating suites in Orange County is utilized. Using this approach, ORMC contends that of the 79 total operating suites in Orange County, there are presently 39 excess operating suites available to perform outpatient surgery. By multiplying total number of hours per day per operating room times 260 days, ORMC calculates the total available hours of operation of an operating suite and by multiplying this number times the total number of suites, the total available hours or operating room time for a facility is determined. The total available hours is then divided by the average operating room time for all procedures performed to determine the total number of potential procedures. Using this approach, ORMC's expert opined that there is potential for 95,513 - 98,980 total surgical cases in the existing 79 operating rooms in Orange County These 79 rooms include the 4 new operating suites in ORMC's Sand Lake facility as well as the 4 suite in Florida Hospital's new freestanding ambulatory surgical center. Subtracting the total procedures of 47,712 from the potential capacity, ORMC projects an available excess capacity for growth of 47,801 to 51,268 surgical cases in Orange County. Also using total available hours, hours per average procedure and total hours required for procedure presently being performed, ORMC's expert calculated the number of operating suites presently required. By subtracting this number from the number of existing suites, the ORMC expert concluded that there are presently 39 excess operating suites in Orange County. Once the ORMC Sand Lake facility and the Florida Hospital Freestanding Ambulatory Center (FAC) open, there will be a total or 79 operating suites in Orange County. These are divided as follows: ORMC, Orange Division 14 ORMC, Holiday Division 10 Winter Park Memorial 10 Orlando General 4 West Orange 3 Lucerne 8 Brookewood 5 Florida Hospital 17 Florida Hospital, FAC 4 ORMC, Sand Lake 4 79 At present, ORMC, Holiday Division, is the only facility operating dedicated ambulatory surgical suites. There are no applications pending for dedicated outpatient facilities within hospitals or for a freestanding ambulatory surgical facility. No such applications have been filed for these types of facilities since the SSO application was filed. Each of the existing facilities listed above performs outpatient surgery to some degree. On August 16, 1982, Florida Hospital was issued a Certificate of Need to construct a freestanding ambulatory surgical center. That facility will contain four operating suites and is expected to begin operation in mid 1984. Once this facility is complete, Florida Hospital will not perform outpatient surgery in its 17 other suites, except when special equipment which is available only in those suites is required. Outpatient surgery at Winter Park Memorial and Orlando General now comprises approximately 30 percent of the total surgeries performed at those facilities. Lucerne Hospital operates no separate ambulatory surgery unit and favors SSO's application. ORMC has been performing outpatient surgery for over 20 years. However, the specific facilities in which outpatient surgery has been performed have changed during this period of time. Prior to August 1979, outpatient surgery was performed at the Five North unit in the Orange Division as well as at the Holiday Division. At that time, Orange Five North was closed for renovation and outpatient surgery was concentrated in Holiday One East. In October 1981, an outpatient surgery review committee was established by ORMC to examine more efficient ways to conduct outpatient surgery and to improve utilization of certain departments at the Holiday Division. The end result was a decision to concentrate outpatient surgery at ORMC in one designated unit to be known as Outpatient Day Surgery ("ODS"), and to provide a financial incentive for physicians and patients to utilize the unit. One of the primary reasons for concentrating outpatient surgery in Holiday One East was the inefficiency and increased cost of staffing the units. Outpatient census counts were resulting in overstaffing the 3 to 11 shift. To encourage doctors and patients to utilize Holiday One East, ORMC reduced the rates for outpatient surgery in the ODS unit by approximately 40 percent. Although some outpatient surgery continues to be performed at the Orange Division the charge for such surgeries is at the inpatient rates rather than the reduced rates utilized by the ODS. The ORMC Board of Directors approved the capital expenditure to renovate the Holiday One East area into the ODS unit on September 20, 1982. The ODS unit was renovated at a cost of approximately $600,000, which was below the Certificate of Need threshold requirement. The ODS unit opened on November 28, 1983. The ODS unit is open Monday through Friday, and utilizes a ten hour day with general anesthesia administered to outpatients from 7:30 a.m. to 1:00 p.m. ODS patients use a separate and distinct entrance to the Holiday Division and have a designated parking area east of the hospital. There are sixteen semi- private holding beds and four recliner chairs located within the ODS unit. The average case load and length of stay are such that holding beds may be used for more than one outpatient per day. As a result of instances where there have been shortages of holding beds for outpatients, ORMC beginning April 2, 1984, established an overflow area of ten beds on the third floor of the Holiday Division. As of May 29, 1984, this overflow area had been utilized on three occasions. The ODS unit contains two dedicated operating rooms where only local anesthesia can be administered. Outpatient procedures requiring general anesthesia are performed in the eight general operating suites of the Holiday Division. These eight operating suites are also used for inpatient surgery. Outpatients are placed in the same holding and recovery areas where inpatients are held. The staff in these areas serve inpatients and outpatients. The ODS unit averages 15 to 16 outpatients per day. In 1983, outpatient surgery comprised 29.4 percent of the total surgeries performed at the Holiday Division. This was a slight increase over the 27.7 percent outpatient percentage for that same division for the previous year. Presently, the two dedicated local anesthesia rooms are being utilized approximately 40 percent of the time. The present utilization rate of the entire Holiday Division is approximately 50 to 55 percent to as much as 80 percent depending upon the particular day of the week. The 80 percent rate is attained on a regular basis at least once per week. ORMC has been issued a Certificate of Need for a children's hospital. As presently designed and approved, the construction of the children's hospital will require the demolition of Holiday One East where the ODS unit is located. It is uncertain where the ODS unit would be relocated. The master facility plan approved by the ORMC Board of Directors includes the construction of a freestanding ambulatory diagnostic center which will include ambulatory surgery. Depending upon the staff and its efficiency and the quality of care provided, a freestanding ambulatory center offers several advantages over outpatient units within hospitals. In such a freestanding facility, only outpatient surgery is performed and the staff and physicians, including anesthesiologists, can be specialized in outpatient surgery. In the freestanding facility, outpatients are not mixed with inpatients. A substantial portion of those patients utilizing outpatient surgery are well patients having elective surgery performed. By specializing in outpatient surgery only, overall operating costs are likely to be less and should result in reduced patient costs. In a hospital setting, there is on occasion a problem with "bumping" elective surgery for emergencies. This would not occur in a freestanding ambulatory surgery facility. Patients will have shorter waits in the facility and Medicare patients will be reimbursed 100 percent rather than the 80 percent reimbursed in a hospital setting. The 550 application is consistent with the applicable criteria enumerated in Section 381.494(6)(c), Florida Statutes and need for its facility exists in Orange County. Of the thirteen governing criteria, the parties have stipulated that the criteria contained in Subsections 6, 7, 10 and 11 of Section 381.494(6)(c), Florida Statutes, are not applicable to this proceeding. In addition, the parties stipulated that Subsection 1 of Section 381.494(6)(c), Florida Statutes, is not applicable to this proceeding to the extent that there is no applicable district health plan or state health plan pertaining to ambulatory or outpatient surgery.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is, RECOMMENDED That HRS issue a Certificate of Need to Surgical Services of Orlando, Inc., to construct and operate a freestanding, five operating room ambulatory surgery center in Orange County. DONE AND ENTERED this 2nd day of July, 1984, in Tallahassee, Florida. MARVIN E. CHAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of July, 1984. COPIES FURNISHED: Douglas L. Mannheimer, Esq. CULPEPPER, TURNER & MANNERED 318 North Call on Street Tallahassee, Florida 32302-3300 Fred W. Baggett, Esq. ROBERTS, BAGGETT, LaFACE, RICHARD, & WISER P.O. Drawer 1838 Tallahassee, Florida 32302 E. G. Boone, Esq. P.O. Box 1596 Venice, Florida 34284 Steven R. Bechtel, Esq. MATEER, HARBERT, FREY BECHTEL AND PHALIN, PA P.O. Box 2854 Orlando, Florida 32802 P. Joseph Wright, Esq. MURRAH AND DOYLE, P.A. P.O. Box 1328 Winter Park, Florida 32790 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact Petitioner, OMCO, is a corporation formed by Basic American Medical, Inc.(BAMI), to apply for a certificate of need (CON) to construct and operate a 120-bed acute care osteopathic hospital in Ocala, Florida. Petitioner is incorporated with 1,000 authorized shares with a par value of $1.00 per share. All shares of OMCO are controlled by BAMI pending issue. To obtain local support for the application, BAMI has offered local investors, principally doctors, the opportunity to purchase ten shares each at par value conditioned upon the issuance of a CON to OMCO. Up to 20 percent of the stock is proposed to be issued to 20 such investors (Exhibit 3). At the time of the hearing 10 percent of the stock had been issued to ten doctors, each of whom paid BAMI $10.00. Financing of the project is to be arranged by BAMI and, although BAMI is prepared to provide in excess of $1 million for initial construction and $1 million for start-up operating expenses, the entire cost of the project is intended to be funded with long-term financing. Arrangements for this financing is to be handled by Century Mortgage Corp., a wholly owned subsidiary of BAMI. Century Mortgage Corp. offered to provide $9 million at 12.5 percent for 25 years and $3.6 million at 13.5 percent for 8 years, for equipment, but proposes to serve only as a broker between OMCO and the investors who advance the money. BAMI corporate officers testified that Marion County was selected as the site for the proposed hospital because the state acute care bed methodology rule indicates there is a need for additional acute care beds in Marion County. No need for osteopathic hospital beds was determined but the application was submitted for an osteopathic hospital because, under Florida law, it was believed easier to get a CON for an osteopathic hospital than for an allopathic hospital. One of these investors, Sheldon Katanick, D.O., is a resident of Michigan who is contemplating a move to the Ocala area. Dr. Katanick is a radiologist but is currently on the staff at no hospital. He would prefer to practice at an osteopathic hospital rather than at an allopathic hospital because "There are procedures I might want that wouldn't be carried out at an allopathic hospital." No further identification of these procedures was given. As a radiologist Dr. Katanick would admit fewer patients than he would if he were in general practice. He estimates that he would admit five to ten patients per month if the application is approved and he moves to Ocala and establishes a practice. Arthur Paraiso, M.D., lives in Bellview, some ten miles south of Ocala, and is also an investor in OMCO. He has never served on the staff of an osteopathic hospital but would have no objection to serving on such a staff and will serve if the hospital is built. Paraiso is currently on the staff of no hospital. He recently resigned from the staff of Munroe Regional Medical Center because he "didn't like the atmosphere." He was told to resign from the staff of another hospital which was not identified. He has approximately 1,000 active patients but has no idea how many of these patients he would admit to the proposed hospital. Ronald E. Shelley, D.O., has operated the Bellview Medical Center for 16 years as sole practitioner. Although he has served on the staff of allopathic hospitals in the past, he is currently on the staff of no hospital. He considers the commuting from Bellview to Ocala (ten miles) to be difficult and prefers to refer his patients needing hospitalization to a doctor admitted to the staff at one of the Ocala hospitals. Also, he considers it difficult for a sole practitioner to serve on the staff of a hospital without being covered by another practitioner in his office. Shelley sees up to 60 patients per day in the winter season and approximately 40 patients per day during the summer. Most of the patients he has hospitalized go to an Ocala hospital but occasionally he sends patients to an osteopathic hospital in Orlando. Dr. Shelley is also a stockholder in OMCO and is on the board of directors. He is president of District Twelve Osteopathy Group, which has 25 members located throughout District Three, the health planning district in which Marion County is located. Robert M. Corbett, D.O., supports the application to construct an osteophathic hospital at Ocala. He operates two emergency walk-in clinics, one at Crystal River, Florida, and one at Ocala, Florida. He holds staff privileges at Seven Rivers Community Hospital in Crystal River and consulting privileges at Marion Community Hospital, which authorizes him to admit a limited number of patients to this hospital each year. Emergency clinics are staffed with four DO's and two MD's. Generally, the clinics treat emergency patients, and if one of these patients needs to be hospitalized the clinic refers the patient to a doctor on the staff of the appropriate hospital for admission. Dr. Corbett and the other doctors manning the emergency walk-in clinics do not have time to run the clinics and monitor patients in the hospital at the same time; hence, the referrals to another doctor for admission. Dr. Corbett did not testify he would change his mode of operation of referring patients for hospitalization and personally admit patients if an osteophathic hospital opened in Ocala. Robert Panzer, D.O., testified by deposition submitted after the final hearing date. Dr. Panzer has been practicing osteopathy in the Ocala area for approximately eight years and has about 5,000 active patients, of which six to ten are normally hospitalized. He admits all of his patients through M.D. specialists. He applied for and was accepted on the staff of Munroe Regional Medical Center, but never exercised the privileges granted. Panzer testified that he was told by a staff member at an Ocala hospital that he could not do manipulation of patients in the hospital; but, on cross-examination, he could not recall who told him that.; Dr. Panzer also has patients from outside Marion County. If this osteophathic hospital is authorized, Fanzer would join the staff and admit patients. He is one of the ten local investors and has been elected to the board of directors of the proposed hospital by the other investors. Other than the testimony of Dr. Panzer that he could not practice manipulation at a local hospital, no testimony was presented that any osteopathic patient is unable to obtain adequate treatment at existing facilities in Marion County, that existing hospitals refuse to admit osteopathic physicians to their staffs, or that there is any unmet need for osteophathic treatment in Marion County. There is no osteopathic hospital in District Three, which includes Marion County and 15 other surrounding counties. In District Three there are approximately 25 osteopathic physicians; in Marion County there are eight, of which only two, including Panzer, have applied for staff privileges at a Marion County hospital. Considerable testimony was presented that once an osteopathic hospital is built additional osteopathic physicians will move to the area, will build up practices, and utilize the facilities provided. Only general historical data from other counties was presented to support this position. In those counties cited the population is more urban than is Marion County and District Three population. Except for one hospital in Palm Beach County, osteopathic hospitals in Florida have a lower occupancy rate than do allopathic hospitals. Most DO witnesses emphasize the holistic approach to the patient taken by the osteophathic physician in his treatment as compared to the treatment of the specific illness used by an allopathic physician and to the fact that greater use of manipulative therapy is used in the practice of osteopathic medicine than in the practice of allopathic medicine. Otherwise, all witnesses generally agreed that the physical facilities provided at an acute care hospital are identical at allopathic and osteopathic hospitals. A bed in an allopathic hospital is indistinguishable from a bed in an osteopathic hospital and the primary difference between the two practices results from the philosophical approach to medicine each takes. As a result, patients of osteopathic physicians receive more physical therapy treatment than do patients of allopathic physicians albeit by use of identical equipment. Plans and cost estimates for the proposed hospital, including equipment, are taken largely from an allopathic hospital recently opened by BAMI at Kissimmee, Florida. The implementation of the Diagnostic Related Groups (DRG's) by the Federal Government for Medicare patients and greater emphasis and growth of Health Maintenance Organizations (HMO's) and Preferred provider Organizations (PPO's) which have occurred during the past year have coincided with a major reduction in the usage rate of hospital beds in the subdistrict of Marion County as well as throughout the State of Florida and the United States. For reasons generally attributed to actions intended to reduce the cost of medical treatment, patient days and hospital occupancy rates have been materially reduced and if current trends continue substantial rate increases will be needed to keep many hospitals solvent. This factor is affecting the existing 15 osteopathic hospitals in Florida at the same or greater rate than it is affecting the allopathic hospitals. Although Gulf Coast Hospital v. DHRS, 420 So.2d 86 (Fla. 1st DCA 1982), indicates the acute care bed need rule, 10 5.11(23), F.A.C., is not applicable to determining need for osteopathic hospital beds, Petitioner uses this rule to show a need for acute care beds exists in Marion County. Because the acute care bed rule is partly based on a 1978 statewide use rate to determine need, the methodology overstates the need for new beds. Since 1978 the use rate has decreased throughout the state but the rule has not been modified to reflect this reduction in use rate. District Three, the 16-county area including Marion County, has a need for acute care beds in 1990 (the target year for this application) of 191. Using the 1984 use rate, Marion County will have a need for 87 acute care beds in 1990. The Health Planning council for District Three has recommended that 15 percent of the district bed need should be set aside for Levy, Dixie, and Gilchrist Counties, which have been determined to be underserved. This reduces the potential allocation of beds to Marion County to 74. As a general rule CON's for less than 100 bed hospitals are not granted because those hospitals tend to be less cost-effective than are larger hospitals offering the same services. Absent a bed need methodology for osteopathic hospitals, DHRS developed two methodologies to determine need for osteopathic hospital beds. The first methodology divides the number of admissions to osteopathic hospitals in each county in 1984 by the number of doctors of osteopathy in the county to arrive at an admission rate per DO. This is multiplied by the average length of stay (ALOS) to arrive at the number of patient days per DO. Averaging the patient days per 1,000 population for these osteopathic hospitals in the southern Florida counties in which osteopathic hospitals are located gives an average of 63.3 patient days per 1,000 population in these counties. Applying this figure to the population of Marion County in 1990, the five year planning horizon used to determine the hospital bed need, shows approximately 41 osteopathic beds will be needed in Marion County in 1990 (Exhibit 9). The second approach which is not really a bed need methodology as much as a check on the requested beds is to determine from the same historical data the number of DO's needed to support a 120-bed hospital. That figure is calculated to be 91 (Exhibit 9). Methodologies proposed by OMCO's expert witnesses rely heavily on the acute care bed need methodology established by Rule 10-5.11(23), F.A.C. although the courts have held that this methodology is not applicable to osteopathic hospitals because of the language of Section 381.494(2), Florida Statutes, which requires "The need for such facilities shall be determined on the basis of the need for and the availability of osteopathic services and facilities in the community." Further, Petitioner attempts to justify the need for an osteopathic facility in District Three, which has no osteopathic hospital, on the basis of the population of the district as a whole despite the long distances involved in this 16-county area. Obviously, people in the extreme northwestern part of this district are unlikely to use the proposed facility in Ocala in view of much nearer acute care hospital beds. Only a hospital offering those services provided by a regional medical center can expect to have a districtwide service area. Here, OMCO proposes to provide only basic acute care facilities and few patients could be expected from beyond the primary service area of Marion County. With the current decline in hospital occupancy rate, the introduction of a new hospital in Marion County will have an adverse impact on existing hospitals since patients that would be admitted at OMCO would generally come from those patients that otherwise would use MCH or MRMC. This would serve to reduce even further those hospital occupancy rates and adversely affect the ability of MRMC to serve indigent patients. Because of the declining occupancy rates in all hospitals and the generally lower occupancy rates at osteopathic hospitals in Florida, the financial feasibility of the project is questionable despite OMCO's witnesses who attested to the financial feasibility of the project. The estimates on which these opinions of financial feasibility are based are not realistic and do not incorporate the latest data on occupancy rates for the calendar year 1984 which were available, albeit not in final published form, at the time of the hearing. Evidence presented for those completed months of 1985 indicates the occupancy rates are further declining in the Marion County hospitals in 1985. OMCO proposes to serve as a teaching hospital and presented witnesses who so testified. Before a hospital can serve as a teaching hospital, it must meet certain qualifications, such as having as heads of all departments DO's who meet specific requirements, and thereafter be certified as a teaching hospital by the American Osteopathic Association. While it is certainly possible for OMCO to meet these requirements and be so certified, it is speculative to say at the present time that such certification will be obtained. Evidence of need for additional teaching hospitals was submitted only by objected-to hearsay testimony not corroborated by admissible evidence. Accordingly, need for additional osteopathic teaching hospitals was not shown. None of the other criteria of Section 381.494(6)(c)1 13, Florida Statutes, are of sufficient comport to justify denial of this application if a need for the proposed facility had been demonstrated. Absent a showing of need, further discussion of these criteria is not deemed warranted or necessary to the findings.
Findings Of Fact The applicants, MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., are wholly owned subsidiaries of MediVision Inc., which maintains its corporate offices in Boston, Massachusetts. MediVision, Inc., was incorporated in January, 1984, to promote the development of outpatient eye surgery, in part through the development and operation of outpatient eye surgery centers. MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., will each be responsible for the development and operation of the projects proposed in their respective applications. MediVision, Inc., was organized by several individuals in response to a study conducted by Bain and Company, a strategic consulting firms as part of a consulting engagement in which those persons were involved. The study disclosed several demographic and health care delivery trends which prompted MediVision management to pursue the development of outpatient eye surgery centers. Those trends are: an overall movement of all types of surgery from an impatient to an outpatient setting; the increase in the nation's elderly population, and the fact that the likelihood of a person developing cataracts increases dramatically with age; the technological improvements in the provision of cataract surgery; the growth in the number of cataract surgeries performed nationally; and, a change in the manner in which Medicare reimburses a facility for outpatient surgery performed upon Medicare recipients. Medicare, since 1982, has reimbursed licensed freestanding ambulatory surgical facilities at a flat rate for the provision of such surgery, with no cost to the patient. For the same surgical procedures performed in a hospital outpatient setting, Medicare will reimburse the facility its costs of providing the surgery; the patient is responsible to pay the Medicare deductible and 20 percent co-insurance. Various subsidiaries of MediVision Inc., presently operate eight outpatient eye surgery centers nationwide; two are located in Florida. Other MediVision subsidiaries are developing three additional centers in Florida, pursuant to certificates of need issued by the Department of Health and Rehabilitative Services. Both parties employed the same quantitative need methodology. The methodology employs the following steps: acquire data regarding number of impatient and outpatient surgical procedures performed by existing providers; using this data, calculate current overall surgical use rate and outpatient surgical use rate for county; using the projected population for the year in question and the current use rate, calculate projected number of surgeries; multiply total projected surgeries by 40 percent to establish total outpatient surgery pool for year in question; subtract from result of step 4, all outpatient surgical procedures projected to be performed in hospitals and operating freestanding ambulatory surgery centers; subtract financial break-evens of all certificate of need approved freestanding outpatient surgery centers from this pool; and, after subtractions the number of surgical procedures remaining are compared to the break-evens of certificate of need applicant at issue. If the pool is larger than break-evens the condition is satisfied. If the pool is smaller than break-evens the condition is not satisfied. The quantitative methodology provides a reasonable approach to the evaluation of need for ambulatory surgical facilities. The basic methodology has been employed by the Department since 1982; in December, 1985, the Department began to employ a "40 percent outpatient factor" in implementing the policy. Accordingly, looking toward the planning horizon of 1988, the methodology projects that 40 percent of all surgeries in Dade County will be performed on an outpatient basis. The 40 percent outpatient factor is reasonable for use in these proceedings. The prevailing literature suggests that 40 percent of all surgeries can be expected to be performed on an outpatient basis. Within Florida, many counties are already performing in excess of 30 percent of all surgeries on an outpatient basis. Trends in health care delivery and reimbursements including the growth in pre-paid health care organizations, such as health maintenance organizations; professional review organizations, which monitor the appropriateness of hospital admissions; and Medicare reimbursement incentives will contribute to an increase in the percentage of surgeries performed in an outpatient setting. While employing the same quantitative need methodology, the parties' health planning experts arrived at different conclusions as to whether the methodology projects need for the facilities at issue in these proceedings. The differences in outcome are attributable to two issues: (1) the calculation of a base-year use rate; and (2) the calculation of "break-evens" for previously approved, but non-operational, ambulatory surgical facilities. Each expert relied upon the same basic data source in calculating a base-year surgical use rate, employing data collected by HRS and reported in the most current State Agency Action Report prepared by the Department relative to Dade County. Such Action Report (CON Action No. 4095) lacked complete data regarding the total number of surgeries performed in Dade County during the base-year (1984-5), in that six of the thirty-three acute care hospitals in Dade County failed to report. Because it is necessary to have complete data in order to establish an accurate base-year surgical use rate, Mark Druash who was engaged to undertake a need analysis by the applicants, referred to earlier State Agency Action Reports to acquire surgical procedure data for the six hospitals which had failed to report. Such documents are reliable data sources upon which to base a need analysis. In calculating a county's surgical use rate, health planners take into consideration the total population within the county. Accordingly, the total number of surgeries provided within the county must also be considered. In that six Dade County hospitals failed to report data and HRS' health planner did not acquire data relative to those facilities, the surgeries performed at those hospitals were not included in his calculation of a surgical use rate. If the total population of a county is considered in calculating a surgical use rate, but something less than the total number of surgeries is considered, the calculation results in an artificially deflated use rate. As the base-year use rate drives all of the remaining calculations in the quantitative methodology, an error in the calculation of the use rate will be carried through the entire methodology. The ultimate effect of a deflated use rate is to project a smaller number of surgical procedures, as compared to a use rate calculated upon complete data. HRS calculated a base-year surgical use rate for Dade County of 78.2 surgeries/1000 population. MediVision calculated a base-year surgical use rate of 92.8/1000 population. The variance in the use rates is attributable solely to the fact that Druash acquired and employed in his calculations surgical procedure data from all Dade County hospitals previously relied upon by HRS; while HRS relied upon incomplete data. In that Druash's calculations are based on a complete data based the surgical use rate of 92.8/1000 population is found to be more accurate and reliable than the rate of 78.2/1000 population calculated by HRS from incomplete data. The parties differ in their calculation of "break- evens for previously approved, but not yet operational, ambulatory surgical facilities. The break-even calculation is an integral part of the quantitative need methodology. The purpose of subtracting from the available outpatient surgical pool the "break-evens" of approved, but not yet operational ambulatory surgical facilities is to assure that there exists need for the project proposed adequate to allow both such project and previously approved facilities to operate in a financially viable manner. The "break-even" approach is also intended to promote competition; rather than assuming that all of the procedures projected by a facility will be performed in such facility; the approach allocates to the facility only that number of procedures it needs to generate sufficient revenues to cover its expenses. Druash who participated in the development of the quantitative methodology during his tenure with HRS, testified that the "break-even" approach was selected because it would promote competition among providers by approving enough applicants so that they would be "hungry" for the residual surgeries projected by the methodology. The purpose of calculating a financial break-even is to ascertain at what point a project's cash flow will equal its expenditures. The generally accepted method for calculating a financial break-even requires that fixed costs be separated from variable costs. The concept of variable costs is the basis for the computation of a break-even. Fixed costs are those which remain constant regardless of the volume of business conducted by an entity; variable costs are those that change directly with volume. In the operation of an ambulatory surgical facility, virtually all expenses related to medical supplies are variable. If no patients are treated, no medical supplies are needed, and no expenses are incurred. If 100 patients are treated, 100 units of medical supplies are needed, with resultant expense. Certain expenses involved in the operation of an ambulatory surgical center are totally fixed, such as debt service and property taxes. All other expenses are variable to some degree e.g. salaries, utilities, and maintenance. Depreciation and amortization of property and equipment are not considered as expenses in a break-even analysis, as those items do not represent cash expenditures. As mere accounting recognitions of prior investment, depreciation and amortization should not be included in a calculation of a cash flow break-even. HRS' methodology for calculating financial break-evens for ambulatory surgical procedures treats all expenses as fixed, and includes amortization and depreciation among those expenses. By HRS' admissions the Department, "in lieu of attempting to determine what is fixed and what is variable . . . will use a somewhat more crude method". Where a financial break-even is calculated treating all costs as fixed, the resulting break-even number is artificially inflated. By the Department's reckoning, the effect of treating all expenses as fixed is to "add a cushion" to its approvals of prior applications. HRS' expert acknowledged, however, that differentiating between fixed and variable costs in performing a financial break-even analysis is the "preferred methods no question". Lovell Jones, a certified public accountant and expert in health care finance, performed revised break-even analyses for previously approved, but not yet operational, ambulatory surgical facilities. Jones first acquired expense and revenue data from the certificate of need applications submitted by previously approved applicants. Then, treating only medical supplies as variable expenses, and excluding amortization and depreciation from the list of fixed expenses, he calculated the actual financial break-even of each approved, but not yet operational, facility. Jones' analysis finds the collective break- even of all previously approved, but not yet operational, facilities to be 17,996 procedures, whereas the Department's "crude" analysis results in a collective break-even of 25,736. Jones' method of calculating break-even, which was agreed to be technically correct by both parties, is more accurate and reliable than the method employed by the Department. Using the agreed-upon quantitative methodology, the surgical use rate calculated by Druash, and the break-even numbers calculated by Jones, there is projected to exist in 1988 a pool of 5006 outpatient surgical procedures that could be provided by the applicants in these proceedings. Subtracting the break-even numbers of the two proposed facilities, there will exist a residual pool of greater than 3600 procedures. Accordingly, there exists a quantitative need for the two proposed facilities. Furthers the residual pool of greater than 3600 procedures represents an adequate "cushion" to satisfy the concerns of HRS that previously approved facilities be given the opportunity to operate in a financially viable manner. The proposed facilities will improve access to services for both Medicare and indigent patients. Medicare patients receiving surgery at the facilities will be treated free of cost, with the Medicare program having full responsibility for payment. All other patients will be treated at the facilities regardless of ability to pay. The proposed facilities will promote competition in that management intends the charges to commercial patients to be less than the prevailing charges in the community. Where an ambulatory surgical facility enters a market, hospital charges for similar services tend to decrease. The proposed facilities will promote cost containment, as it is more costly to render care in a hospital outpatient department than in a freestanding ambulatory surgical facility. Hospital outpatient departments, which are reimbursed by Medicare for their costs of providing services, do not have the same incentive to reduce costs as do freestanding ambulatory surgery facilities, which are reimbursed at a predetermined flat rate for the provision of services. Accordingly, Medicare has encouraged the use of freestanding ambulatory surgical facilities by incurring all responsibility for payments at no cost to Medicare recipients. The Department's sole concern regarding the financial feasibility of the proposed facilities arises out of its position that there exists no need for the facilities. Accordingly, the Department questions whether the facilities will enjoy utilization sufficient to generate the revenues necessary to their viable operation. In that need for the facilities has been found to exist, it follows that the facilities will be able to generate adequate numbers of surgeries to achieve break-even in their second years of operation. Several other factors indicate that the facilities will experience utilization sufficient to achieve break-even in their second years of operation: The marketing and community education activities proposed by the applicants will encourage utilization. In its existing surgical facility in Orlando, MediVision, Inc., has undertaken similar activities, which have resulted in substantial surgical referrals to the facility; There exists a residual pool of approximately 5,000,000 untreated cataracts nationally; Medicare reimbursement policies which allow Medicare recipients to receive treatment at licensed freestanding ambulatory surgical centers at no cost to the recipient will encourage utilization of the proposed facilities; The applicants' pricing structure, for both Medicare and commercial patients, will encourage utilization of the proposed facilities; and Two local ophthalmology group practices have expressed strong interest in performing surgery at the proposed facilities. Each group presently performs in excess of 1000 surgeries annually, which volume is greater than the break-even volume necessary to be achieved at each facility.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Lawn it is RECOMMENDED that a Final Order be entered approving the applications of Petitioners to establish and operate freestanding ophthalmic ambulatory surgical centers in Dade County, Florida. DONE and RECOMMENDED this 6th day of June, 1986, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 1986. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert A. Weiss, Esquire The Perkins House, Suite 101 118 North Gadsden Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
Findings Of Fact Petitioner, Peter P. McKeown, is a graduate of the University of Queensland Medical School in Brisbane, Australia. He holds the degrees of Bachelor of Medicine and Bachelor of Surgery. Doctorates of Medicine, under the British system, are reserved for specialists. Nonetheless, the medical training Petitioner received equates to that leading up to the award of the degree of Doctor of Medicine in the United States, and he is a physician and licensed as such in several states. He has completed residencies in general and thoracic surgery in Australia and the United States and has taken advanced training in cardiovascular and thoracic surgery at Emory University. Immediately before coming to the University of South Florida, (USF), Dr. McKeown was an Assistant Professor of Surgery at the University of Washington. In mid to late 1988, Dr. McKeown responded to an advertisement USF had placed in the Journal of the American Medical Association seeking applicants qualified for appointment at the Associate Professor level "... to join the Department of Surgery at the University of South Florida College of Medicine as the Chief of Cardiothoracic Surgery." He was selected for the position and joined the faculty effective May 1, 1989. All the correspondence leading up to Petitioner's joining the University faculty referred not only to his appointment as Associate Professor but also his assignment as Chief of the Cardiothoracic Surgery Division. Only the actual state employment contract described his employment exclusively as Associate Professor and made no mention of the Chief position. Under these circumstances, Petitioner did not gain any proprietory interest in the position of Chief of the Cardiothoracic Surgery Division. Dr. McKeown held the position of Chief of the Cardiothoracic Surgery Division until April, 1994, when, as a result of a decision made by the Chairman of the school's Department of Surgery, he was replaced as Chief and that position was filled, on a temporary basis, by the Department Chair. Petitioner claims that when he arrived at USF to assume the directorship, an administrative position, he saw an opportunity to develop the position into something significant. He contends he would not have come to USF unless he was to be the Chief of the Division as there was no appeal to him in a position as a general faculty member. He wanted an opportunity to budget, hire people, and develop plans and programs, and in order to advance in academic medicine, one must, at some point, hold an administrative position. Apparently the Department of Surgery had experienced a rapid turnover in faculty. It is not clear whether this caused or was the result of a dispute with administrators and medical staff at Tampa General Hospital, (TGH), where much of the clinical medical school activity is carried on. However, the program was recognized as being weak in cardiothoracic surgery, and this condition offered Petitioner the challenge he wanted. In his five years as Chief, Petitioner increased both the number and quality of personnel and revenues considerably. He developed affiliations with several foreign universities and recruited qualified people, built up the laboratory, secured more grants, developed a program of continuing medical education and raised the examination scores of the school's graduates. He opened new clinical programs and built up both billings and collections to the point where the program revenues were increased at least 2 to 5 times. By 1992- 1993, the Division was making money and generating a surplus and still used clinic funds to support research. During his tenure as Chief of the Division, Petitioner served under two Department of Surgery chairmen. The first was Dr. Connar, the individual who recruited him; and the incumbent is Dr. Carey, the individual who removed him. Petitioner asserts that at no time during his tenure in the position of Chief of the Cardiothoracic Surgery Division was he ever told, by either Department Chairman, that his performance was unsatisfactory. All Division heads within the Department were, from time to time, counseled about personnel costs, and Petitioner admits he had some differences with Dr. Carey about that subject and some other financial aspects of the job, but nothing different than anywhere else in academia. Petitioner was removed by Dr. Carey based in part upon his alleged inability to get along with people. Though he claims this is not true, he admits to three areas of conflict. The first related to his objection to transplants being accomplished by unqualified surgeons which, he alleges, Dr. Carey permitted to further his own ends. The second related to the pediatric heart transplant program for which Petitioner supported one candidate as chair and Dr. Carey supported another. The third related to Petitioner's reluctance to hire a physician whom Dr. Carey wanted to hire but to whom Petitioner purportedly objected. Of the three areas of dispute, only the first two came before his removal, but he contends at no time was he advised his position was a problem for the Department. By the same token, none of Petitioner's annual performance ratings reflected any University dissatisfaction with his performance. At no time was he ever rated unsatisfactory in any performance area; and prior to his removal, he had no indication his position as Chief of the Division was in jeopardy. Dr. Carey indicates he did counsel with Petitioner often regarding his attitude but did not rate him down because he hoped the situation would improve. Dr. McKeown was called to meet with Dr. Carey in his office on April 12, 1994. At that meeting, Dr. Carey was very agitated. He brought up the "Norman" incident and indicated he was going to remove Petitioner as Chief of the Division. Dr. McKeown admits to having made an inappropriate comment regarding Dr. Norman, another physician, to a resident in the operating room while performing an operation. He also admits that it was wrong to do this and apologized to Dr. Norman both orally and in writing shortly thereafter. Dr. Norman accepted his apology and Petitioner asserts that after his removal, Dr. Norman called him and assured him he, Norman, had not prompted the removal action. Dr. Norman did not testify at the hearing. Dr. Carey removed Petitioner from his position as Chief because of the comments he had made regarding Dr. Norman. Almost immediately after the meeting was concluded, Dr. Carey announced in writing his assumption of the Chief's position, in which position he remained until he hired Dr. Robinson as Chief in April, 1995. Petitioner found out that Carey's threat to remove him had been carried out the following day when his nurse told him his removal had been announced at the Moffett Cancer Center. He thereafter heard other reports of his removal from other sources, and based on what had happened, concluded his removal was intended to be and constituted a disciplinary action for his comment regarding Dr. Norman. He was not advised in advance of Carey's intention to impose discipline nor given an opportunity to defend himself before the action was taken. He claims he was not given any reason for his removal before or at the time of his dismissal. It is found, however, that the removal was not disciplinary action but an administrative change in Division leadership. Dr. McKeown at first did nothing about his removal, believing it would blow over. However, after he heard his removal had been publicized, he called several University officials, including a Vice-President, the General Counsel and the Provost, to see how the matter could be handled. He claims he either got no response to his inquiries or was told it was a Medical College problem. He then met with the Dean of the College of Medicine who indicated he could do nothing. After he was removed as Division Chief, Petitioner's salary remained the same as did his supplement from his practice. He claims, however, his removal has had an adverse effect on his reputation in the medical and academic communities. It is his belief that people now feel something is wrong with him. Dr. Carey's blunt announcement of his assumption of the Chief's position, without any reasons being given for that move or credit being given to Petitioner for his past accomplishments has had an impact on his ability to work effectively. After his removal, he received calls from all over the world from people wanting to know what had happened. The removal has, he claims, also made it more difficult for him to get grants and has, thereby, adversely impacted his ability to do productive research. In addition, his removal made it difficult for him to carry out his academic duties. His specialty is still presented in student rotations, only in a different place in the medical curriculum. Dr. McKeown has sought reinstatement to the administrative position of Chief of the Division. He is of the opinion that Dr. Carey's action in removing him from his position as Division Chief was capricious and damaging to the University as well as to his career. Petitioner admits he could have been less confrontational in the performance of his duties as Division Chief, but he knows of no complaints about him from TGH, All Children's Hospital or the VA Hospital. There are, however, letters in the files of the Department Chairman which indicate some dissatisfaction with Petitioner's relationships in some quarters and, as seen below, there were signs of dissatisfaction from both TGH and All Children's Hospitals. Petitioner admits he may have been somewhat overbearing or abrasive, but neither his alleged inability to properly steward finances nor his alleged inability to get along with people were mentioned to him at the time of dismissal or before. After Dr. Carey assumed the Chairmanship of the Department of Surgery in July, 1990, he saw Dr. McKeown frequently on an official basis at first. A Chief, as Petitioner was, has many and varied functions such as administration, teaching, fiscal, research, clinic administration and the like. People skills are important because of the necessary interface with colleagues, faculty, administrators and the public. When Dr. Carey came to USF, Dr. McKeown had not been in place very long, and the Division of Cardiothoracic Surgery was not doing well financially. There were contract negotiations going on with the VA Hospital which were not going well, at least partly because, Dr. Carey asserts, Dr. McKeown had made some major unacceptable demands. As a result, Dr. Carey stepped in, along with Dr. Benke, who was very effective in dealing with the VA, and as a result, an agreement was reached which resulted in somewhere between $275,000 and $300,000 per year coming in which put the Division in the black. Dr. Carey recalls other instances indicating Dr. McKeown's inability to get along with others. One related to the relationship with TGH previously mentioned. TGH had made a decision to use a particular physician as head of its transplant program because, allegedly, Dr. McKeown had so angered private heart patients they would not let him be appointed even though Dr. McKeown was Dr. Carey's choice. As it turned out, Dr. Carey convinced the TGH Director and another physician to agree to a plan whereby Dr. McKeown would be head of the program 50 percent of the time. This would have been good for the University, but Dr. McKeown refused indicating that if he could not be in charge all of the time, he would not be in charge at all. Another incident relates to All Children's Hospital. That institution wanted to initiate a pediatric heart transplant program and a meeting was set up to which Dr. McKeown was invited. Petitioner so infuriated the community surgeons attending that meeting they would not work with him, and without his, Carey's, efforts, Dr. Carey claims the program was doomed to failure. As a result, Carey asked Dr. Nevitsky to help get the program started. This gave the USF an opportunity to participate in the program, but when Nevitsky left, they lost it. Still another example, according to Dr. Carey, is the fact that some surgeons on staff have called to complain about Dr. McKeown's attitude and unwillingness to compromise and negotiate and about his demands for service and staff, all of which creates friction among the hospital staff. A few days before Dr. Carey removed Petitioner as Chief, he spoke with the Dean of the College of Medicine, a Vice-president of the University, and others who would be impacted, about his concern regarding the Cardiothoracic Surgery Division and, in fact, he had had discussions with other officials even before that time. Long before making his decision to remove Petitioner, Carey spoke of his consideration of possibly shifting the emphasis within the Division to non-cardiac thoracic surgery in place of the cardiac program which Dr. Carey felt was not very successful. He believed the program did not do enough procedures to support the medical school affiliation. Dr. Carey chose to dismiss Dr. McKeown as Chief of the Division on April 12, 1994, after learning of McKeown's destructive attack on another surgeon before a junior physician in a public place, an operating room, (the Norman incident). He notes that over the years there was a building concern regarding Dr. McKeown's abilities as an administrator, and this incident with Dr. Norman was the last straw. Dr. Carey had received complaints about Petitioner from other physicians, all of which he discussed with Dr. McKeown. Finally, with the Norman incident, it became abundantly clear that Dr. McKeown's capabilities as a leader had diminished to the point where a change was necessary. Before he dismissed Petitioner, and during the investigation which led up to the dismissal, Dr. Carey admits, he did not give Dr. McKeown any opportunity to give any input to the decision. By the time Carey met with McKeown on April 12, 1994, his mind was made up. The Norman incident was demonstrative of what Carey perceived as McKeown's lack of supervisory ability, and it was that factor which led Carey to the ultimate decision to remove McKeown. He felt it necessary to act then and not leave Dr. McKeown in place during the search for a replacement. Petitioner cites alleged comments made by Carey to others that he would have relieved anyone for doing what Petitioner did in the Norman incident. Dr. Carey cannot recall having made such a statement. He claims he considered disciplinary action against Petitioner for the Norman comments but decided against it. However, it was the last in a series of incidents which caused him to question the propriety of McKeown's placement in the Chief's position, and which ultimately cemented his decision to replace him. Dr. Carey met with Dr. McKeown several times before the dismissal and counseled him about administrative deficiencies in his performance, but he never told Dr. McKeown that unless he improved, he would be dismissed. This is consistent with Petitioner's testimony that he was not warned of his shortcomings or of the administration's dissatisfaction with his performance. Disagreements in conversations between superior and subordinate, meant by the former to be corrective in nature, are not always taken as such by the latter. Dr. Carey did not document any of this in Dr. McKeown's personnel files but put some of the information he received by way of communications from others in the files. These are the letters submitted by the University, pursuant to agreement of the parties, subsequent to the hearing. They contributed to Carey's increasing concern about Dr. McKeown's ability to lead the Division. At no time, however, though he questioned Dr. McKeown's leadership, did Dr. Carey ever question his good faith and sincerity, nor does he do so now. When he finally decided action was necessary, on April 12, 1994, Dr. Carey wrote a memorandum to the Medical College faculty concerning his assumption of the position as Chief of the Cardiothoracic Surgery Division. He also advised Dr. McKeown of his removal. Dr. Carey remained in the Chief's position, holding that title in an administrative capacity and not from a clinical standpoint, for approximately one year, intending to stay in the position only until he could find a fully qualified thoracic surgeon to take the job. After Carey removed Petitioner, he was contacted by the Medical College Dean who asked that he get with McKeown and try to work something out. He thereafter offered Dr. McKeown the position of Chief of the cardiac section of the Division but McKeown declined. Dr. Carey also, on April 26, 1994, wrote to TGH recommending that Dr. McKeown be allowed to have more impact on the hospital's transplant program, pointing out that the change in McKeown's position at the University was occasioned by a need for a change in leadership. According to Dr. Tennyson J. Wright, Associate Provost of the University, disciplinary action against nonunion faculty members is governed by Rule 6C4-10.009, F.A.C., and requires notice of proposed action be given before such disciplinary action is taken. The contract which Dr. McKeown holds and has held since the inception of his tenure at the University, is a standard USF/State University System contract. It reflects Petitioner was hired as an Associate Professor, which is one of the three types of personnel classifications used within the system. These are faculty, administration and support. Petitioner's contract does not refer to his holding the Division Chief position and it is not supposed to. Such a position is an administrative appointment within a Department and a working title used to define the holder's duties, and service in such a position is at the pleasure of the Department Chair. Appointment to or removal from a Chief position is an administrative assignment. The position of Department Chairperson, on the other hand is a separate position and subclassification within the University classification system and is different.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Petitioner, Peter P. McKeown's, grievance against the University of South Florida School of Medicine arising from his removal as Chief, Cardiothoracic Surgery Division in the Department of Surgery be denied. DONE AND ENTERED this 19th day of January, 1996, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of January, 1996. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 95-1832 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: 1. - 7. Accepted and incorporated herein. Though the documents in question refer to appointment, in actuality the personnel action was an appointment to the faculty with an administrative assignment to the position of Director of the Division. & 10. Accepted. 11. & 12. Accepted and incorporated herein. 13. & 14. Accepted and incorporated herein. - 19. Accepted and incorporate herein. Accepted and incorporated herein. Accepted. Rejected as inconsistent with the better evidence of record. Accepted. Accepted and incorporated herein. Rejected as inconsistent with the better evidence of record. & 27. Accepted. & 29. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. 32. - 34. First sentence accepted. Second sentence rejected as inconsistent with the better evidence of record. 35. - 37. Accepted. 38. Rejected as argument. 39. Accepted. FOR THE RESPONDENT: - 9. Accepted and incorporated herein. Accepted. - 14. Accepted and incorporated herein. 15. & 16. Accepted and incorporated herein. COPIES FURNISHED: Benjamin H. Hill, III, Esquire William C. Guerrant, Jr., Esquire Danelle Dykes, Esquire Hill, Ward & Henderson, P.A. Post Office Box 2231 Tampa, Florida 33601 Thomas M. Gonzalez, Esquire Thompson, Sizemore & Gonzalez 109 North Brush Street, Suite 200 Post Office Box 639 Tampa, Florida 33601 Olga J. Joanow, Esquire University of South Florida 4202 East Fowler Avenue, ADM 250 Tampa, Florida 33620 Noreen Segrest, Esquire General Counsel University of South Florida 4202 East Fowler Avenue, ADM 250 Tampa, Florida 33620-6250
The Issue Whether Respondent, a medical doctor, in his treatment of Patient M.A., failed to keep legible medical records in violation of section 458.331(1)(m), Florida Statutes (2007); prescribed or administered inappropriate or excessive quantities of controlled substances in violation of section 458.331(1)(q), Florida Statutes (2007); committed medical malpractice by practicing below the standard of care in violation of section 458.331(1)(t), Florida Statutes (2007); failed to perform a statutory or legal obligation placed upon a licensed physician in violation of section 458.331(1)(g), Florida Statutes (2007); and violated any provision of chapter 458 or chapter 456, or any rules adopted pursuant thereto in violation of section 458.331(1)(nn), Florida Statutes (2007), as Petitioner alleges in the Third Amended Administrative Complaint; if so, whether (and what) disciplinary measures should be imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Medicine enter a final order: Finding that Paul M. Goldberg, M.D., violated sections 458.331(1)(g) and (nn), Florida Statutes, as charged in Counts IV and V of the Complaint; Dismissing Counts I-III of the Complaint; Imposing $20,000 in administrative fines; issuing a reprimand against Dr. Goldberg's medical license; requiring Dr. Goldberg to complete the "Laws and Rules" Course; suspending Dr. Goldberg's medical license until such time as Dr. Goldberg undergoes a "UF CARES" evaluation; and placing Dr. Goldberg's license on probation for three years under indirect supervision with 100 percent chart review of cosmetic surgery patients and 25 percent chart review of all other patients. DONE AND ENTERED this 4th day of March, 2015, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 2015.
The Issue Whether Cleveland Clinic Florida Hospital's application for a Certificate of Need to operate an adult inpatient cardiac catheterization program in AHCA District 10 should be granted or denied by the Agency for Health Care Administration?
Findings Of Fact The parties Cleveland Clinic Florida Hospital, ("CCFH,") is a not-for-profit corporation which owns and operates a 153 bed acute-care hospital located within the incorporated limits of Fort Lauderdale on Route A1A in the mid-section of Broward County, AHCA District 10. Among its 153 medical and surgical beds are approximately 11 beds in the intensive care unit and a similar number of intermediate care beds. CCFH is not a Level II trauma center; nor does it provide comprehensive medical rehabilitation services or the tertiary health care services of open heart surgery or organ transplantation. But, fully accredited by the Joint Commission of Health Care Organizations for Special Care Units, provision of tertiary care services in South Florida is a long-term goal of CCFH. Amisub (North Ridge Hospital), Inc., d/b/a North Ridge Medical Center, owns and operates a general acute-care hospital located in Broward County. It provides adult inpatient cardiac catheterization services as well as open heart surgery services. North Broward Hospital District, (the "District,") owns and operates hospitals in Broward County. Among the hospitals are three that provide, individually, adult inpatient cardiac catheterization services. The three hospitals, each a division of the District, are known as Broward General Medical Center, ("BGMC,") Imperial Point Medical Center, ("IPMC,") and North Broward Medical Center, ("NBMC.") In addition to cardiac cath services, BGMC provides open heart surgery services. Holy Cross Hospital is located in the northern part of Broward County within thirty minutes travel time of CCFH by emergency vehicle. It has 587 total licensed beds; 535 are acute care beds, 9 are level II NICU beds and 43 are rehabilitation beds. There is an open heart surgery program at Holy Cross and an adult inpatient cardiac catheterization program with two cardiac cath laboratories. The Agency for Health Care Administration is the single state agency authorized by Section 408.034(1), Florida Statutes, to issue or deny certificates of need, "written statements ... evidencing community need for a new ... health service [such as an adult inpatient cardiac catheterization program.]" Section 408.032(2), Florida Statutes. Other Cleveland Clinic Organizations Cleveland Clinic Florida ("CCF") is a not-for-profit corporation separate and apart from CCFH. Comprised originally of 24 or 25 physicians, most of whom came from the Cleveland Clinic Foundation in Cleveland, Ohio, it began operation in Broward County on February 29, 1988. CCF initially established an outpatient diagnostic and treatment facility on Cypress Creek Road in the eastern middle part of Broward County with the long- term aim of providing tertiary health care services in the South Florida market. It contracted for hospital services with North Beach Hospital, and with the growth of its practice, purchased the hospital in 1990. Converted into a separate not- for-profit corporation, (the applicant in this proceeding,) the hospital was re- named Cleveland Clinic Florida Hospital in 1993. In the six years since the inception of its practice, CCF has expanded into a multi-specialty group practice of approximately 85 physicians, representing more than 30 specialties. Both CCF and CCFH are subsidiaries of the same parent corporation. Although governed by separate entities, a Board of Trustees in the case of CCFH and a Board of Governors in the case of CCF, both entities' boards report to a common Board of Trustees. That board is the Executive Committee of the Board of Trustees of the parent corporation, the Cleveland Clinic Foundation. The Foundation, located in Cleveland, Ohio, is a not-for-profit corporation that serves as the sole corporate member of CCFH. Presently a multi-disciplinary group of approximately 500 salaried physicians, the Foundation is an integrated physician hospital organization, composed of hospital and clinical divisions and a research institute. In contrast to a traditional hospital environment in which a hospital governance may or may not be in accord with its service components' goals, these divisions and the research institute act in concert. The Foundation's organizations and its physicians, therefore, through collaborative effort, carry out the same mission: to provide better care of the sick, to investigate the problems of their illnesses, and to advance those who serve in like capacities. Fundamental values associated with this mission include quality, integrity, compassion, collaboration and commitment. Established in 1921, the Foundation has an extraordinarily distinguished history in cardiac care including coronary cardiac catheterization. Staff members, for example, performed the first valve transplant with bypass surgery. More pertinently, coronary angiography, a diagnostic procedure involving placement of a catheter into the heart, and which accounts for more than 80 percent of diagnostic cardiac catheterization activity, was performed for the first time at the Foundation. Today, the Foundation enjoys wide-spread recognition as a leader in cardiovascular care, research, and education. It is a major tertiary referral center for cardiac patients, treating high risk patients, many of whom have recurring heart disease. The Foundation's hospital in Cleveland has approximately 1,000 beds and is a full service tertiary care center with the exception that it does not provide obstetrics. The Foundation has seven cardiac cath laboratories used primarily for adult cardiac cath or angiography. An eighth laboratory is used to evaluate the arteries in the legs. There are approximately 17 cathing cardiologists on staff at the Foundation's hospital, compared to two on staff at CCFH. On average, 280 adult diagnostic cardiac cath procedures are performed there annually. 12. Despite the close relationship among the Cleveland Clinic organizations, CCFH is a separate entity from the others. The Foundation hospital, as outlined above, is both much larger than CCFH, and a major tertiary referral center when CCFH, at the moment, can only hope to provide tertiary services in the future. Most importantly, while advantages enjoyed by the Foundation may flow directly to CCFH because of their close relationship, the Foundation is not a co-applicant with CCFH in this proceeding. Nor is CCF a co-applicant. The applicant in this case is CCFH only. Pre-hearing Proceedings Including a Projection of Numeric Need Leading to the Agency's Intent to Grant CCFH's Application. 13. On August 6, 1993, the AHCA published in the Florida Administrative Weekly its Summary Need Projections. The Agency's publication projected a need for one additional adult inpatient cardiac catheterization program in District No party challenged the Agency's projection of numeric need. By letter dated August 19, 1993, CCFH notified the Agency of its intent to submit a Certificate of Need application for an adult inpatient cardiac catheterization program in District 10. On the same day that the letter of intent was filed with the agency, August 23, 1993, CCFH filed a copy of the letter with the Broward Regional Health Planning Council. Within fourteen days of the filing of the notice of intent with the Agency, CCFH twice published in the Fort Lauderdale Sun Sentinel a Notice of Filing. The first publication was on August 23, 1993, the second, on September 3, 1993. On September 22, 1993, CCFH filed the application with the Agency and on the same day filed a copy with the Broward Regional Health Planning Council. On October 7, 1993, the Agency acknowledged receipt of the application and informed CCFH that, "[c]ertain elements have been omitted from your proposal which are needed to implement formal review." Cleveland Clinic's Composite Ex. No. 2, Tab 3. Attached to the letter were a list of the omissions under the heading, "Omissions - Certificate of Need No. 7449." The letter informed CCFH that it was required by law to file an omissions response with both the Agency and the appropriate local health council by 5 p.m. on November 8, 1993, or else the application would be incomplete and deemed withdrawn by operation of Agency rule. On November 8, 1993, CCFH timely filed an omissions response with the Agency and a copy with the Broward Regional Health Planning Council. One week later, the Agency acknowledged receipt of the response and deemed the application complete effective November 9, 1993. On January 10, 1994, the Agency by letter to CCFH informed it of its intent to issue: Certificate of Need Number 7449 to Cleveland Clinic Florida Hospital for the establishment of an adult inpatient cardiac catheterization program at Cleveland Clinic Hospital located in Ft. Lauderdale, Broward County, District 10. Cleveland Clinic Composite Ex. No. 2, Tab 6. The letter also informed CCFH that the Agency intended to deny Certificate of Need No. 7551 for the establishment of a like program to be conducted by NME Hospitals, Inc. Outpatient Cath Lab Not Subject to CON Review At the time of hearing, CCFH had no outpatient cardiac catheterization program in operation. But, in October of 1993, CCFH requested a determination from the Agency as to whether it could establish an outpatient cardiac catheterization laboratory without certificate of need review. It received word that an outpatient lab would not require review by letter from the Agency dated October 25, 1993. Whatever one may think of the wisdom of a policy of allowing outpatient cardiac cath labs to escape CON review, (and the apparent conflict with requiring inpatient labs to undergo such review,) the Agency's determination is in keeping with the policy of this state. For its part, CCFH is committed to opening an outpatient cardiac cath lab, regardless of whether it receives the approval it seeks in this proceeding. Commencement of operation for the outpatient laboratory will occur prior to start-up of an inpatient program. At the time of hearing, the outpatient lab was expected to commence operation sometime between November, 1994 and January, 1995. CCFH's aspiration to have an inpatient, as well as an outpatient, cardiac catheterization program at its hospital supports its long-term objective of providing the tertiary services provided in open heart surgery. An inpatient program will be capable of providing immediate endocardiac catheter pacemaking in cases of cardiac arrest, and pressure recording for monitoring and evaluation of valvular disease, or heart failure. The Application Conversion of the Outpatient Lab CON Application No. 7449, (the "Application,") seeks authority to establish an adult inpatient cardiac catheterization program at the Cleveland Clinic Florida Hospital. If granted, the outpatient cardiac catheterization laboratory will be converted to inpatient use. But approval of the application will provide authority to perform diagnostic cardiac catheterization only, not therapeutic cardiac catheterization. To implement the inpatient cath program, CCFH will not incur any construction, design, or equipment costs beyond those incurred with the outpatient cardiac cath facilities. Location, Design and Equipment The proposed location for the cardiac cath laboratory has not changed since the application was submitted in September of 1993. Well situated in relation to the central supply, surgical, telemetry and intensive care areas of the hospital, the laboratory will be on the second floor of the hospital, the site of the pathology lab at the time of the application. It has the added benefit of being near where families can wait while procedures are conducted. And, near the elevator on the second floor and an adjacent post-procedure monitoring area, the location is well-suited to good patient flow. The proposed design has not changed either since the filing of the application. The design calls for special procedure x-rays, film storage, and a dark room for proper processing of films. There will be adequate and appropriate space allocated to each area of the laboratory including the patient holding area. The equipment, manufactured by Picker and Hewlett-Packard, is "state of the art." To be purchased, whether the laboratory remains outpatient or not, is x-ray equipment with the capability of cineangiography or cineangiocardiography, an image intensifier, an automatic injector, a diagnostic x-ray examination table for special procedures, a blood gas analyzer and a multi-channel polygraph. A Closed Lab Currently there are no closed cardiac cath labs in Broward County. But, CCFH intends to operate its cath program, if converted from outpatient to inpatient, as "closed," meaning use of the laboratory by medical staff will be restricted. In the case of CCFH, the restriction will allow only physicians employed by CCF to have access to the lab. Initially, medical staff will be restricted to two members of CCF. When warranted by volume of procedures, CCF will recruit additional physicians to perform cardiac catheterization procedures at the lab. Modeling the Foundation with its Assistance With the assistance of the Foundation, CCFH will model its cardiac cath program after the program in place at the Foundation, allowing for the unique needs of its patient base. The Foundation model entails guidelines and protocols that ensure procedures performed are appropriate, cost-effective, efficient, with acceptable morbidity and mortality, and in a setting that allows education, research and training of medical personnel. It involves salaried staff physicians, in a closed laboratory where the performance of the physicians, themselves, as well as of nurses and technicians are monitored and evaluated. The Foundation has developed standardized protocols for determining whether catheterization procedures are indicated, how they should be performed, and for the evaluation of patients before and after the procedure. It has also developed quality assurance, credentialing, recredentialing, and peer review protocols. Standardized protocols improve efficiency, lower costs, and contribute to better patient care. The Foundation will assist CCFH in developing standardized protocols, based on the protocols used at the Foundation. The Foundation will assist CCFH in training the staff which will perform procedures at the laboratory. The Foundation will make available staff to visit the hospital and will allow CCFH staff to participate in training at the Foundation. The Foundation's assistance should enable CCFH to implement the program expeditiously and efficiently. Other Protocols CCFH has in place a transfer protocol for the transfer of emergency patients to Holy Cross Hospital where open heart surgery and other coronary procedures not available at CCFH can be performed. Holy Cross has agreed to accept emergency transfers. Another Application In addition to the filing of the application in this case, CCFH filed another application for the batched cycle in the Spring of 1994. There are differences in the two applications because the data used by the two are different; the data for the second application being newer. The application in this case used the best data available at the time the application was prepared. Certificate of Need Criteria The criteria upon which the Agency "shall ... review applications for certificate-of-need determinations for health care facilities," Section 408.035(1), F.S., are listed in subsections (a) through (o) of the statute. In addition, Section 408.035(2), Florida Statutes, mandates the Agency to make certain findings of fact, listed in subsections (a) through (e) "[i]n cases of capital expenditure proposals for the provision of new health services to inpatients." Benefits and Absence of Harm Approval of the project is advanced by CCFH as meeting principally three public needs. First, it will further the development of the only fully- integrated health care provider in South Florida. This innovation into the South Florida market will improve quality and control cost. Second, it will improve access to services, albeit limited to cardiac care, for the uninsured population. Access to health care services for the uninsured population is one of the main needs of the health care system in Florida. Third, it will further expanded medical research and education in District 10 by allowing the Cleveland Clinic organization through the presence of CCFH in South Florida to sponsor research and postgraduate medical education in cardiology. Approval of the application will not do any harm. It will not result in any significant expenditure or duplication of equipment since CCFH has already committed to the equipment for its outpatient facility. It will not result in harm to the quality of inpatient cardiac cath services at existing providers. Nor will it cause significant financial injury to existing providers. Need in Relation to the Applicable District Health Plan and State Health Plan The State Health Plan The 1989 State Health Plan, superseded for the most part by the 1992 Interim State Health Plan, contains the latest statement at the state level of policy preferences for approval of new inpatient cardiac cath programs. The 1989 Plan lists four preferences, three of which apply to the application. The second preference applies to counties without any cardiac cath programs and so is not applicable to this proceeding. Of the remaining three preferences, CCFH's application does not conform to the third preference: "Preference shall be given to hospitals with a history of providing a disproportionate share of charity care and Medicaid patient days in the respective acute care subdistrict...". (Cleveland Clinic's Composite Ex. No. 2, Tab 4, p. 18, Testimony of Dr. Luke, Tr. 989.) The application conforms to the first and fourth preferences. The first preference is: "Preference shall be given to an applicant who proposes the establishment of both cardiac catheterization services and open heart surgical services provided that a need for open heart surgery is indicated." Id. The application conforms to this preference because CCFH has applied for authority to implement an open heart surgery program and because the "Florida Need Projections Adult Inpatient Cardiac Catheterization and Open Heart Surgery Programs and Pediatric Cardiac Catheterization and Open Heart Surgery Programs, January 1996 Planning Horizon" indicates a net need for one adult inpatient cardiac catheterization program and a net need for one adult open heart surgery program in District 10. Id. The fourth preference is: "Preference shall be given to an applicant who agrees to provide services to all patients regardless of their ability to pay." Id., p. 19. Consistent with its mission, CCFH has agreed to provide services to patients regardless of ability to pay as evidenced by its commitment to deliver 76 diagnostic caths per year to the uninsured population. The application is consistent with the goals of the 1992 Interim State Health Plan and "Healthy Homes, 1994," the 1994 Health Security Plan. Both of those plans demonstrate the intent of the State to promote improved access, quality, and cost control, based on the model of managed competition. The Cleveland Clinic is cited specifically in those plans as the type of organization that will facilitate managed competition. The District Health Plan The application conforms to both of the recommendations contained in the 1990 District 10 Comprehensive Health Plan. The application conforms to the sole applicable recommendation contained in the 1993 Certificate of Need Allocation Factors Report for Broward County. That recommendation, (also the second recommendation in the 1990 plan,) requires an applicant to document its willingness to make services available to all segments of the service area population, regardless of ability to pay. The recommendation is satisfied by CCFH's commitment in the application to perform seventy-six (76) diagnostic catheterization per year to the uninsured population. Availability, Accessibility, Quality of Care, Efficiency, Appropriateness, Extent of Utilization, and Adequacy of Like and Existing Services in the Service District of the Applicant Geographic Availability and Accessibility There are twelve existing providers of adult inpatient cardiac cath services located in District 10. There are five of these providers within five miles of CCFH: Holy Cross, North Ridge, IPMC, BGMC and Pompano Beach Medical Center. Less than eight miles away are three other providers: Plantation General Medical Center, Florida Medical Center and North Broward Medical Center. A thirteenth program was approved at University Medical Center in 1994. The road system in Broward County is highly developed. There are many facilities within a few minutes drive of any resident in Broward County. In sum, even were CCFH's aspiration of obtaining approval for an inpatient cardiac cath lab never granted, there is no portion of Broward County that is without close, easy and reasonable geographic access to diagnostic inpatient cardiac care. Extent of Utilization Several providers have multiple laboratories, including North Ridge with three separate cardiac catheterization labs. Not counting the new program at University Medical Center, there are 19 cardiac cath laboratories in the District. At a minimum, a single cardiac catheterization laboratory can reasonably accommodate between 1500 and 2000 cardiac catheterizations in a single year. The nineteen labs of the providers existing and in operation at the time of hearing, therefore, had the capacity to perform between 28,500 and 38,000 cardiac catheterizations per year. During 1993, there were 14,701 cardiac caths performed at existing providers in District 10, a number, it may be safely assumed, no more than half of the capacity supported by existing providers. Individually, no existing provider operated at as much as 80 percent capacity and six of the twelve operated at less than 30 percent capacity. Excess capacity led the Agency to conclude in its State Agency Action Report, ("SAAR"): the need for an additional program cannot be supported in total, although based on current and proposed referral patterns, the impact of an additional cardiac cathe- terization program in the district on these underutilized facilities appears minimal. Cleveland Clinic Composite Ex. No. 2, Tab 6, SAAR, p. 13. The primary impact of an inpatient program at CCFH will be on BGMC and Holy Cross, where CCF physicians currently perform diagnostic caths. The adequacy of existing capacity was confirmed by testimony from the Chief of the Certificate of Need and Budget Review sections of the Agency that she is not aware of any individuals within two years of June of 1994 who have been denied access to inpatient diagnostic cardiac cath services because of lack of capacity. Quality of Care Quality assurance, peer review, and credentialing processes are established in order to ensure the highest quality of care. The objective of these processes is to reduce the possibility of unwanted events during the course of treatment. The American College of Cardiology and American Heart Association ("ACC/AHA") have established guidelines regarding the number of diagnostic cardiac catheterization procedures a physician should perform in order to maintain proficiency in the procedure. The guidelines provide, generally, that each physician perform a minimum of 150 procedures annually. And, in general, the guidelines provide that where a physician performs at multiple laboratories, a minimum of 50 procedures should be performed at each laboratory. Some hospitals in Broward County do not require physicians to meet the guidelines. For example, the clinical criteria for performing cardiac cath services at BGMC require that a physician perform as few as 25 diagnostic procedures annually. During 1992 and 1993, only two of the nineteen physicians credentialed to perform diagnostic cardiac catheterization services at NBMC performed more than 40 procedures at the facility. But the guidelines are nothing more than for the purpose of offering guidance to a director of a laboratory in making decisions for what is appropriate in terms of operator experience with regard to credentialing. They are "not written in stone." (Tr. 367.) Exceptions are justifiably made on a case-by-case basis and do not necessarily reflect on quality of care. And there are exceptions in the guidelines, themselves, made for physicians who have extensive experience, that is, more than a thousand independently prepared cases. Nonetheless, one would expect that adherence to the guidelines would enhance quality of care. With the exception of the indirect negative reflection on quality of care that failure to adhere to the guidelines might have, and which could arguably lead to an inference that quality of care was suffering in some existing providers, there was no evidence that quality of care for inpatient cardiac catheterization patients suffers in Broward County. To the contrary, existing providers in District 10 are providing good quality of care. Access for Uninsured Persons Whether on an outpatient or an inpatient basis, CCFH has committed to perform 76 cardiac catheterization on uninsured patients annually, if their application for an inpatient service is granted. On an age-adjusted basis, the use rates for the District 10 uninsured population for diagnostic cardiac catheterization services are significantly below those for the insured population. But whether the use rates signify that the uninsured population of Broward County does not have adequate access to needed cardiac catheterization services is difficult to determine. Dr. Luke, CCFH's expert in health care planning, concluded that uninsured residents of District 10 do not have adequate access. His opinion was met with forceful resistance by other experts in health care planning presented by Cleveland Clinic's opponents. Even the Agency, CCFH's supporter in this proceeding, does not share Dr. Luke's opinion. But Dr. Luke's opinion gains support form the nature of cardiac catheterization. It is a service dependent on referrals. Uninsured persons plainly have more difficulty navigating the referral chain. While there are a number of vulnerabilities in the data Dr. Luke used to reach his opinion, without doubt, there are at least 76 members of the uninsured population per year in Broward County who need cardiac catheterization services annually. Whether they would receive such services, were Cleveland Clinic's application granted, is dependant upon whether they can successfully make their way along the referral chain. CCF, as a multi-specialty practice group, has few primary care physicians, the physicians who would make the initial referral that would lead to a cath procedure at CCFH. But, CCFH and CCF will engage in a program of outreach to identify appropriate uninsured candidates for cardiac catheterization services. CCFH and CCF will inform primary care physicians and clinics of their commitment to provide care to the uninsured population, and will encourage physicians to refer candidates for diagnostic cardiac catheterization services to CCF and CCFH. This outreach program enhances the chances that District 10's uninsured in need of cardiac catheterization services will receive them but there is no guarantee that the outreach program will be successful. Nor has CCFH, in its application or otherwise, offered such a guarantee. Ability and Record of the Applicant to Provide Quality of Care The CCFH cardiac catheterization program will enhance the quality of care offered in Broward County. The CCFH program will model its quality assurance, peer review, patient care, and credentialing/recredentialing protocols upon those used by the Foundation. These protocols meet or exceed the elements necessary to a successful quality assurance program contained in "Guidelines for Continuous Quality Improvement in the Cardiac Catheterization Laboratory" by Members of the Laboratory Performance Standards Committee of the Society for Cardiac Angiography & Interventions, a committee chaired by an employee of the Foundation, Frederick A. Heupler, Jr., M.D. The Foundation's quality assurance and peer review programs provide expressly for sharing quality assurance data with all physicians who perform procedures in the laboratory. The Foundation conducts weekly conferences at which data and specific cases are discussed among all the physicians performing procedures in the laboratory. The CCF physicians who will perform procedures in the CCFH laboratory will participate in the Foundation's conferences via the Foundation's telemedicine capability. The conferences perform an important educational function because in order to bring about quality improvement, the purpose of quality assurance, it is essential to provide feedback to all the physicians, nurses and technicians involved. The closed nature of the inpatient laboratory will enhance quality of care in several ways. Low-volume operators will be excluded thereby enhancing quality control. It will be easier to assure that the physicians with access to the lab meet recommended minimum volume standards necessary to assure quality. Cooperation is enhanced in the standardization of indications for procedures, practice of procedures and protocols. And, the ability to evaluate physicians' performances for purposes of recredentialing is enhanced. CCFH's status as an academically oriented organization enhances quality of care. For example, the presence of post- graduate fellows training in cardiology not only provides support to the laboratory but through their enthusiasm and inquisitiveness provide an animated atmosphere that brings out the best in the practitioners. As well as taking time to educate the fellows, the physicians spend more time educating the nursing staff. The nursing staff, therefore, benefits, in turn, from the stimulating environment afforded by the academic orientation to be provided in the Cleveland Clinic setting. The establishment of a cardiac catheterization program at CCFH will allow the CCF cardiologists to interact clinically with the rest of the CCF staff physicians, who practice predominantly at the hospital. The collegial clinical relationship among the CCF staff physicians enhances quality of care. The CCFH program will perform a minimum of 300 procedures annually by the second year of operation, consistent with the minimum number of procedures called for by the ACC/AHA Guidelines to ensure quality of care. The CCFH program will have a sufficient number and complement of staff to provide high quality services to the patients projected to be served by the program. The number and complement of staff are sufficient to allow for rapid mobilization of an on-call team 24 hours a day, seven days per week. The staff projected for the CCFH program will include a program director, board certified or board eligible in cardiology, radiology, or with subspecialty training in cardiology or cardiovascular radiology; a physician, board- certified or board-eligible in cardiology, radiology, or with specialized training in cardiac catheterization and angiographic techniques who will perform the examination; support staff, specially trained in critical care of cardiac patients, with a knowledge of cardiovascular medication and an understanding of catheterization and angiographic equipment; support staff, highly skilled in conventional radiographic techniques and angiographic principles, knowledgeable in every aspect of catheterization and angiographic instrumentation, with a thorough knowledge of the anatomy and physiology of the circulatory system; support staff for patient observation, handling blood samples and performing blood gas evaluation calculations; support staff for monitoring physiological data and alerting the physician of any changes; support staff to perform systematic tests and routine maintenance on cardiac catheterization equipment and be available immediately in the event of equipment failure during a procedure; and support staff trained in photographic processing and in the operation of automatic processors used for both sheet and cine film. The CCFH plan for care both before and after the procedure will be of high quality. 74. CCFH's cardiac catheterization program will be capable of providing immediate endocardiac catheter pacemaking in case of cardiac arrest and pressure recording for monitoring and to evaluate valvular disease, or heart failure. The following noninvasive cardiac or circulatory diagnostic services will be available at CCFH: Hematology studies or coagulation studies; Electrocardiography; Chest x-ray; Blood gas studies; and Clinical pathology studies and blood chemistry analysis. Availability of Alternatives to the Project While there was expert opinion that an appropriate alternative would be to use the expertise of CCF physicians by operating "a high quality Cleveland Clinic program in one of the existing combined diagnostic and open heart approved facilities," (Tr. 1415,) there are disadvantages to this alternative. First, the transfer of patients from CCFH to a hospital providing inpatient cardiac catheterization services poses risks to patients and anxiety for both the patient and family. Transfer of patients also disrupts continuity of care. Second, the equipment for the laboratory has been purchased. If the project is not implemented, inpatients at CCFH will bypass that equipment and be transferred elsewhere. Third, there are no cost savings associated with the alternative since CCFH will implement an outpatient program if the inpatient program is not approved. Fourth, the South Florida community will not benefit from the research and education capabilities of CCFH and Foundation. Finally, the community will not benefit from whatever free care it might receive if CCFH is able, in fact, to make good on its pledge for the provision of free care. In contrast, the proposed program will benefit the community by enhancing the chances of improving access to the uninsured population, expanding and enhancing medical research and education, and furthering development of the only fully-integrated health care provider in South Florida, which, in turn, will improve quality and control costs. The Need For Research and Educational Facilities North Broward Hospital District has a division of academic affairs related to the training of medical students. It has established medical student affiliations with Nova Southeastern College of Osteopathic Medicine in Broward County and the University of Florida School of Medicine. Broward General Medical Center is seeking approval to establish a residency program and currently instructs third and fourth year medical students on a regular basis. These students often observe cath lab procedures at both BGMC and NBMC. By 1995, BGMC will be listed as an available point of residency in the catalog for the University of Florida School of Medicine. In addition to assisting in the education of medical students, the District is seeking national approval as a continuing medical education (CME) site. CME programs are presently approved by the Florida Medical Association. The week the hearing in this proceeding commenced, for example, the District's division of academic affairs hosted a program on emergency cardiology services sponsored by the University of Florida. Research programs serve an important function as a point of dissemination of new medical techniques. The District is engaged in secondary research. It was recently selected to participate in a multi-center lifestyle heart trial. Six sites were selected nationwide with BGMC being one of the approved sites. The program will do research regarding the reversal of coronary heart disease. The District's hospitals, moreover, have an Institutional Research Board. Any physician can propose a research program to the Board. But, despite BGMC's research activity, there are no recognized research institutions in District 10. Unlike the research in which the District is engaged which is secondary in nature, academic centers such as the Foundation, perform primary or original research. The Foundation, together with CCF and CCFH, is actively engaged in research related to cardiology. Included among CCF and CCFH's research activities are multi- center research studies, most of which are coordinated with the Foundation. The Foundation serves as the principal investigator for those studies but District 10 will benefit from the close relationship with the Foundation enjoyed by CCF and CCFH. There are substantial benefits associated with graduate medical education, including enhancing the quality of medical services provided. When patient care takes place in the milieu of education and research, as it does at the Foundation's facility in Cleveland, it enhances a hospital's opportunity to recruit physicians interested in that type of activity more than in the economics of medicine. Because of the close relationship between the Foundation and CCFH, the benefits provided by the Foundation's research and educational environment spill over to the applicant. For example, the Foundation has one of the largest cardiology residency programs in the United States. Residents from that program, as well as other Foundation residency programs, rotate to CCF/CCFH for part of their training. The number of Foundation residents rotating to CCF/CCFH has grown from 6 to 29 over five years. Most of the residents are in primary care and internal medicine programs. CCFH will provide educational benefits independent of the benefits that flow from the Foundation. There exists a need for additional graduate medical education training sites both in Florida and in District 10. Florida ranks 41st among the 50 states in the number of residents per population. To help meet this need, CCFH provides an independent residency in surgery under the guidance of CCF. It is the only accredited graduate medical education program in District 10. The proposed inpatient cardiac cath lab will further the training of graduate medical students both in Florida and Broward County by increasing their educational opportunities. The program will provide CCFH with the full diagnostic capabilities needed in order to train internists and other primary medicine specialists in evaluating and caring for cardiovascular patients. The ability of primary care physicians to evaluate and care for cardiovascular patients is critical, given the high rate of cardiovascular disease in South Florida. The provision of graduate medicine education requires institutional commitment. The applicant is so committed and its application is backed by the commitment of CCF. The approval of the application will enhance medical research and education in District 10 and the State of Florida. Availability of Resources CCFH's estimate of project costs is found on the second page of Schedule 2 on page 63 of its omissions response. A breakdown of the estimated costs appears at pages 114 and 115 of the omissions response on Table 25, AHCA Form 1455, 1993. The total of the estimate, $117,000, accurately reflects the total costs for the application. CCFH has available the $117,000 necessary to meet the costs and to finance implementation. CCFH will be able to recruit the nursing and technical staff necessary to the implementation of the project. Long-term Financial Feasibility The immediate financial feasibility of the project is not in doubt. CCFH has available funds in cash from operations with which it intends to fund the start-up of the project. The long-term financial feasibility of this project is another matter. Measured by whether the project produces a positive net income following its start up period, long-term financial feasibility should not be an impossible matter to judge within accepted norms. But, determining long-term financial feasibility in this case is difficult because of the troublesome task of sorting out the truth when experts, all duly-qualified, have opinions, either as to the underlying data and assumptions or the ultimate conclusion, that are diametrically opposed. Petitioners and intervenor attacked fervently the assumptions underlying the opinion of CCFH's expert in health care finance that the project is financially feasible in the long-term. These assumptions were, in the main, provided to the finance expert by CCFH's expert in health care planning, Dr. Luke. The attack was launched from various angles. One expert witness noted that the Agency reported in its SAAR that it was unable to determine long- term financial feasibility and that such an observation by the Agency ordinarily would lead to preliminary action by the Agency in the form of a denial. Moreover, inconsistencies between the Application and the subsequent application were viewed by experts other than Dr. Luke as "profound." (See e.g., Tr. 1300.) Conclusions reached in the application were seen as inconsistent by opposing experts when compared with data that was used to support the opinion of CCFH's finance expert, data provided by the Foundation with regard to its hospital in Cleveland, Ohio. Furthermore, internal inconsistencies in the Application were observed by experts called by CCFH's opponents. These included that CCFH overstated volume projections, overstated its service area, used a flawed charge methodology, understated its average length of stays for four DRGs related to cardiac catheterization and failed to account for expenses associated with the outpatient cath lab that would support the inpatient lab, if approved. These inconsistencies led the opponents' expert witnesses either to offer the opinion that the project was not financially feasible in the long-term or to view the data and assumptions used by CCFH's financial expert as so flawed as to prevent the expert from reaching the opinion held by CCFH's financial expert and to constitute a failure in proof by CCFH that its project is financially feasible in the long term. The flaws observed by CCFH's opponents' experts, however, were explained by Dr. Luke so that the opinion of CCFH's expert in health care finance, as best can be determined, remains valid. For example, Petitioners and intervenor pressed hard on the average length of stay assumptions provided for various DRGs. Dr. Luke conceded that the average lengths of stay provided, based on the cardiac cath inpatient treatment by CCF physicians at BGMC and other area hospitals, are "certainly shorter than the [overall] experience of other area providers." (Tr. 1100, 1101.) But, in response to the assertion that the shorter length of stay could be due to treatment at CCFH prior to the transfer to another area hospital where the cardiac cath procedure was to be performed, Dr. Luke offered two explanations. First, there was no evidence to suggest that a much larger percentage of CCF cardiac cath patients were transferred than were patients of other physicians. Second, the total length of stay in the hospital would be less if a patient were treated solely at CCFH and not transferred to another hospital because of efficiencies in scheduling and time lost in the transfer, itself. Dr. Luke's opinion, in this regard, was bolstered by analysis as to length of stay of patients under the care of CCF physicians in DRGs comparable to inpatient cardiac cath DRGS. With regard to DRG 143, (Chest pain), CCFH's average length of stay is tied for the lowest in the district. Others are the lowest. CCFH's 2.7 average length of stay for DRG 140, for example, the lowest in the District, may be contrasted with NBMC's average length of stay for DRG 140, which is 4.3, nearly 160 percent higher than CCFH's. The notion, therefore, that CCFH would have significantly lower average lengths of stay for cardiac cath patients is not inconsistent with available data. Average length of stay is the critical building block in the financial feasibility model used by CCFH in its application. But, on rebuttal, CCFH's expert in health care offered the opinion that the project is financially feasible in the long term based on a methodology under which average length of stay is eliminated as a variable. This methodology uses "Cost per Case" data. CCFH's expert compared CCF physicians' cost per case to the costs per case of both petitioners and their experts in this proceeding as well as data from three clients of the expert who provide inpatient cardiac cath services and employ casemix cost accounting systems: Holmes Regional Medical Center, Sarasota Memorial Hospital and Memorial Medical Center of Jacksonville. The outcome of the analysis was that the cost per case projected by CCFH, $2225, fell in the middle of the range of the other providers, which ran from a low of approximately $1600 to a high of approximately $3000. Based on a cost per case analysis, CCFH's health care finance expert concluded that even were the CCFH cost per case understated and turned out to be as high as the average cost per case of any of the petitioners in this case, the project would still be financially feasible in the long term. To take another of the attacks raised by petitioners, that CCFH failed in its application to take into account for expenses associated with the outpatient cardiac cath lab that would support an inpatient lab, it was not necessary that there be such consideration in the application. CCFH has committed the costs associated with constructing and equipping it outpatient cardiac cath program. This commitment makes these costs "sunk." They will be undertaken regardless of whether CCFH's application is granted or not and so are not part of the costs of the inpatient project. It is difficult to determine whether Dr. Luke or his critics are right. On balance, it seems that the matter swings in Dr. Luke's favor. In any event, the testimony on rebuttal which established financial feasibility based on a cost-per-case methodology was not overcome by the parties opposed to CCFH's application. In sum, the project will be financially feasible in the long term. The project will generate a positive net income and positive cash flow after its start-up period. The projections of utilization relied upon in evaluating the long- term financial feasibility of the program are reasonable and achievable. Those projections are based on the historical experience of CCF physicians who perform cardiac catheterization services at other Broward County hospitals. Those physicians performed in excess of 400 procedures in 1992 and 1993. There was growth of approximately 2000 diagnostic cardiac catheterization procedures performed in District 10 between 1992 and 1993. The CCF physicians will need to obtain modest increases in their market shares in order to meet the projections of utilizations. The payor mix assumptions contained in the application are reasonable and achievable. The application accounts for all operational expenses necessary to the provision of inpatient cardiac catheterization services at CCFH. The Needs of a Multidisciplinary Clinic A multidisciplinary clinic is an organization which employs salaried physicians in a variety of medical specialties to provide diagnostic and therapeutic services to its patients. The physicians practice in a collegial collaborative environment. The multidisciplinary group clinic model promotes ease and economy in the diagnosis and care of patients. The clinic model uses a unified medical record, affording each physician who comes into contact with a patient all data and information pertaining to the patient. CCF is the only multidisciplinary group clinic in South Florida. Approximately eight percent of the discharges by CCF and CCFH in Major Diagnosis Category Five ("MDC-5"), which is the cardiac diagnostic group of the International Classification of Diseases, are attributable to patients who reside outside District 10 and the service districts adjacent to District 10. For purposes of health planning, a service district is a geographic area from which at least two-third's of a health care provider's patients are expected to come. The one-third to 20 percent remainder of the health care provider's patients come from outside the service district. A service district is used in analyzing growth in population or growth in demand for services because such growth will occur most intensively within the service district. The service district for CCFH includes all of Broward County and the southern portion of Palm Beach County. On average, approximately four percent of the MDC-5 discharges for other District 10 facilities reside outside District 10 and the adjacent service districts. The difference between the percentage of CCF and CCFH MDC-5 discharges from outside District 10 and service districts adjacent to District 10 and the average percentage of other District 10 hospitals' MDC-5 discharges from outside District 10 and adjacent service districts is statistically significant. Impact on Costs and Effects of Competition The CCFH program will sharpen competition for cardiac cath services in Broward County. CCFH, in conjunction with CCF and the Cleveland Clinic Florida Health Plan ("CCFHP"), constitute a fully-integrated health care delivery system. A fully integrated system enables a person in need of any type of medical care to receive services through the system. The relationship that exists between CCFH, CCF and CCFHP are unique in the Broward County market. Fully integrated health care delivery systems have been shown generally to produce efficiencies of operations and to improve the quality of care. The Cleveland Clinic system has had a positive impact on both the quality and cost efficiency of care offered in Broward County. CCH's average length of stay for patients and average charges for treatment of common cardiac problems are, on average, the lowest in Broward County. Both in Broward County and generally, health care is moving toward an environment of managed care and managed competition. Managed care and managed competition will result in a more competitive system, which will involve providers of health services bearing risk, in terms of prospective payment or prepaid medical plans. Managed care is intended to achieve high quality and cost efficiency in the delivery of medical services. The integrated health care delivery system model in place at CCFH is well suited for an environment of managed care and managed competition. Similar models in California, for example, have proven effective in offering high quality services at a lower cost in the California managed competition environment. In order for an integrated health care delivery system to achieve the goals of lower consumer costs and high quality, it must be able to control all elements of service delivery, including the costs of delivering services. The better the system can control its costs, the more competitive it can be. If the application is approved, CCFH will be able to control all its elements of the delivery of cardiac catheterization services. The approval of the application will enable CCFH to compete more effectively in the managed care environment because of the desire on the part of purchasers in the marketplace to receive the maximum number of services available. The more comprehensive CCFHP is the more its competitive stature is enhanced in the local market for health care services. To the extent that managed care entities compete on the basis of price, lower prices for health care services will occur. CCFHP has formed an accountable health partnership, ("AHP"). AHPs are organizations comprised of a service delivery system and a financing vehicle. The CCFHP AHP recently submitted a bid to a community health purchasing alliance ("CHPA"), which entities are organized under Florida law to serve as a clearinghouse of information to purchasers of health care, including the assembling and dissemination of information on constituent AHPs to interested parties. The CCFHP bid was the second lowest of the proposals offered to both the Broward County and Palm Beach County CHPAs. While the approval of the application is likely to lower the number of procedures done at all other programs in District 10, it will not have a material adverse impact on the quality of services offered at any existing inpatient cardiac cath program in the District. For those most likely to be affected by the program, approval does not at all threaten that they will drop below 300 procedures since the number of procedures conducted in their programs is in the thousands. For other programs operating at or about 300 procedures annually, approval should not impede their ability to perform in excess of 300 procedures annually. The approval of the application will not have a material impact on University Hospital, which recently received a certificate of need authorizing the development of an inpatient cardiac cath program. The approval of the application will result in the redirection to CCFH of cases primarily from BGMC and Holy Cross. Even with the redirection of cases, both BGMC and Holy Cross will retain in excess of 1000 procedures annually, which is more than adequate to ensure a program's quality. Nor will approval have a material adverse financial impact on any of the petitioners or intervenor. Both Holy Cross and North Ridge have enjoyed substantial operating margins and are otherwise extremely solvent. In the cases of IPMC, BGMC and NBMC, it is appropriate to evaluate the impact on the District system as a whole. The District has substantial financial resources. In the contexts of these organizations' financial strength, the impact of the CCFH inpatient cardiac cath program will be inconsequential. Past and Proposed Provision of Services to Medicaid and Indigent Patients It is the policy of CCFH to accept all patients, regardless of ability to pay. In addition to its commitment to provide free services to 76 uninsured patients as a condition of approval of the application, CCFH will also seek out Medicaid patients. This conditional commitment has the potential to be a substantial contribution to alleviating problems of the uninsured in obtaining needed inpatient cardiac catheterization services. But, as stated above, there simply is no guarantee that the commitment will be fulfilled. The Decision in the Dr. John T. MacDonald Foundation Case On April 1, 1994, slightly more than two months before final hearing in this case commenced, Hearing Officer Michael M. Parrish rendered a Final Order in Dr. John T. MacDonald Foundation, et al., v. Department of Health and Rehabilitative Services, DOAH Case Nos. 91-6390R (consolidated). The issue in the case was whether Rule 10-5.032, Florida Administrative Code, is an invalid exercise of delegated legislative authority. By the Final Order, the hearing office declared only a relatively small part of the rule invalid, leaving almost the entire text of the rule intact. Rule 10-5.032 "implements the provision of section 381.706(1)(c), F.S., which provides that certificate of need shall not be required for an expenditure to provide an outpatient service." Pertinently to this case, the rule goes on to define[] the requirements for the establish- ment of inpatient cardiac catheterization services, including minimum requirements for staffing, equipment, and a need methodology for cardiac catheterization programs. A certificate of need for the establishment of inpatient cardiac catheterization services shall not normally be approved unless the applicant meets all relevant statutory criteria, including the standards and need criteria set forth in this rule. Dr. John T. MacDonald Foundation, at 8. Sub-section (8) of the rule is entitled, "Need Determination." Paragraph (c) of subsection (8), also entitled, "Need Determination," sets out the "need formula" as follows: A new adult cardiac catheterization program may be approved if the difference between the projected program volume and the number of adult cardiac catheterizations performed in the service planning area during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool, minus the number of approved adult programs times 300, is at or exceeds a program volume of 300 for the applicable service planning area. This need formula is expressed as follows: NN = PCCPV - ACCPV - APP Where: NN is the 12-month net adult program volume need in the service planning area projected 2 years into the future for the respective planning horizon. Net need projections are published by the department as a fixed need pool twice a year. The planning horizon for applications submitted between January 1 and June 30 shall be July of the year 2 years subsequent to the year the application is submitted. The planning horizon for applications submitted between July 1 and December 31 shall be January of the year 2 years subsequent to the year which follows the year the application is submitted. PCCPV is the projected adult cardiac catheterization program volume which equals the actual adult cardiac catheterization program volume (ACCPV) rate per thousand adult population 15 years and over for the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool, multiplied by the projected adult population 15 years of age and over 2 years into the future for the respective planning horizon. The population projections shall be based on the most recent population projections available from the Executive Office of the Governor which are available to the department 3 weeks prior to the fixed need pool publication. ACCPV equals the actual adult cardiac catheterization program volume for the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool. APP is the projected program volume for approved adult programs. The projected program volume for each approved program shall be 300 admissions. Id., at 14 and 15. The rule goes on in (8)(d): Irrespective of the net need calculated under paragraph (c), no additional cardiac catheterization program shall normally be granted unless ACCPV divided by the number of operational programs for the service planning area is at or exceeds a program volume of 300 patient admissions. Id., at 15. The Hearing Officer summarized the rule as follows: it, projects a number of anticipated admissions to cardiac catheterization programs in the horizon year by multiplying the current use rate (number of admissions per thousand adult population) times the projected population. If the difference between the current volume and the projected volume is greater than 300, a new program may be awarded, so long as all of the existing programs, plus the proposed program, are projected to perform an average of 300 admissions each. An approved program is assigned a value of 300 for purposes of determining the average. Id., at 15 and 16. After summarizing the rule in the Final Order, the hearing officer took it to task on the basis of a number of deficiencies, not the least of which is that the rule fails to take into account the number of cath laboratories as opposed to the number of cath programs within a district. This point is found in Finding of Fact No. 29 in the Final Order. Even the most cavalier reading of Finding of Fact No. 29 shows the point could not have been made more plainly: The rule does not take into consideration the number of individual catheterization laboratories, rather it considers the number of cardiac catheterization programs. The difference is that an individual hospital will have only one program, but it may have more than one laboratory in each program. Id., at 19. In addition to deficiencies, the rule, in the view of the hearing officer, contains a fatal flaw. It does not address the capacity of existing cardiac catheterization programs or the capacity of existing laboratories. Furthermore, its use of 300 as the threshold number of procedures was an unexplained deviation from an earlier standard of 600 procedures as the threshold. This deviation was also an "unexplained departure from the National Guidelines for Health Planning, and an unexplained departure from other published guidelines recognized as authoritative." Id., at 25. The hearing officer went on in the Final Order to find that "[a]n essential ingredient of any functional need determination methodology is a method for identifying unmet need." Id., at 26. To do so, the methodology must identify "not only ... a reasonable estimate of future need," but also "a reasonable estimate of the future capacity of existing providers to meet that need." Id. The rule's shortcomings are summarized in Finding of Fact 43 of the order: The failure of the subject rule to consider the future capacity of existing providers in calculating future need has an adverse effect upon the ability to accurately predict future unmet need and also has a potential for adverse effect upon the quality of care offered by the existing providers. The rule authorizes the approval of a new inpatient cardiac catheteri- zation program even though many of the existing programs may be operating substantially below their capacity. The addition of new programs under such circumstances has the adverse effect of tending to reduce utilization of existing facilities that are already functioning well below capacity. Id., 26, 27. Ultimately, parts of the rule were determined by the Hearing Officer to be beyond the bounds of "reasonableness" and therefore arbitrary and capricious, and hence, an invalid exercise of delegated legislative authority, see Section 120.52(8), F.S., as follows: The term "operational programs," was determined arbitrary and capricious because the term failed to take into account the number of laboratories within each program. The hearing officer wrote, "[I]llogical results [produced by the use of the term] can be avoided only by use of a methodology that takes into account the number of existing and approved laboratories." Id., at 32; The use of the phrase "a program volume of 300 patient admissions" was determined un- reasonable because it is inconsistent with the National Guidelines For Health Planning and other authoritative guidelines and because it bears no rational relationship to the actual capacity of cardiac catheterization laboratories, Id., at 33; and, Paragraph (9) of the rule was determined to be arbitrary and capricious because "it has the effect of ignoring the existence of any new laboratories added to existing facilities." Id., at 34. The effect of the hearing officer's ruling and the explanation underpinning the ruling was to turn much of the rule, and certainly the numeric need formula, into mincemeat. It clearly called for the initiation of rulemaking if AHCA wanted a rule establishing "need methodology" for calculating numeric inpatient cardiac catheterization program need. But AHCA chose to look at the Final Order in a different way, a way that one would think would occur only in a hearing officer's wildest nightmare. Instead of reading the Final Order in its entirety, and taking it as a whole in able for the order to make sense, AHCA, followed only the strict, literal, reading of paragraphs 4., and 5., on pages 35 and 36 of the order, where it is declared: That the following portions of Rule 10-5.032, Florida Administrative Code, are an invalid exercise of delegated legislatively authority for the reasons stated above: the use of the term "operational programs" at paragraph (8)(d), the use of the phrase "a program volume of 300 patient admissions" at paragraph (8)(d), and the last sentence of paragraph (9). That, with the exception of the portions of the rule described in the immediately preceding paragraph, Rule 10-5.032, Florida Administrative Code, has not been shown to be an invalid exercise of delegated legislative authority, and the chal- lenges to other portions of the rule are hereby dismissed. Id., at 35, 36. By reading the declaration of partial invalidity "literally," in the strictest sense of the word, AHCA chose to leave in effect the numeric need formula: "NN = PCCPV - ACCPV - APP." This decision was made despite the fact that nearly the entire Final Order is devoted to an explanation of why the formula is dysfunctional in ways which strike at the very heart of the Certificate of Need program. Moreover, the strictly literal reading of the Final Order by AHCA leaves a rule on the books with portions which make no sense. AHCA conceded as much, through its Chief of the Certificate of Need and Budget Review sections of the Agency, elicited during the hearing in direct examination by AHCA's own counsel: Q: ... Now, specifically, as to paragraph 59C-1.0328, I think it is (d), with the language that has been stricken by the hearing officer in the John T. MacDonald case, does that paragraph make any sense to you? A: Not without that language in there, no. It doesn't read as something that could actually function. (e.s., Testimony of Elizabeth Dudek, Tr. 1468-1469.) The remainder of the Final Order was characterized in this manner by the Agency, Well, in looking through the final order, and then discussing it with other members of my staff and the legal staff, and in determining how we actually utilize the rule and what the difference in what is stated within the final order and the rule ... there did not appear to be any language that indicated ... that we needed to review capacity, nor the number of laboratories that were there. There were some comments related to both, but the findings were only such in the final order that the provisions of (8)(d) and then of (9) were deleted. (Tr. 1470-1). Suffice it to say, as will be articulated in the Conclusions of Law, below, this hearing officer does not read the Final Order in the Dr. John T. MacDonald Foundation case in the same way as does the Agency.
