Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the decision of the respondent to deny petitioner's proposal to establish a new ten station dialysis facility in Dade County be AFFIRMED. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 21st day of August, 1978. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Bart Pelstring, Administrator Dialysis Associates, Inc. 2125 Biscayne Boulevard Miami, Florida 33137 Eric J. Haugdahl Assistant General Counsel Department of HRS 1323 Winewood Boulevard Suite 406 Tallahassee, Florida 32301 Mr. Art Forehand, Administrator Office of Community Medical Facilities 1323 Winewood Boulevard Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES DIALYSIS ASSOCIATES, INC., Petitioner, vs. CASE NO. 78-779 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, OFFICE OF COMMUNITY MEDICAL FACILITIES, Respondent. /
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On or about June 16, 1976, petitioner Frederick W. Campbell, M.D., Director of the proposed Kidneycare of Florida, submitted his application to respondent for the issuance of a certificate of need. The applicant proposes to organize as a nonprofit corporation to operate a freestanding hemodialysis facility to provide maintenance dialysis for patients who qualify for care under the Medicare End-Stage Renal Disease Program. The proposed facility is to be located in north Tampa adjacent to both the College of Medicine of the University of South Florida and the University Community Hospital. The area proposed to be served includes the northern area of Hillsborough County, Pasco County and the western half of Polk County. A capital expenditure in the amount of $220,000.00 is proposed. The facility is to include ten stations or renal dialysis units. Six are to be available for chronic patients on an outpatient basis, two are for limited self care and two are to be used for training for home dialysis patients. In its application, petitioner proposed to operate eight patient stations six days per week on two, four hour shifts per day. The other two stations were proposed to operate on one shift six days a week. An estimated construction and operation time is six to nine months from the date of approval of petitioner's proposal. The staff of the Florida Gulf Health Systems Agency, Inc. reviewed petitioner's application and recommended approval of the project. The staff found that need for the facility had been established based upon the assumption that two shifts per day or 3.6 patients per machine per week was the optimum for planning purposes. (Exhibit 4). The Hillsborough Project Review Committee voted five to one to recommend disapproval of the application. This Committee found that only a marginal potential need for additional dialysis service had been demonstrated by the year 1978, and that such need could be met by the present facilities by increasing their operation to three shifts per day. (Exhibit 4). By a vote of ten to seven, the governing body of the Florida Gulf Health Systems Agency, Inc. recommended to respondent that the application be approved. As a basis for this recommendation, it was found that a three shift operation was not a viable alternative and that there was a definite need based upon a two shift assumption by the year 1978. Accessibility, the offering of a service not presently available (home dialysis), duality of choice and lower costs were also factors supporting the recommendation of approval. (Exhibits 4 and 8). At some time prior to respondent's letter of denial, respondent sought advice from the Florida Kidney Council and from a review panel of three nephrologists regarding petitioner's application. The response was a unanimous recommendation that the application be approved. (Exhibit 7). By letter dated September 17, 1976, respondent notified petitioner that the proposal to construct a free standing hemodialysis center had not been favorably considered. Respondent found a lack of demonstrated need in the foreseeable future within the proposed service area. This conclusion was based upon the following assumptions: a current patient load of 151, 44 existing dialysis units having a current potential for treating 198 patients based on a factor of five patients per unit and a utilization rate of ninety percent. The factor of five was derived from the operation of three shifts three days a week and two shifts three days a week. Assuming a three shift operation six days a week, and a ninety percent utilization rate, respondent found an unused current capacity of 87 patients. With such findings, respondent concluded that: "approval of additional dialysis units would be a duplication of existing, available, and under utilized hemodialysis units which are considered as sufficient in numbers to meet forseeable needs." In computing these figures, respondent did not take into consideration the projected future growth of the patient population. (Exhibit 1). In the proposed service area, three dialysis centers presently exist, excluding those at the Veterans Administration Hospital which serve veterans only. The dialysis unit at Tampa General Hospital has received approval to operate 14 stations, but is currently operating only 11. At the time of the hearing on this matter, there were approximately 54 patients being treated in this facility. Tampa General serves as a tertiary treatment center, treating acute as well as chronic patients. Bio-Medical Applications (BMA) of Tampa operates 20 stations and currently serves approximately 94 patients. The BMA facility in St. Petersburg, which opened in mid-September of 1976, operates 12 dialysis stations and has about twenty patients. Ten stations have been approved at Lakeland General Hospital in Polk County; however, such stations have not been placed into operation. An application is pending for six dialysis units in Brooksville, Hernando County. Other than the VA Hospital, none of the existing facilities currently provide training for home dialysis, although the BMA unit in St. Petersburg does anticipate home training capabilities. The optimum utilization rate for renal dialysis units is ninety percent. A figure less than 100 percent is necessary due to patient complications, scheduling difficulties, staff vacations, breakdown of machinery and the length of dialysis required by each patient. A figure somewhat lower than 90 percent may be applied for hospitals serving acute and emergency patients. The length of dialysis varies with the patient, as does the number of times per week the patient must dialyze. The average end-stage renal disease patient now dialyzes from four to six hours, three times a week. This is the amount of patient time normally required. The machine time is extended by thirty to sixty minutes to get it ready for operation and then to tear it down again after the patient is dialyzed. The majority of evidence adduced at the hearing related to the number of patients per week who could be serviced on a single machine. This of course, is dependent upon the number of shifts utilized per day. If two shifts per day were in operation for six days per week, four persons per week could be dialyzed on that machine. A ninety percent utilization rate for that machine renders a figure of 3.6. If three shifts per day were in operation for six days a week, six persons could be dialyzed per week. Assuming a ninety percent utilization rate, a figure of 5.4 ensues. All but one of the nephrologists who presented their views at the hearing thought that the operation of three shifts per day, in the absence of an absolute need for such operations, was totally unacceptable and incredible. Among their objections to the three shift operations were the following: inconvenience to those patients assigned to the third shift, though it was admitted that some patients are employed, students or housewives and may prefer an evening shift; many, if not most, patients do not feel normal or well enough to come out late at night to be dialyzed; inasmuch as the federal government reimburses 90 percent of the patients on dialysis at a specific rate per dialysis, the patient cost is not affected by the number of times a machine is actually used; the dialysis machines wear out more rapidly with three, as opposed to two, shifts; flexibility in patient load and scheduling is hampered; problems in staffing three shifts per day; nephrologists do not think it practical to work three shifts a day and therefore if three shifts per day were required in this State, nephrologists would be discouraged from coming into Florida; and expansion of kidney care dialysis units would be deterred; and finally neither the State Kidney Council nor the State Society of Nephrology have endorsed the three shift per day concept. Tampa General Hospital presently operates its dialysis program on a three shift basis on three days a week, and two shifts the other three days. This renders a 90 percent utilization figure of 4.5 patients per machine. Although problems in staffing have occurred in the past, these problems have been solved. The first shift patient is put on the machine around 7:00 a.m. and the third shift patients come off the machines around 10:00 p.m. Members of the staff then clean up and they are out by 11:00 or 11:15 p.m. The BMA unit in Tampa also operates three shifts per day, three days a week, with the first shift patients coming in at 6:30 a.m. and the last shift leaving at about 8:00 p.m. No real problems have been experienced in this operation. The BMA unit in St. Petersburg has not yet had the need to operate in three shifts. While the co-director of the dialysis units at both Tampa General and BMA was content to work with three shifts alternating with two every other day, he did not feel it medically or economically desirable to operate three shifts all six days of the week. The "Analysis of Dialysis Needs - 1974-1979 contained in Appendix D of the Renal Disease Plan for Florida indicates that the annual statewide incidence rate for new end stage renal disease patients requiring dialysis is seventy per million. In South Florida, a higher rate of eighty per million is probable. These figures are somewhat higher than the national average due to a higher than average Florida population over age 65. (Exhibit 16, p. 64). Population figures derived from the University of Florida indicate an estimated 1977 population of the proposed service area of 1,677,700 and for 1978, 1,734,367. Through either successful transplantation or patient mortality, the number of persons requiring dialysis will be reduced by approximately 25 percent in any given year.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the determination of the Office of Community Medical Facilities to deny the petitioner's application for a certificate of need be REVERSED. Respectfully submitted and entered this 10th day of December, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Lakeland Regional Medical Center (LRMC), is a 897-bed private, not-for-profit, general acute care hospital located at 1324 Lakeland Hills Boulevard, Lakeland, Florida. It is considered a major regional referral hospital and provides a wide range of tertiary services, including open heart surgery. The facility is located in District 6 and is one of six facilities in the district having an existing open heart surgery program. Respondent, Department of Health and Rehabilitative Services (HRS), is the state agency charged with the responsibility of administering the Health Facility and Services Development Act, also known as the Certificate of Need (CON) law. On September 26, 1988 intervenor, Winter Haven Hospital, Inc. (WHH), filed with HRS an application for a CON seeking authority to establish an open heart surgery program at its facility in Winter Haven, Florida. After reviewing the application, on February 3, 1989, HRS published notice of its intent to issue the requested CON. If approved, this program would be in competition with similar programs operated by LRMC and intervenor, Hillsborough County Hospital Authority d/b/a Tampa General Hospital (TGH). Those two parties have initiated formal proceedings in Case Nos. 89-1286 and 89-1287 to contest the proposed grant of authority. Intervenor, Venice Hospital, Inc. (Venice), has a pending application for authority to establish an open heart surgery program in a separate administrative proceeding and has intervened in opposition to LRMC's rule challenge. It is noted that LRMC, WHH and TGH are located in District 6 while Venice is located in an adjoining, but separate, district. All parties have standing in this proceeding. In order for HRS to grant a certificate of need, it is necessary for an applicant to satisfy all relevant rule and statutory criteria. In this vein, the agency has promulgated Rule 10-5.011(1)(f), Florida Administrative Code (1987), which contains certain criteria pertaining to open heart surgery programs. That rule provides in relevant part as follows: (f)2. Departmental Goal. The Department will consider applications for open heart surgery programs in context with applicable statutory and rule criteria. The Department will not normally approve applications for new open heart surgery programs in any service area unless the conditions of Sub-paragraphs 8. and 11., below, are met. * * * 11.a. There shall be no additional open heart surgery programs established unless: (1) the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year, (Emphasis added) * * * The requirements of this rule, which are unambiguous, and other pertinent statutory and rule criteria, are to be applied by HRS to all applicants, including WHH, during the CON review process. Although the rule itself is not being challenged by LRMC, subparagraph 11.a. of the rule is at the heart of this controversy. Petitioner and TGH contend that the clear language of the rule requires that, absent the existence of not normal circumstances, HRS may not award a CON unless each existing and approved open heart surgery program in the service area is operating at and is expected to continue to operate at 350 procedures per year. Because there are now six approved and existing open heart surgery programs in the district, petitioner argues that the rule mandates that, before a new program can be authorized, each of the six programs must meet the required level of 350 procedures per year. They contend further that the particular policy applied by HRS to WHH's application is not apparent on the face of rule 10-5.011(1)(f)2. and thus it constitutes an unpromulgated rule. In preliminarily approving WHH's application, HRS admits that it used a so-called averaging policy which it agrees may be described in the following manner: HRS has formulated and is applying in reviews of Certificate of Need ("CON") applications for new open heart surgery services a policy of general applicability that is uniformly and consistently applied, which calls for the averaging of the utilization of existing and approved adult open heart surgery programs in the applicable service area, and which deems subparagraph 11.a.(I) of Rule 10-5.011(1)(f), Fla. Admin. Code, to be met if the average utilization of all such existing and approved programs in that service area is at least 350 cases (the "Averaging Policy"). Pursuant to its Averaging Policy, HRS will approve a CON application for a new adult open heart surgery program under Rule 10- 5.011(1)(f), Fla. Admin. Code, even if each existing and approved program in the proposed service area is not operating at a minimum of 350 adult cases per year, and even if no "not normal" circumstances are presented in the application or found to exist in the State agency Action Report. Stated another way, HRS deemed subparagraph 11.a. to have been met in WHH's case because, after dividing the total number of procedures performed district wide by the number of existing and approved programs, there were an average number of procedures in excess of 350 for each program in the district. It used this averaging process even though two programs were not operational at the time the review process took place, and only two (LRMC and TGH) of the six programs had actually performed more than 350 procedures during the specified time period being measured. 1/ Thus, the averaging policy used by HRS allows approval of a CON application for open heart surgery even if only some programs in a district, rather than each, have the required 350 case volume. The averaging technique has not been reduced to writing in a memorandum, manual or agency policy directive, and it has not been formally adopted as a rule. In this regard, HRS, but not WHH and Venice, has admitted that the policy is indeed a rule. The results of applying that "rule" are contained in the state agency action report issued by HRS and made a part of this record. HRS has consistently and uniformly applied this averaging technique in every open heart surgery case except one since the rule was adopted in substantially its present form on February 14, 1983. 2/ It has been applied without discretion by those HRS personnel who have the responsibility of administering the CON law and regulations. The proponents of the averaging policy argued first that the language in subparagraph 11.a. authorized its use. However, nothing in the language of the existing rule expressly refers to an averaging process. They also contended that when other provisions within the rule are read, the use of the policy becomes apparent. More particularly, they pointed to subsection (7) of the rule which requires that the provision of open heart surgery be consistent with the state health plan. That plan provides in part that one of its objectives is to maintain an average volume of 350 procedures at all programs in the state. However, the state health plan is not mentioned in subparagraph 11.a., subsection (7) does not track or mirror the averaging technique, and the same subsection does not alert the user of the rule to the fact that an averaging process will be applied.
The Issue Whether the Certificate of Need application (CON 9239) of Galencare, Inc., d/b/a Brandon Regional Hospital ("Brandon") to establish an open heart surgery program at its hospital facility in Hillsborough County should be granted?
Findings Of Fact District 6 District 6 is one of eleven health service planning districts in Florida set up by the "Health Facility and Services Development Act," Sections 408.031-408.045, Florida Statutes. See Section 408.031, Florida Statutes. The district is comprised of five counties: Hillsborough, Manatee, Polk, Hardee, and Highlands. Section 408.032(5), Florida Statutes. Of the five counties, three have providers of adult open heart surgery services: Hillsborough with three providers, Manatee with two, and Polk with one. There are in District 6 at present, therefore, a total of six existing providers. Existing Providers Hillsborough County The three providers of open heart surgery services ("OHS") in Hillsborough County are Florida Health Sciences Center, Inc., d/b/a Tampa General Hospital ("Tampa General"), St. Joseph's Hospital, Inc. ("St. Joseph's"), and University Community Hospital, Inc., d/b/a University Community Hospital ("UCH"). For the most part, Interstate 75 runs in a northerly and southerly direction dividing Hillsborough County roughly in half. If the interstate is considered to be a line dividing the eastern half of the county from the western, all three existing providers are in the western half of the county within the incorporated area of the county's major population center, the City of Tampa. Tampa General Opened approximately a century ago, Tampa General has been at its present location in the City of Tampa on Davis Island at the north end of Tampa Bay since 1927. The mission of Tampa General is three-fold. First, it provides a range of care (from simple to complex) for the west central region of the state. Second, it supports both the teaching and research activities of the University of South Florida College of Medicine. Finally and perhaps most importantly, it serves as the "health care safety net" for the people of Hillsborough County. Evidence of its status as the safety net for those its serves is its Case Mix Index for Medicare patients: 2.01. At such a level, "the case mix at Tampa General is one of the highest in the nation in Medicare population." (Tr. 2452). In keeping with its mission of being the county's health care safety net, Tampa General is a full-service acute care hospital. It also provides services unique to the county and the Tampa Bay area: a Level I trauma center, a regional burn center and adult solid organ transplant programs. Tampa General is licensed for 877 beds. Of these, 723 are for acute care, 31 are designated skilled nursing beds, 59 are comprehensive rehabilitation beds, 22 are psychiatry beds, and 42 are neonatal intensive care beds (18 Level II and 24 Level III). Of the 723 acute care beds, 160 are set aside for cardiac care, although they may be occupied from time-to-time by non-cardiac care patients. Tampa General is a statutory teaching hospital. It has an affiliation with the University of South Florida College of Medicine. It offers 13 residency programs, serving approximately 200 medical residents. Tampa General offers diagnostic and interventional cardiac catheterization services in four laboratories dedicated to such services. It has four operating rooms dedicated to open heart surgery. The range of open heart surgery services provided by Tampa General includes heart transplants. Care of the open heart patient immediately after surgery is in a dedicated cardiovascular intensive care unit of 18 beds. Following stay in the intensive care unit, the patient is cared for in either a 10-bed intermediate care unit or a 30- bed telemetry unit. Tampa General's full-service open heart surgery program provides high quality of care. St. Joseph's Founded by the Franciscan Sisters of Allegheny, New York, St. Joseph's is an acute care hospital located on Martin Luther King Boulevard in an "inner city kind of area" (Tr. 1586) of the City of Tampa near the geographic center of Hillsborough County. On the hospital campus sit three separate buildings: the main hospital, consisting of 559 beds; across the street, St. Joseph's Women's Hospital, a 197-bed facility dedicated to the care of women; and, opened in 1998, Tampa Children's Hospital, a 120-bed free-standing facility that offers pediatric services and Level II and Level III neonatal intensive care services. In addition to the women's and pediatric facilities, and consistent with the full-service nature of the hospital, St. Joseph's provides behavioral health and oncology services, and most pertinent to this proceeding, open heart surgery and related cardiovascular services. Designated as a Level 2 trauma center, St. Joseph's has a large and active emergency department. There were 90,211 visits to the Emergency Room in 1999, alone. Of the patients admitted annually, fifty-five percent are admitted through the Emergency Room. The formal mission of St. Joseph's organization is to take care of and improve the health of the community it serves. Another aspect of the mission passed down from its religious founders is to take care of the "marginalized, . . . the people that in many senses cannot take care of themselves, [those to whom] society has . . . closed [its] eyes . . .". (Tr. 1584). In keeping with its mission, it is St. Joseph's policy to provide care to anyone who seeks its hospital services without regard to ability to pay. In 1999, the hospital provided $33 million in charity care, as that term is defined by AHCA. In total, St. Joseph's provided $121 million in unfunded care during the same year. Not surprisingly, St. Joseph's is also a disproportionate Medicaid provider. The only hospital in the district that provides both adult and pediatric open heart surgery services, St. Joseph's has three dedicated OHS surgical suites, a 14-bed unit dedicated to cardiovascular intensive care for its adult OHS patients, a 12-bed coronary care unit and 86 progressive care beds, all with telemetry capability. St. Joseph's provides high quality of care in its OHS. UCH University Community Hospital, Inc., is a private, not-for-profit corporation. It operates two hospital facilities: the main hospital ("UCH") a 431-bed hospital on Fletcher Avenue in north Tampa, and a second 120-bed hospital in Carrollwood. UCH is accredited by the JCAHO "with commendation," the highest rating available. It provides patient care regardless of ability to pay. UCH's cardiac surgery program is called the "Pepin Heart & Vascular Institute," after Art Pepin, "a 14-year heart transplant recipient [and] . . . the oldest heart transplant recipient in the nation alive today." (Tr. 2841). A Temple Terrace resident, Mr. Pepin also helped to fund the start of the institute. Its service area for tertiary services, including OHS, includes all of Hillsborough County, and extends into south Pasco County and Polk County. The Pepin Institute has excellent facilities and equipment. It has three dedicated OHS operating suites, three fully-equipped "state-of-the-art" cardiac catheterization laboratories equipped with special PTCA or angioplasty devices, and several cardiology care units specifically for OHS/PTCA services. Immediately following surgery, OHS patients go to a dedicated 8-bed cardiovascular intensive care unit. From there patients proceed to a dedicated 20-bed progressive care unit ("PCU"), comprised of all private rooms. There is also a 24-bed PCU dedicated to PTCA patients. There is another 22-bed interventional unit that serves as an overflow unit for patients receiving PTCA or cardiac catheterization. UCH has a 22-bed medical cardiology unit for chest pain observation, congestive heart failure, and other cardiac disorders. Staffing these units requires about 110 experienced, full-time employees. UCH has a special "chest pain" Emergency Room with specially-trained cardiac nurses and defined protocols for the treatment of chest pain and heart attacks. UCH offers a free van service for its UCH patients and their families that operates around the clock. As in the case of the other two existing providers of OHS services in Hillsborough Counties, UCH provides a full range of cardiovascular services at high quality. Manatee County The two existing providers of adult open heart surgery services in Manatee County are Manatee Memorial Hospital, Inc., and Blake Medical Center, Inc. Neither are parties in this proceeding. Although Manatee Memorial filed a petition for formal administrative hearing seeking to overturn the preliminary decision of the Agency, the petition was withdrawn before the case reached hearing. Polk County The existing provider of adult open heart surgery services in Polk County is Lakeland Regional Medical Center, Inc. ("Lakeland"). Licensed for 851 beds, Lakeland is a large, not-for- profit, tertiary regional hospital. In 1999, Lakeland admitted approximately 30,000 patients. In fiscal 1999, there were about 105,000 visits to Lakeland's Emergency Room. Lakeland provides a wide range of acute care services, including OHS and diagnostic and therapeutic cardiac catheterization. It draws its OHS patients from the Lakeland urban area, the rest of Polk County, eastern Hillsborough County (particularly from Plant City), and some of the surrounding counties. Lakeland has a high quality OHS program that provides high quality of care to its patients. It has two dedicated OHS surgical suites and a third surgical suite equipped and ready for OHS procedures on an as-needed basis. Its volume for the last few years has been relatively flat. Lakeland offers interventional radiology services, a trauma center, a high-risk obstetrics service, oncology, neonatal intensive care, pediatric intensive care, radiation therapy, alcohol and chemical dependency, and behavioral sciences services. Lakeland treats all patients without regard to their ability to pay, and provides a substantial amount of charity care, amounting in fiscal year 1999 to $20 million. The Applicant Brandon Regional Hospital ("Brandon") is a 255-bed hospital located in Brandon, Florida, an unincorporated area of Hillsborough County east of Interstate 75. Included among Brandon's 255 beds are 218 acute care beds, 15 hospital-based skilled nursing unit beds, 14 tertiary Level II neonatal intensive care unit ("NICU") beds, and 8 tertiary Level III NICU beds. Brandon offers a wide array of medical specialties and services to its patients including cardiology; internal medicine; critical care medicine; family practice; nephrology; pulmonary medicine; oncology/hematology; infectious disease; neurology; psychiatry; endocrinology; gastroenterology; physical medicine; rehabilitation; radiation oncology; pathology; respiratory therapy; and anesthesiology. Brandon operates a mature cardiology program which includes inpatient diagnostic cardiac catheterization, outpatient diagnostic cardiac catheterization, electrocardiography, stress testing, and echocardiography. The Brandon medical staff includes 22 Board-certified cardiologists who practice both interventional and invasive cardiology. Board certification is a prerequisite to maintaining cardiology staff privileges at Brandon. Brandon's inpatient diagnostic cardiac catheterization program was initiated in 1989 and has performed in excess of 800 inpatient diagnostic cardiac catheterization procedures per year since 1996. Brandon's daily census has increased from 159 to 187 for the period 1997 to 1999 commensurate with the burgeoning population growth in Brandon's primary service area. Brandon's Emergency Room is the third busiest in Hillsborough County and has more visits than Tampa General's Emergency Room. From 1997- 1999, Brandon's Emergency Room visits increased from 43,000 to 53,000 per year and at the time of hearing were expected to increase an additional 5-6 percent during the year 2000. Brandon has also recently expanded many services to accommodate the growing health care needs of the Brandon community. For example, Brandon doubled the square footage of its Emergency Room and added 17 treatment rooms. It has also implemented an outpatient diagnostic and rehabilitation center, increased the number of labor, delivery and recovery suites, and created a high-risk ante-partum observation unit. Brandon was recently approved for 5 additional tertiary Level II NICU beds and 3 additional tertiary Level III NICU beds which increased Brandon's Level II/III NICU bed complement to 22 beds. Brandon is a Level 5 hospital within HCA's internal ranking system, which is the company's highest facility level in terms of service, revenue, and patient service area population. Brandon has been ranked as one of the Nation's top 100 hospitals by HCIA/Mercer, Inc., based on Brandon's clinical and financial performance. The Proposal On September 15, 1999, Brandon submitted to AHCA CON Application 9239, its third application for an open heart surgery program in the past few years. (CON 9085 and 9169, the two earlier applications, were both denied.) The second of the three, CON 9169, sought approval on the basis of the same two "not normal" circumstances alleged by Brandon to justify approval in this proceeding. CON 9239 addresses the Agency's January 2002 planning horizon. Brandon proposes to construct two dedicated cardiovascular operating rooms ("CV-OR"), a six-bed dedicated cardiovascular intensive care unit ("CVICU"), a pump room and sterile prep room all located in close proximity on Brandon's first floor. The costs, methods of construction, and design of Brandon's proposed CV-OR, CVICU, pump room, and sterile prep room are reasonable. As a condition of CON approval, Brandon will contribute $100,000 per year for five years to the Hillsborough County Health Care Program for use in providing health care to the homeless, indigent, and other needy residents of Hillsborough County. The administration at Brandon is committed to establishing an adult open heart surgery program. The proposal is supported by the medical and nursing staff. It is also supported by the Brandon community. The Brandon Community in East Hillsborough County Brandon, Florida, is a large unincorporated community in Hillsborough County, east of Interstate 75. The Brandon area is one of the fastest growing in the state. In the last ten years alone, the area's population has increased from approximately 90,000 to 160,000. An incorporated Brandon municipality (depending on the boundaries of the incorporation) has the potential to be the eighth largest city in Florida. The Brandon community's population is projected to further increase by at least 50,000 over the next five to ten years. Brandon Regional Hospital's primary service area not only encompasses the Brandon community, but further extends throughout Hillsborough County to a populous of nearly 285,000 persons. The population of Brandon's primary service area is projected to increase to 309,000 by the year 2004, of which approximately 32,000 are anticipated to be over the age of 65, making Brandon's population "young" relative to much of the rest of the State. The community of Brandon has attracted several new large housing developments which are likely to accelerate its projected growth. According to the Hillsborough County City- County Planning Commission, six of the eleven largest subdivisions of single-family homes permitted in 1998 are located nearby. For example, the infrastructure is in place for an 8,000-acre housing development east of Brandon which consists of 7,500 homes and is projected to bring in 30,000 people over the next 5-10 years. Two other large housing developments will bring an additional 5,000-10,000 persons to the Brandon area. The community of Brandon is also an attractive area for relocating businesses. Recent additions to the Brandon area include, among others, CitiGroup Corporation, Atlantic Lucent Technologies, Household Finance, Ford Motor Credit, and Progressive Insurance. CitiGroup Corporation alone supplemented the area's population with approximately 5,000 persons. The community of Brandon has experienced growth in the development of health care facilities with 5 new assisted living facilities and one additional assisted living facility under construction. The average age of the residents of these facilities is much higher than of the Brandon area as a whole. Existing Providers' Distance from Brandon's PSA Brandon's primary service area ("PSA") is comprised of 12 zip code areas "in and around Brandon, essentially eastern Hillsborough County." (Tr. 1071). Using the center of each zip code in Brandon's primary service area as the location for each resident of the zip code area, the residents of Brandon's PSA are an average of 15 miles from Tampa General, 16.4 miles from St. Joseph's, 17.3 miles from UCH and 24.6 miles from Lakeland Regional Medical Center. In contrast, they are only 7.7 miles from Brandon Regional Hospital. Using the same methodology, the residents of Brandon's PSA are an average of more than 40 miles from Blake Medical Center (44.9 miles) and Manatee Memorial (41 miles). Numeric Need Publication Rule 59C-1.033, Florida Administrative Code (the "Open Heart Surgery Program Rule" or the "Rule") specifies a methodology for determining numeric need for new open heart surgery programs in health planning districts. The methodology is set forth in section (7) of the Rule. Part of the methodology is a formula. See subsection (b) of Section (7) of the Rule. Using the formula, the Agency calculated numeric need in the District for the January 2002 Planning Horizon. The calculation yielded a result of 3.27 additional programs needed to serve the District by January 1, 2002. But calculation of numeric need under the formula is not all that is entailed in the complete methodology for determining numeric need. Numeric need is also determined by taking other factors into consideration. The Agency is to determine net need based on the formula "[p]rovided that the provisions of paragraphs (7)(a) and (7) (c) do not apply." Rule 59C-1.033(b), Florida Administrative Code. Paragraph (7)(a) states, "[a] new adult open heart surgery program shall not normally be approved in the district" if the following condition (among others) exists: 2. One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; . . . Rule 59C-1.033(7)(a), Florida Administrative Code. Both Blake Medical Center and Manatee Memorial Hospital in Manatee County were operational and performed less that 350 adult open heart surgery operations in the qualifying time periods described by subparagraph (7)(a)2., of the Rule. (Blake reported 221 open heart admissions for the 12-month period ending March 31, 1999; Manatee Memorial for the same period reported 319). Because of the sub-350 volume of the two providers, the Rule's methodology yielded a numeric need of "0" new open heart surgery programs in District 6 for the January 2002 Planning Horizon. In other words, the numeric need of 3.27 determined by calculation pursuant to the formula prior to consideration of the programs described in (7)(a)2.1, was "zeroed out" by operation of the Rule. Accordingly, a numeric need of zero for the district in the applicable planning horizon was published on behalf of the Agency in the January 29, 1999, issue of the Florida Administrative Weekly. No Impact on Manatee County Providers In 1998, only one resident of Brandon's PSA received an open heart surgery procedure in Manatee County. For the same period only two residents from Brandon's PSA received an angioplasty procedure in Manatee County. These three residents received the services at Manatee Memorial. Of the two Manatee County programs, Manatee Memorial consistently has a higher volume of open heart surgery cases and according to the latest data available at the time of hearing has "hit the mark" (Tr. 1546) of 350 procedures annually. Very few residents from other District 6 counties receive cardiac services in Manatee County. Similarly, very few Manatee county residents migrate from Manatee County to another District 6 hospital to receive cardiac services. In 1998, only 19 of a total 1,209 combined open heart and angioplasty procedures performed at either Blake or Manatee Memorial originated in the other District 6 counties and only two were from the Brandon area. Among the 6,739 Manatee County residents discharged from a Florida hospital in calendar year 1998 following any cardiovascular procedure (MDC-5), only 58(0.9 percent) utilized one of the other providers in District 6, and none were discharged from Brandon. Among the 643 open heart surgeries performed on Manatee County residents in 1998, only 17 cases were seen at one of the District 6 open heart programs outside of Manatee County. There is, therefore, practically no patient exchange between Manatee County and the remainder of the District. In sum, there is virtually no cardiac patient overlap between Manatee County and Brandon's primary service area. The development of an open heart surgery program at Brandon will have no appreciable or meaningful impact on the Manatee County providers. CON 9169 In CON 9169, Brandon applied for an open heart surgery program on the basis of special circumstances due to no impact on low volume providers in Manatee County. The application was denied by AHCA. The State Agency Action Report ("SAAR") on CON 9169, dated June 17, 1999, in a section of the SAAR denominated "Special Circumstances," found the application to demonstrate "that a program at Brandon would not impact the two Manatee hospitals . . .". (UCH Ex. No. 6, p. 5). The "Special Circumstances" section of the SAAR on CON 9169, however, does not conclude that the lack of impact constitutes special circumstances. In follow-up to the finding of the application's demonstration of no impact to the Manatee County, the SAAR turned to impact on the non-Manatee County providers in District The SAAR on CON 9169 states, "it is apparent that a new program in Brandon would impact existing providers [those in Hillsborough and Polk Counties] in the absence of significant open heart surgery growth." Id. In reference to Brandon's argument in support of special circumstances based on the lack of impact to the Manatee County providers, the CON 9169 SAAR states: [T]he applicant notes the open heart need formula should be applied to District 6 excluding Manatee County, which would result in the need for several programs. This argument ignores the provision of the rule that specifies that the need cannot exceed one. (UCH No. 6, p. 7). The Special Circumstances Section of the SAAR on CON 9169 does not deal directly with whether lack of impact to the Manatee County providers is a special circumstance justifying one additional program. Instead, the Agency disposes of Brandon's argument in the "Summary" section of the SAAR. There AHCA found Brandon's special circumstances argument to fail because "no impact on low volume providers" is not among those special circumstances traditionally or previously recognized in case law and by the Agency: To demonstrate need under special circumstances, the applicant should demonstrate one or more of the following reasons: access problems to open heart surgery; capacity limits of existing providers; denial of access based on payment source or lack thereof; patients are seeking care outside the district for service; improvement of care to underserved population groups; and/or cost savings to the consumer. The applicant did not provide any documentation in support of these reasons. (UCH No. 6, p. 29). Following reference to the Agency's publication of zero need in District 6, moreover, the SAAR reiterated that [t]he implementation of another program in Hillsborough County is expected to significantly [a]ffect existing programs, in particular Tampa General Hospital, an important indigent care provider. (Id.) Typical "not normal circumstances" that support approval of a new program were described at hearing by one health planner as consisting of a significant "gap" in the current health care delivery system of that service. Typical Not Normal Circumstances Just as in CON 9169, none of the typical "not normal" circumstances" recognized in case law and with which the Agency has previous experience are present in this case. The six existing OHS programs in District 6 have unused capacity, are available, and are adequate to meet the projected OHS demand in District 6, in Hillsborough County ("County"), and in Brandon's proposed primary service area ("PSA"). All three County OHS providers are less than 17 miles from Brandon. There are, therefore, no major service geographic gaps in the availability of OHS services. Existing providers in District 6 have unused capacity to meet OHS projected demand in January 2002. OHS volume for District 6 will increase by only 179 surgeries. This is modest growth, and can easily be absorbed by the existing providers. In fact, existing OHS providers have previously handled more volume than what is projected for 2002. In 1995, 3,313 OHS procedures were generated at the six OHS programs. Yet, only 3,245 procedures are projected for 2002. The demand in 1995 was greater than what is projected for 2002. Neither population growth nor demographic characteristics of Brandon's PSA demonstrate that existing programs cannot meet demand. The greatest users of OHS services are the elderly. In 1999, the percentage in District 6 was similar to the Florida average; 18.25 percent for District 6, 18.38 percent for the state. The elderly percentage in Hillsborough County was less: 13.21 percent. The elderly component in Brandon's PSA was less still: 10.44 percent. In 2004, about 18.5 percent of Florida and District 6 residents are projected to be elderly. In contrast, only 10.5 percent of PSA residents are expected to be elderly. Brandon's PSA is "one of the younger defined population segments that you could find in the State of Florida" (Tr. 2892) and likely to remain so. Brandon's PSA will experience limited growth in OHS volume. Between 1999 - 2002, OHS volume will grow by only 36. The annual growth thereafter is only 13 surgeries. This is "very modest" growth and is among the "lowest numbers" of incremental growth in the State. Existing OHS providers can easily absorb this minimal growth. Brandon's PSA, is not an underserved area . . . there is excellent access to existing providers and . . . the market in this service area is already quite competitive. There is not a single competitor that dominates. In fact, the four existing providers [in Hillsborough and Polk Counties] compete quite vigorously. (Tr. 2897). Existing OHS programs in District 6 provide very good quality of care. The surgeons at the programs are excellent. Dr. Gandhi, testifying in support of Brandon's application, testified that he was very comfortable in referring his patients for OHS services to St. Joseph and Tampa General, having, in fact, been comfortable with his father having had OHS at Tampa General. Likewise, Dr. Vijay and his group, also supporters of the Brandon application, split time between Bayonet Point and Tampa General. Dr. Vijay is very proud to be associated with the OHS program at Tampa General. Lakeland also operates a high quality OHS program. In its application, Brandon did not challenge the quality of care at the existing OHS programs in District 6. Nor did Brandon at hearing advance as reasons for supporting its application, capacity constraints, inability of existing providers to absorb incremental growth in OHS volume or failure of existing providers to meet the needs of the residents of Brandon's primary service area. The Agency, in its preliminary decision on the application, agreed that typical "not normal" circumstances in this case are not present. Included among these circumstances are those related to lack of "geographic access." The Agency's OHS Rule includes a geographic access standard of two hours. It is undisputed that all District 6 residents have access to OHS services at multiple OHS providers in the District and outside the District within two hours. The travel time from Brandon to UCH or Tampa General, moreover, is usually less than 30 minutes anytime during the day, including peak travel time. Travel time from Brandon to St. Joseph's is about 30 minutes. There are times, however, when travel time exceeds 30 minutes. There have been incidents when traffic congestion has prevented emergency transport of Brandon patients suffering myocardial infarcts from reaching nearby open heart surgery providers within the 30 minutes by ground ambulance. Delays in travel are not a problem in most OHS cases. In the great majority, procedures are elective and scheduled in advance. OHS procedures are routinely scheduled days, if not weeks, after determining that the procedure is necessary. This high percentage of elective procedures is attributed to better management of patients, better technology, and improved stabilizing medications. The advent of drugs such as thrombolytic therapy, calcium channel blockers, beta blockers, and anti-platelet medications have vastly improved stabilization of patients who present at Emergency Rooms with myocardial infarctions. In its application, Brandon did not raise outmigration as a not-normal circumstance to support its proposal and with good reason. Hillsborough County residents generally do not leave District 6 for OHS. In fact, over 96 percent of County residents receive OHS services at a District 6 provider. Lack of out-migration shows two significant facts: (a) existing OHS programs are perceived to be reasonably accessible; and (2) County residents are satisfied with the quality of OHS services they receive in the County. This 96 percent retention rate is even more impressive considering there are many OHS programs and options available to County residents within a two-hour travel time. In contrast, there are two low-volume OHS providers in Manatee County, one of them being Blake. Unlike Hillsborough County residents, only 78 percent of Manatee County residents remain in District 6 for OHS services. Such outmigration shows that these residents prefer to bypass closer programs, and travel further distances, to receive OHS services at high-volume facility in District 8, which they regard as offering a higher quality of service. In its Application, Brandon does not raise economic access as a "not normal" circumstance. In fact, Brandon concedes that the demand for OHS services by Medicaid and indigent patients is very limited because Brandon's PSA is an affluent area. Brandon does not "condition" its application on serving a specific number or percentage of Medicaid or indigent patients. There are no financial barriers to accessing OHS services in District 6. All OHS providers in Hillsborough County and LRMC provide services to Medicaid and indigent patients, as needed. Approving Brandon is not needed to improve service or care to Medicaid or indigent patient populations. Tampa General is the "safety net" provider for health care services to all County residents. Tampa General is an OHS provider geographically accessible to Brandon's PSA. Tampa General actively services the PSA now for OHS. Brandon did not demonstrate cost savings to the patient population of its PSA if it were approved. Approving Brandon is not needed to improve cost savings to the patient population. Brandon based its OHS and PTCA charges on the average charge for PSA residents who are serviced at the existing OHS providers. While that approach is acceptable, Brandon does not propose a charge structure which is uniquely advantageous for patients. Restated, patients would not financially benefit if Brandon were approved. Tertiary Service Open Heart Surgery is defined as a tertiary service by rule. A "tertiary health service" is defined in Section 408.032(17), Florida Statutes, as follows: health service, which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service. As a tertiary service, OHS is necessarily a referral service. Most hospitals, lacking OHS capability, transfer their patients to providers of the service. One might expect providers of open heart surgery in Florida in light of OHS' status as a tertiary service to be limited to regional centers of excellence. The reality of the six hospitals that provide open heart surgery services in District 6 defies this health-planning expectation. While each of the six provides OHS services of high quality, they are not "regional" centers since all are in the same health planning district. Rather than each being a regional center, the six together comprise more localized providers that are dispersed throughout a region, quite the opposite of a center for an entire region. Brandon's Allegations of Special Circumstances. Brandon presents two special circumstances for approval of its application. The first is that consideration of the low-volume Manatee County providers should not operate to "zero out" the numeric need calculated by the formula. The second relates to transfers and occasional problems with transfers for Brandon patients in need of emergency open heart services. "Time is Muscle" Lack of blood flow to the heart during a myocardial infarction ("MI") results in loss of myocardium (heart muscle). The longer the blood flow is disrupted or diminished, the more myocardium is lost. The more myocardium lost, the more likely the patient will die or, should the patient survive, suffer severe reduction in quality of life. The key to good patient outcome when a patient is experiencing an acute MI is prompt evaluation and rapid treatment upon presentation at the hospital. Restoration of blood flow to the heart (revascularization) is the goal of the treating physician once it is recognized that a patient is suffering an MI. If revascularization is not commenced within 2 hours of the onset of an acute MI, an MI patient's potential for recovery is greatly diminished. The need for prompt revascularization for a patient suffering an MI is summed up in the phrase "time is muscle," a phrase accepted as a maxim by cardiologists and cardiothoracic surgeons. Recent advances in modern medicine and technology have improved the ability to stabilize and treat patients with acute MIs and other cardiac traumas. The three primary treatment modalities available to a patient suffering from an MI are: 1) thrombolytics; 2) angioplasty and stent placement; and, 3) open heart surgery. Because of the advancement of the effectiveness of thrombolytics, thrombolytic therapy has become the standard of care for treating MIs. Thrombolytic therapy is the administration of medication to dissolve blood clots. Administered intravenously, thrombolytic medication begins working within minutes to dissolve the clot causing the acute MI and therefore halt the damage done by an MI to myocardium. The protocols to administer thrombolysis are similar among hospitals. If a patient presents with chest pain and the E.R. physician identifies evidence of an active heart attack, thrombolysis is normally administered. If the E.R. physician is uncertain, a cardiologist is quickly contacted to evaluate the patient. Achieving good outcomes in cases of myocardial infarctions requires prompt consultation with the patient, competent clinical assessment, and quick administration of appropriate treatment. The ability to timely evaluate patient conditions for MI, and timely administer thrombolytic therapy, is measured and evaluated nationally by the National Registry of Myocardial Infarction. The National Registry makes the measurement according to a standard known as "door-to-needle" time. This standard measures the time between the patient's presentation at the E.R. and the time the patient is initially administered thrombolytic medication by injection intravenously. Patients often begin to respond to thrombolysis within 10-15 minutes. Consistent with the maxim, "time is muscle," the shorter the door-to-needle time, the better the chance of the patient's successful recovery. The effectiveness of thrombolysis continues to increase. For example, the advent of a drug called Reapro blocks platelet activity, and has increased the efficacy rate of thrombolysis to at least 85 percent. As one would expect, then, thrombolytic therapy is the primary method of revascularization available to patients at Brandon. Due to the lack of open heart surgery backup, moreover, Brandon is precluded by Agency rule from offering angioplasty in all but the most extreme cases: those in which it is determined that a patient will not survive a transfer. While Brandon has protocols, authority, and equipment to perform angioplasty when a patient is not expected to survive a transfer, physicians are reluctant to perform angioplasty without open heart backup because of complications that can develop that require open heart surgery. Angioplasty, therefore, is not usually a treatment modality available to the MI patient at Brandon. Although the care of choice for MI treatment, thrombolytics are not always effective. To the knowledge of the cardiologists who testified in this proceeding, there is not published data on the percentage of patients for whom thrombolytics are not effective. But from the cardiologists who offered their opinions on the percentage in the proceeding, it can be safely found that the percentage is at least 10 percent. Thrombolytics are not ordered for these patients because they are inappropriate in the patients' individual cases. Among the contraindications for thrombolytics are bleeding disorders, recent surgery, high blood pressure, and gastrointestinal bleeding. Of the patients ineligible for thrombolytics, a subset, approximately half, are also ineligible for angioplasty. The other half are eligible for angioplasty. Under the most conservative projections, then at least 1 in 20 patients suffering an MI would benefit from timely angioplasty intervention for which open heart surgery back-up is required in all but the rarest of cases. In 1997, 351 people presented to Brandon's Emergency Room suffering from an acute MI. In 1998, the number of MIs increased to 427. In 1999, 428 patients presented to Brandon's Emergency Room suffering from an acute MI. At least 120 (10 percent) of the total 1206 MI patients presenting to Brandon's Emergency Room from 1997 to 1999 would have been ineligible for thrombolytics as a means of revascularization. Of these, half would have been ineligible for angioplasty while the other half would have been eligible. Sixty, therefore, is the minimum number of patients from 1997 to 1999 who would have benefited from angioplasty at Brandon using the most conservative estimate. Transfers of Emergency Patients Those patients who presented at Brandon's Emergency Room with acute MI and who could not be stabilized with thrombolytic therapy had to be transferred to one of the nearby providers of open heart surgery. In 1998, Brandon transferred an additional 190 patients who did not receive a diagnostic catheterization procedure at Brandon for either angioplasty or open heart surgery. For the first 9 months of 1999, 114 such transfers were made. Thus, in 1998 alone, Brandon transferred a total of 516 cardiac patients to existing providers for the provision of angioplasty or open heart surgery, more than any other provider in the District. In 1999, Brandon made 497 such transfers. Not all of these were emergency transfers, of course. But in the three years between 1997 and 1999 at least 60 patients were in need of emergency transfers who would benefit from angioplasty with open heart backup. Of those Brandon patients determined to be in need of urgent angioplasty or open heart surgery, all must be transferred to existing providers either by ambulance or by helicopter. Ambulance transfer is accomplished through ambulances maintained by the Hillsborough County Fire Department. Due to the cardiac patient's acuity level, ambulance transfer of such patients necessitates the use of ambulances equipped with Advanced Life Support Systems (ALS) in order to monitor the patient's heart functions and to treat the patient should the patient's condition deteriorate. Hillsborough County operates 18 ambulances. All have ALS capability. Patients with less serious medical problems are sometimes transported by private ambulances equipped with Basic Life Support Systems (BLS) that lack the equipment to appropriately care for the cardiac patient. But, private ambulances are not an option to transport critically ill cardiac patients because they are only equipped with BLS capability. Private ambulances, moreover, do not make interfacility transports of cardiac patients between Hillsborough County hospitals. There are many demands on the ambulance transfer system in Hillsborough County. Hillsborough County's 18 ALS ambulances cover in excess of 960 square miles. Of these 18 ambulances, only three routinely operate within the Brandon area. Hillsborough County ambulances respond to 911 calls before requests for interfacility transfers of cardiac patients and are extremely busy responding to automobile accidents, especially when it rains. As a result, Hillsborough County ambulances are not always available on a timely basis when needed to perform an interfacility transfer of a cardiac patient. At times, due to inordinate delay caused by traffic congestion, inter-facility ambulance transport, even if the ambulance is appropriately equipped, is not an option for cardiac patients urgently in need of angioplasty or open heart surgery. It has happened, for example, that an ambulance has appeared at the hospital 8 hours after a request for transport. Some cardiac surgeons will not utilize ground transport as a means of transporting urgent open heart and angioplasty cases. Expeditious helicopter transport in Hillsborough County is available as an alternative to ground transport. But, it too, from time-to-time, is problematic for patients in urgent need of angioplasty or open heart surgery. Tampa General operates two helicopters through AeroMed, only one of which is located in Hillsborough County. AeroMed's two helicopters are not exclusively devoted to cardiac patients. They are also utilized for the transfer of emergency medical and trauma patients, further taxing the availability of AeroMed helicopters to transfer patients in need of immediate open heart surgery or angioplasty. BayCare operates the only other helicopter transport service serving Hillsborough County. BayCare maintains several helicopters, only one of which is located in Hillsborough County at St. Joseph's. BayCare helicopters are not equipped with intra-aortic balloon pump capability, thereby limiting their use in transporting the more complicated cardiac patients. Helicopter transport is not only a traumatic experience for the patient, but time consuming. Once a request has been made by Brandon to transport a patient in need of urgent intervention, it routinely takes two and a half hours, with instances of up to four hours, to effectuate a helicopter transfer. At the patient's beside, AeroMed personnel must remove the patient's existing monitors, IVS, and drips, and refit the patient with AeroMed's equipment in preparation for flight. In more complicated cases requiring the use of an intra-aortic balloon pump, the patient's balloon pump placed at Brandon must be removed and substituted with the balloon pump utilized by AeroMed. Further delays may be experienced at the receiving facility. The national average of the time from presentation to commencement of the procedure is reported to be two hours. In most instances at UCH, it is probably 90 minutes although "[t]here are of course instances where it would be much faster . . .". (Tr. 3212). On the other hand, there are additional delays from time-to-time. "[P]erhaps the longest circumstance would be when all the labs are full . . . or . . . even worse . . . if all the staff has just left for the day and they are almost home, to then turn them around and bring them all back." (Id.) Specific Cases Involving Transfers Delays in the transfer process were detailed at hearing by Brandon cardiologists with regard to specific Brandon patients. In cases in which "time is muscle," delay is critical except for one subset of such cases: that in which, no matter what procedure is available and no matter how timely that procedure can be provided, the patient cannot be saved. Craig Randall Martin, M.D., Board-certified in Internal Medicine and Cardiovascular Disease, and an expert in cardiology, wrote to AHCA in support of the application by detailing two "examples of patients who were in an extreme situation that required emergent, immediate intervention . . . [intervention that could not be provided] at Brandon Hospital." (Tr. 408). One of these concerned a man in his early sixties who was a patient at Brandon the night and morning of October 13 and 14, 1998. It represents one of the rare cases in which an emergency angioplasty was performed at Brandon even though the hospital does not have open heart backup. The patient had presented to the Emergency Room at approximately 11:00 p.m., on October 13 with complaints of chest pain. Although the patient had a history of prior infarctions, PTCA procedures, and onset diabetes, was obese, a smoker and had suffered a stroke, initial evaluation, including EKG and blood tests, did not reveal an MI. The patient was observed and treated for what was probably angina. With the subsiding of the chest pain, he was appropriately admitted at 2:30 a.m. to a non- intensive cardiac telemetry bed in the hospital. At 3:00 a.m., he was observed to be stable. A few hours or so later, the patient developed severe chest pain. The telemetry unit indicated a very slow heart rate. Transferred to the intensive care unit, his blood pressure was observed to be very low. Aware of the seriousness of the patient's condition, hospital personnel called Dr. Martin. Dr. Martin arrived on the scene and determined the patient to be in cardiogenic shock, an extreme situation. In such a state, a patient has a survival rate of 15 to 20 percent, unless revascularization occurs promptly. If revascularization is timely, the survival rate doubles to 40 percent. Coincident with the cardiogenic shock, the patient was suffering a complete heart block with a number of blood clots in the right coronary artery. The patient's condition, to say the least, was grave. Dr. Martin described the action taken at Brandon: . . . I immediately called in the cardiac catheterization team and moved the patient to the catheterization laboratory. * * * Somewhere around 7:30 in the morning, I put a temporary pacemaker in, performed a diagnostic catheterization that showed that one of his arteries was completely clotted. He, even with the pacemaker giving him an adequate heart rate, and even with the use of intravenous medication for his blood pressure, . . . was still in cardiogenic shock. * * * And I placed an intra-aortic balloon pump . . ., a special pump that fits in the aorta and pumps in synchrony with the heart and supports the blood pressure and circulation of the muscle. That still did not alleviate the situation . . . an excellent indication to do a salvage angioplasty on this patient. I performed the angioplasty. It was not completely successful. The patient had a respiratory arrest. He required intubation, required to be put on a ventilator for support. And it became apparent to me that I did not have the means to save this patient at [Brandon]. I put a call to the . . . cardiac surgeon of choice . . . . [Because the surgeon was on vacation], [h]is associate [who happened to be in the operating room at UCH] called me back immediately . . . and said ["]Yes, I'll take your patient. Send him to me immediately, I will postpone my current case in order to take care of your patient.["] At that point, we called for helicopter transport, and there were great delays in obtaining [the] transport. The patient was finally transferred to University Community Hospital, had surgery, was unsuccessful and died later that afternoon. (Tr. 409-412). By great delays in the transport, Dr. Martin referred to inability to obtain prompt helicopter transport. University Community Hospital, the receiving hospital, was not able to find a helicopter. Dr. Martin, therefore, requested Tampa General (a third hospital uninvolved from the point of being either the transferring or the receiving hospital) to send one of its two helicopters to transfer the patient from Brandon to UCH. Dr. Martin described Tampa General's response: They balked. And I did not know they balked until an hour later. And I promptly called them back, got that person on the telephone, we had a heated discussion. And after that person checked with their supervisor, the helicopter was finally sent. There was at least an hour-and-a-half delay in obtaining a helicopter transport on this patient that particular morning that was unnecessary. And that is critical when you have a patient in this condition. (Tr. 413, emphasis supplied.) In the case of this patient, however, the delay in the transport from Brandon to the UCH cardiovascular surgery table, in all likelihood, was not critical to outcome. During the emergency angioplasty procedure at Brandon, some of the clot causing the infarction was dislodged. It moved so as to create a "no-flow state down the right coronary artery. In other words, . . ., it cut off[] the microcirculation . . . [so that] there is no place for the blood . . . to get out of the artery. And that's a devastating, deadly problem." (Tr. 2721). This "embolization, an unfortunate happenstance [at times] with angioplasty", id., probably sealed the patient's fate, that is, death. It is very likely that the patient with or without surgery, timely or not, would not have survived cardiogenic shock, complete heart block, and the circumstance of no circulation in the right coronary artery that occurred during the angioplasty procedure. Adithy Kumar Gandhi, M.D., is Board-certified in Internal Medicine and Cardiology. Employed by the Brandon Cardiology Group, a three-member group in Brandon, Dr. Gandhi was accepted as an expert in the field of cardiology in this proceeding. Dr. Gandhi testified about two patients in whose cases delays occurred in transferring them to St. Joseph’s. He also testified about a third case in which it took two hours to transfer the patient by helicopter to Tampa General. The first case involves an elderly woman. She had multiple-risk factors for coronary disease including a family history of cardiac disease and a personal history of “chest pain.” (Tr. 2299). The patient presented at Brandon’s Emergency Room on March 17, 1999 at around 2:30 p.m. Seen by the E.R. physician about 30 minutes later, she was placed in a monitored telemetry bed. She was determined to be stable. During the next two days, despite family and personal history pointing to a potentially serious situation, the patient refused to submit to cardiac catheterization at Brandon as recommended by Dr. Gandhi. She maintained her refusal despite results from a stress test that showed abnormal left ventricular systolic function. Finally, on March 20, after a meeting with family members and Dr. Gandhi, the patient consented to the cath procedure. The procedure was scheduled for March 22. During the procedure, it was discovered that a major artery of the heart was 80 percent blocked. This condition is known as the “widow-maker,” because the prognosis for the patient is so poor. Dr. Gandhi determined that “the patient needed open heart surgery and . . . to be transferred immediately to a tertiary hospital.” (Tr. 2305-6). He described that action he took to obtain an immediate transfer as follows: I talked to the surgeon up at St. Joseph’s and I informed him I have had difficulties transferring patients to St. Joseph’s the same day. [I asked him to] do me a favor and transfer the patient out of Brandon Hospital as soon as possible by helicopter. The surgeon promised me that he would take care of that. (Tr. 2261). The assurance, however, failed. The patient was not transferred that day. That night, while still at Brandon, complications developed for the patient. The complications demanded that an intra-aortic balloon pump be inserted in order to increase the blood flow to the heart. After Dr. Gandhi’s partner inserted the pump, he, too, contacted the surgeon at St. Joseph’s to arrange an immediate transfer for open heart surgery. But the patient was not transferred until early the next morning. Dr. Gandhi’s frustration at the delay for this critically ill patient in need of immediate open heart surgery is evident from the following testimony: So the patient had approximately 18 hours of delay of getting to the hospital with bypass capabilities even though the surgeon knew that she had a widow-maker, he had promised me that he would make those transfer arrangements, even though St. Joseph’s Hospital knew that the patient needed to be transferred, even though I was promised that the patient would be at a tertiary hospital for bypass capabilities. (Tr. 2262). Rod Randall, M.D., is a cardiologist whose practice is primarily at St. Joseph’s. He had active privileges at Brandon until 1998 when he “switched to courtesy privileges,” (Tr. 1735) at Brandon. He reviewed the medical records of the first patient about whom Dr. Gandhi testified. A review of the patient’s medical records disclosed no adverse outcome due to the patient’s transfer. To the contrary, the patient was reasonably stable at the time of transfer. Nonetheless, it would have been in the patient’s best interest to have been transferred prior to the catheterization procedure at Brandon. As Dr. Randall explained, [W]e typically cath people that we feel are going to have a probability of coronary artery disease. That is, you don’t tend to cath someone that [for whom] you don’t expect to find disease . . . . If you are going to cath this patient, [who] is in a higher risk category being an elderly female with . . . diminished injection fraction . . . why put the patient through two procedures. I would have to do a diagnostic catheterization at one center and do some type of intervention at another center. So, I would opt to transfer that patient to a tertiary care center and do the diagnostic catheterization there. (Tr. 1764, 1765). Furthermore, regardless of what procedure had been performed, the significant left main blockage that existed prior to the patient’s presentation at Brandon E.R. meant that the likely outcome would be death. The second of the patients Dr. Gandhi transferred to St. Joseph’s was a 74-year-old woman. Dr. Gandhi performed “a heart catheterization at 5:00 on Friday.” (Tr. 2267). The cath revealed a 90 percent blockage of the major artery of the heart, another widow-maker. Again, Dr. Gandhi recommended bypass surgery and contacted a surgeon at St. Joseph’s. The transfer, however, was not immediate. “Finally, at approximately 11:00 the patient went to St. Joseph’s Hospital. That night she was operated on . . . ”. (Tr. 2267). If Brandon had had open heart surgery capability, “[t]hat would have increased her chances of survival.” No competent evidence was admitted that showed the outcome, however, and as Dr. Randall pointed out, the medical records of the patient do not reveal the outcome. The patient who was transferred to Tampa General (the third of Dr. Ghandhi's patients) had presented at Brandon’s ER on February 15, 2000. Fifty-six years old and a heavy smoker with a family history of heart disease, she complained of severe chest pain. She received thrombolysis and was stabilized. She had presented with a myocardial infarction but it was complicated by congestive heart failure. After waiting three days for the myocardial infarction to subside, Dr. Gandhi performed cardiac catheterization. The patient “was surviving on only one blood vessel in the heart, the other two vessels were 100 percent blocked. She arrested on the table.” (Tr. 2271). After Dr. Gandhi revived her, he made arrangements for her transfer by helicopter. The transfer was done by helicopter for two reasons: traffic problems and because she had an intra-aortic balloon pump and there are a limited number of ambulances with intra- aortic balloon pump maintenance capability. If Brandon had had the ability to conduct open heart surgery, the patient would have had a better likelihood of successful outcome: “the surgeon would have taken the patient straight to the operating room. That patient would not have had a second arrest as she did at Tampa General.” (Tr. 2273). Marc Bloom, M.D., is a cardiothoracic surgeon. He performs open-heart surgery at UCH, where he is the chief of cardiac surgery. He reviewed the records of this 54-year-old woman. The records reflect that, in fact, upon presentation at Brandon’s E.R., the patient’s heart failure was very serious: She had an echocardiogram done that . . . showed a 20 percent ejection fraction . . . I mean when you talk severe, this would be classified as a severe cardiac compromise with this 20 percent ejection fraction. (Tr. 2712). Once stabilized, the patient should have been transferred for cardiac catheterization to a hospital with open- heart surgery instead of having cardiac cath at Brandon. It is true that delay in the transfer once arrangements were made was a problem. The greater problem for the patient, however, was in her management at Brandon. It was very likely that open heart surgery would be required in her case. She should have been transferred prior to the catheterization as soon as became known the degree to which her heart was compromised, that is, once the results of the echocardiogram were known. Adam J. Cohen, M.D., is a cardiologist with Diagnostic Consultative Cardiology, a group located in Brandon that provides cardiology services in Hillsborough County. Dr. Cohen provided evidence of five patients who presented at Brandon and whose treatments were delayed because of the need for a transfer. The first of these patients was a 76-year old male who presented to Brandon’s ER on April 6, 1999. Dr. Cohen considered him to be suffering “a complicated myocardial infarction.” (Brandon Ex. 45, p. 43) Cardiac catheterization conducted by Dr. Cohen showed “severe multi-vessel coronary disease, cardiogenic shock, severely impaired [left ventricular] function for which an intra-aortic balloon pump was placed . . .”. (Id.) During the placement of the pump, the patient stopped breathing and lost pulse. He was intubated and stabilized. A helicopter transfer was requested. There was only one helicopter equipped to conduct the transfer. Unfortunately, “the same day . . . there was a mass casualty event within the City of Tampa when the Gannet Power Plant blew up . . .”. (Brandon Ex. 45, p. 44). An appropriate helicopter could not be secured. Dr. Cohen did not learn of the unavailability of helicopter transport for an hour after the request was made. Eventually, the patient was transferred by ambulance to UCH. There, he received angioplasty and “stenting of the right coronary artery times two.” (Id., at p. 47.) After a slow recovery, he was discharged on April 19. In light of the patient’s complex cardiac condition, he received a good outcome. This patient is an example of another patient who should have been transferred sooner from Brandon since Brandon does not have open heart surgery capability. The second of Dr. Cohen’s patients presented at Brandon’s E.R. at 10:30 p.m. on June 14, 1999. He was 64 years old with no risk factors for coronary disease other than high blood pressure. He was evaluated and diagnosed with “a large and acute myocardial infarction” Two hours later, the therapy was considered a failure because there was no evidence that the area of the heart that was blocked had been reperfused. Dr. Cohen recommended transfer to UCH for a salvage angioplasty. The call for a helicopter was made at 12:58 a.m. (early the morning of June 15) and the helicopter arrived 40 minutes later. At UCH, the patient received angioplasty procedure and stenting of two coronary arteries. He suffered “[m]oderately impaired heart function, which is reflective of myocardial damage.” (Brandon Ex. 45, p. 58). If salvage angioplasty with open heart backup had been available at Brandon, the patient would have received it much more quickly and timely. Whether the damage done to the patient’s heart during the episode could have been avoided by prompt angioplasty at Brandon is something Dr. Cohen did not know. As he put it, “I will never know, nor will anyone else know.” (Brandon Ex. 45, p. 60). The patient later developed cardiogenic shock and repeated ventricular tachycardia, requiring numerous medical interventions. Because of the interventions and mechanical trauma, he required surgery for repair of his right femoral artery. The patient recently showed an injection fraction of 45 percent below the minimum for normal of 50 percent. The third patient was a 51-year-old male who had undergone bypass surgery 19 years earlier. After persistent recurrent anginal symptoms with shortness of breath and diaphoresis, he presented at Brandon’s E.R. at 1:00 p.m. complaining of heavy chest pain. Thrombolytic therapy was commenced. Dr. Cohen described what followed: [H]he had an episode of heart block, ventricular fibrillation, losing consciousness, for which he received ACLS efforts, being defibrillated, shocked, times three, numerous medications, to convert him to sinus rhythm. He was placed on IV anti- arrhythmics consisting of amiodarone. The repeat EKG showed a worsening of progression of his EKG changes one hour after the initiation of the TPA. Based on that information, his clinical scenario and his previous history, I advised him to be transferred to University Hospital for a salvage angioplasty. (Brandon Ex. 45, p. 62). Transfer was requested at 1:55 p.m. The patient departed Brandon by helicopter at 2:20 p.m. The patient received the angioplasty at UCH. Asked how the patient would have benefited from angioplasty at Brandon without having to have been transferred, Dr. Cohen answered: In a more timely fashion, he would have received an angioplasty to the culprit lesion involved. There would have been much less occlusive time of that artery and thereby, by inference, there would have been greater salvage of myocardium that had been at risk. (Brandon Ex. 45, p. 65). The patient, having had bypass surgery in his early thirties, had a reduced life expectancy and impaired heart function before his presentation at Brandon in June of 1999. The time taken for the transfer of the patient to UCH was not inordinate. The transfer was accomplished with relative and expected dispatch. Nonetheless, the delay between realization at Brandon of the need for a salvage angioplasty and actual receipt of the procedure after a transfer to UCH increased the potential for lost myocardium. The lack of open heart services at Brandon resulted in reduced life expectancy for a patient whose life expectancy already had been diminished by the early onset of heart disease. The fourth patient of Dr. Cohen’s presented to Brandon’s E.R. at 8:30, the morning of August 29, 1999. A fifty-four-year-old male, he had been having chest pain for a month and had ignored it. An EKG showed a complete heart block with atrial fibrillation and change consistent with acute myocardial infarction. Thrombolytic therapy was administered. He continued to have symptoms including increased episodes of ventricular arrhythmias. He required dopamine for blood pressure support due to his clinical instability and the lack of effectiveness of the thrombolytics. The patient refused a transfer and catheterization at first. Ultimately, he was convinced to undergo an angioplasty. The patient was transferred by helicopter to UCH. The patient was having a “giant ventricular infarct . . . a very difficult situation to take care of . . . and the majority of [such] patients succumb to [the] disease . . .”. (Tr. 2703). The cardiologist was unable to open the blockage via angioplasty. Dr. Bloom was called in but the patient refused surgical intervention. After interaction with his family the patient consented. Dr. Bloom conducted open heart surgery. The patient had a difficult post-operative course with arrythmias because “[h]e had so much dead heart in his right ventricle . . .”. (Id.) The patient received an excellent outcome in that he was seen in Dr. Bloom’s office with 40 percent injection fraction. Dr. Bloom “was just amazed to see him back in the office . . . and amazed that this man is alive.” (Tr. 2704). Most of the delay in receiving treatment was due to the patient’s reluctance to undergo angioplasty and then open heart surgery. The fifth patient of Dr. Cohen’s presented at Brandon’s E.R. on March 22, 2000. He was 44 years old with no prior cardiac history but with numerous risk factors. He had a sudden onset of chest discomfort. Lab values showed an elevation consistent with myocardial injury. He also had an abnormal EKG. Dr. Cohen performed a cardiac cath on March 23, 2000. The procedure showed a totally occluded left anterior descending artery, one of the three major arteries serving the heart. Had open heart capability been available at Brandon, he would have undergone angioplasty and stenting immediately. As it was, the patient had to be transferred to UCH. A transfer was requested at 10:25 that morning and the patient left Brandon’s cath lab at 11:53. Daniel D. Lorch, M.D., is a specialist in pulmonary medicine who was accepted as an expert in internal medicine, pulmonary medicine and critical care medicine, consistent with his practice in a “five-man pulmonary internal medicine critical care group.” (Brandon Ex. 42, p. 4). Dr. Lorch produced medical records for one patient that he testified about during his deposition. The patient had presented to Brandon’s E.R. with an MI. He was transferred to UCH by helicopter for care. Dr. Lorch supports Brandon’s application. As he put it during his deposition: [Brandon] is an extremely busy community hospital and we are in a very rapidly growing area. The hospital is quite busy and we have a large number of cardiac patients here and it is not infrequently that a situation comes up where there are acute cardiac events that need to be transferred out. (Brandon Ex. 42, p. 20). Transfers Following Diagnostic Cardiac Catheterization Brandon transfers a high number cardiac patients for the provision of angioplasty or open heart surgery in addition to those transferred under emergency conditions. In 1996, Brandon performed 828 diagnostic cardiac catheterization procedures. Of this number, 170 patients were transferred to existing providers for open heart surgery and 170 patients for angioplasty. In 1997, Brandon performed 863 diagnostic catheterizations of which 180 were transferred for open heart surgery and 159 for angioplasty. During 1998, 165 patients were transferred for open heart surgery and 161 for angioplasty out of 816 diagnostic catheterization procedures. For the first nine months of 1999, Brandon performed 639 diagnostic catheterizations of which 102 were transferred to existing providers for open heart surgery and 112 for angioplasty. A significant number of patients are transferred from Brandon for open heart surgery services. These transfers are consistent with the norm in Florida. After all, open heart surgery is a tertiary service. Patients are routinely transferred from most Florida hospitals to tertiary hospitals for OHS and PCTA. The large majority of Florida hospitals do not have OHS programs; yet, these hospitals receive patients who need OHS or PTCA. Transfers, although the norm, are not without consequence for some patients who are candidates for OHS or PCTA. If Brandon had open heart and angioplasty capability, many of the 1220 patients determined to be in need of angioplasty or open heart surgery following a diagnostic catheterization procedure at Brandon could have received these procedures at Brandon, thereby avoiding the inevitable delay and stress occasioned by transfer. Moreover, diagnostic catheterizations and angioplasties are often performed sequentially. Therefore, Brandon patients determined to be in need of angioplasty following a diagnostic catheterization would have had access to immediate angioplasty during the same procedure thus reducing the likelihood of a less than optimal outcome as the result of an additional delay for transfer. Adverse Impact on Existing Providers Competition There is active competition and available patient choices now in Brandon's PSA. As described, there are many OHS programs currently accessible to and substantially serving Brandon's PSA. There is substantial competition now among OHS providers so as to provide choices to PSA residents. There are no financial benefits or cost savings accruing to the patient population if Brandon is approved. Brandon does not propose lower charges than the existing OHS providers. Balanced Budget Act The Balanced Budget Act of 1997 has had a profound negative financial impact on hospitals throughout the country. The Act resulted in a significant reduction in the amount of Medicare payments made to hospitals for services rendered to Medicare recipients. During the first five years of the Act's implementation, Florida hospitals will experience a $3.6 billion reduction in Medicare revenues. Lakeland will receive $17 million less, St.Joseph's will receive $44 million less, and Tampa General will receive $53 million less. The impact of the Act has placed most hospitals in vulnerable financial positions. It has seriously affected the bottom line of all hospitals. Large urban teaching hospitals, such as TGH, have felt the greatest negative impact, due to the Act's impact on disproportionate share reimbursement and graduate medical education payment. The Act's impact upon Petitioners render them materially more vulnerable to the loss of OHS/PTCA revenues to Brandon than they would have been in the absence of the Act. Adverse Impact on Tampa General Tampa General is the "safety net provider" for Hillsborough County. Tampa General is a Medicaid disproportionate share provider. In fiscal year 1999, the hospital provided $58 million in charity care, as that term is defined by AHCA. Tampa General plays a unique, essential role in Hillsborough County and throughout West Central Florida in terms of provision of health care. Its regional role is of particular importance with respect to Level I trauma services, provision of burn care, specialized Level III neonatal and perinatal intensive care services, and adult organ transplant services. These services are not available elsewhere in western or central Florida. In fiscal year 1999, Tampa General experienced a net loss of $12.6 million in providing the services referenced above. It is obligated under contract with the State of Florida to continue to provide those services. Tampa General is a statutory teaching hospital. In fiscal year 1999, it provided unfunded graduate medical education in the amount of $19 million. Since 1998, Tampa General has consistently experienced losses resulting from its operations, as follows: FY 1998-$29 million, FY 1999-$27 million; FY 2000 (5 months)-$10 million. The hospital’s financial condition is not the result of material mismanagement. Rather, its financial condition is a function of its substantial provision of charity and Medicaid services, the impact of the Act, reduced managed care revenues, and significant increases in expense. Tampa General’s essential role in the community and its distressed financial condition have not gone unnoticed. The Greater Tampa Chamber of Commerce established in February of 2000 an Emergency Task Force to assess the hospital's role in the community, and the need for supplemental funding to enable it to maintain its financial viability. Tampa General requires supplemental funding on a continuing basis in order to begin to restore it to a position of financial stability, while continuing to provide essential community services, indigent care, and graduate medical education. It will require ongoing supplemental funding of $20- 25 million annually to avoid triggering the default provision under its bond covenants. As of the close of hearing, the 2000 session of the Florida Legislature had adjourned. The Legislature appropriated approximately $22.9 million for Tampa General. It is, of course, uncertain as to what funding, if any, the Legislature will appropriate to the hospital in future years, as the terms which constitute the appropriations must be revisited by the Legislature on an annual basis. Tampa General has prepared internal financial projections for its fiscal years 2000-2002. It projects annual operating losses, as follows: FY 2000-$20.1 million; FY 2001- $20.6 million; FY 2002-$31.9 million. While its projections anticipate certain "strategic initiatives" that will enhance its financial condition, including continued supplemental legislative funding, the success and/or availability of those initiatives are not "guaranteed" to be successful. If the Brandon program is approved, Tampa General will lose 93 OHS cases and 107 angioplasty cases during Brandon's second year of operation. That loss of cases will result in a $1.4 million annual reduction in TGH's net income, a material adverse impact given Tampa General’s financial condition. OHS services provide a positive contribution to Tampa General's financial operations. Those services constitute a core piece of Tampa General's business. The anticipated loss of income resulting from Brandon's program pose a threat to the hospital’s ability to provide essential community services. Adverse Impact on UCH UCH operated at a financial break-even in its fiscal year 1999. In the first five months of its fiscal year 2000, the hospital has experienced a small loss. This financial distress is primarily attributed to less Medicare reimbursement due to the Act and less reimbursement from managed care. UCH's reimbursement for OHS services provides a good example of the financial challenges facing hospitals. In 1999, UCH's net income per OHS case was reduced 33 percent from 1998. Also in 1999, UCH received OHS reimbursement of only 32 percent of its charges. UCH would be substantially and adversely impacted by approval of Brandon's proposal. As described, UCH currently is a substantial provider of OHS and angioplasty services to residents of Brandon's PSA. There are many cardiologists on staff at Brandon who also actively practice at UCH. UCH is very accessible from Brandon's PSA. UCH reasonably projects to lose the following volumes in the first three years of operation of the proposed program: a loss of 78-93 OHS procedures, a loss of 24-39 balloon angioplasties, and a loss of 97-115 stent angioplasties. Converting this volume loss to financial terms, UCH will suffer the following financial losses as a direct and immediate result of Brandon being approved: about $1.1 million in the first year, and about $1.2 million in the second year, and about $1.3 million in the third year. As stated, UCH is currently operating at about a financial break-even point. The impact of the Balanced Budget Act, reduced managed care reimbursement, and UCH's commitment to serve all patients regardless of ability to pay has a profound negative financial impact on UCH. A recurring loss of more than $1 million dollars per year due to Brandon's new program will cause substantial and adverse impact on UCH. Adverse Impact on St. Joseph’s If Brandon's application is approved, St. Joseph’s will lose 47 OHS cases and 105 PTCA cases during Brandon's second year. That loss of cases will result in a $732,000 annual reduction in SJH's net income. That loss represents a material impact to SJH. Between 1997 and 2000, St. Joseph’s has experienced a pattern of significant deterioration in its financial performance. Its net revenue per adjusted admission had been reduced by 12 percent, while its costs have increased significantly. St. Joseph's net income from operations has deteriorated as follows: FYE 6/30/97-$31 million; FYE 12/31/98- $24 million; FYE 12/31/99-$13.8 million. A net operating income of $13.8 million is not much money relative to St Joseph's size, the age of its physical plant, and its need for capital to maintain and improve its facilities in order to remain competitive. St. Joseph’s offers a number of health care services to the community for which it does not receive reimbursement. Unreimbursed services include providing hospital admissions and services to patients of a free clinic staffed by volunteer members of SJH's medical staff, free immunization programs to low-income children, and a parish nurse program, among others. St. Joseph’s evaluates such programs annually to determine whether it has the financial resources to continue to offer them. During the past two years, the hospital has been forced to eliminate two of its free community programs, due to its deteriorating financial condition. St. Joseph’s anticipates that it will have to eliminate additional unreimbursed community services if it experiences an annual reduction in net income of $730,000. Adverse Impact to LRMC The approval of Brandon will have an impact on Lakeland. Lakeland will suffer a financial loss of about $253,000 annually. This projection is based on calculated contribution margins of OHS and PTCA/stent procedures performed at the hospital. A loss of $253,000 per year is a material loss at Lakeland, particularly in light of its slim operating margin and the very substantial losses it has experienced and will continue to experience as a result of the Balanced Budget Act of 1997. In addition to the projected loss of OHS and other procedures based upon Brandon's application, Lakeland may experience additional lost cases from areas such as Bartow and Mulberry from which it draws patients to its open heart/cardiology program. Lakeland will also suffer material adverse impacts to its OHS program due to the negative effect of Brandon's program on its ability to recruit and retain nurses and other highly skilled employees needed to staff its program. The approval of Brandon will also result in higher costs at existing providers such as Lakeland as they seek to compete for a limited pool of experienced people by responding to sign-on bonuses and by reliance on extensive temporary nursing agencies and pools. Nursing Staff/Recruitment The staffing patterns and salaries for Brandon's projected 40.1 full-time equivalent employees to staff its open heart surgery program are reasonable and appropriate. Filling the positions will not be without some difficulty. There is a shortage for skilled nursing and other personnel needed for OHS programs nationally, in Florida and in District 6. The shortage has been felt in Hillsborough County. For example, it has become increasingly difficult to fill vacancies that occur in critical nursing positions in the coronary intensive care unit and in telemetry units at Tampa General. Tampa General's expenses for nursing positions have "increased tremendously." (Tr. 2622). To keep its program going, the hospital has hired "travelers . . . short-term employment, registered nurses that come from different agencies, . . . with [the hospital] a minimum of 12 weeks." (Tr. 2622). In fact, all hospitals in the Tampa Bay area utilize pool staff and contract staff to fill vacancies that appear from time-to- time. Use of contract staff has not diminished quality of care at the hospitals, although "they would not be assigned to the sickest patients." (Tr. 2176). Another technique for dealing with the shortage is to have existing full-time staff work overtime at overtime pay rates. St. Joseph's and Lakeland have done so. As a result, they have substantially exceeded their budgeted salary expenses in recent months. It will be difficult for Brandon to hire surgical RNs, other open heart surgery personnel and critical care nurses necessary to staff its OHS program. The difficulty, however, is not insurmountable. To meet the difficulty, Brandon will move members of its present staff with cardiac and open heart experience into its open heart program. It will also train some existing personnel in conjunction with the staff and personnel at Bayonet Point. In addition to drawing on the existing pool of nurses, Brandon can utilize HCA's internal nationwide staffing data base to transfer staff from other HCA facilities to staff Brandon's open heart program. Approximately 18 percent of the nurses hired at Brandon already come from other HCA facilities. The nursing shortage has been in existence for about a decade. During this time, other open heart programs have come on line and have been able to staff the programs adequately. Lakeland, in District 6, has demonstrated its ability to recruit and train open heart surgery personnel. Brandon, itself, has been successful, despite the on- going shortage, in appropriately staffing its recent additions of tertiary level NICU beds, an expanded Emergency Room, labor and delivery and recovery suites, and new high-risk, ante-partum observation unit. Brandon has begun to offer sign-on bonuses to compete for experienced nurses. Several employees who staff the Lakeland, UCH and Tampa General programs live in Brandon. These bonuses are temptations for them to leave the programs for Brandon. Other highly skilled, experienced individuals who already work at existing programs may be lost to Brandon's program as well simply as the natural result of the addition of a new program. In the end, Brandon will be able to staff its program, but it will make it more difficult for all of the programs in Hillsborough County and for Lakeland to meet their staffing needs as well as producing a financial impact on existing providers. Financial Feasibility Short-Term Brandon needs $4.2 million to fund implementation of the program. Its parent corporation, HCA will provide financing of up to $4.5 million for implementation. The $4.2 million in start-up costs projected by Brandon does not include the cost of a second cath lab or the costs to upgrade the equipment in the existing cath lab. Itemization of the funds necessary for improvement of the existing cath lab and the addition of the second cath lab were not included in Brandon's pro formas. It is the Agency's position that addition of a cath lab (and by inference, upgrade to an existing lab) requires only a letter of exemption as projects separate from an open heart surgery program even when proposed in support of the program. (See UCH No. 7, p. 83). The position is not inconsistent with cardiac catheterization programs as subject to requirements in law separate from those to which an open heart surgery program is subject. Brandon, through HCA, has the ability to fund the start-up costs of the project. It is financially feasible in the short-term. Long-Term Open heart surgery programs (inclusive of angioplasty and stent procedures, as well as other open heart surgery procedures) generally are very profitable. They are among the most profitable of programs conducted by hospitals. Brandon's projected charges for open heart, angioplasty, and stent procedures are based on the average charges to patients residing in Brandon's PSA inflated at 2 percent per year. The inflation rate is consistent with HCFA's August 1, 2000, Rule implementing a 2.3 percent Medicare reimbursement increase. Brandon's projected payor mix is reasonably based on the existing open heart, angioplasty, and stent patients within its PSA. Brandon also estimated conservatively that it would collect only 45 to 50 percent of its charges from third-party payors. To determine expenses, Brandon utilized Bayonet Point's accounting system. It provided a level of detail that could not be obtained otherwise. "For patients within Brandon's primary service area, . . . that information is not provided by existing providers in the area that's available for any public consumption." (Tr. 1002). While perhaps the most detailed data available, Bayonet Point data was far from an ideal model for Brandon. Bayonet Point performs about 1,500 OHS cases per year. It achieves economies of scale that will not be achievable at Brandon in the foreseeable future. There is a relationship between volume and cost efficiency. The higher the volume, the greater the cost efficiency. Brandon's volume is projected to be much lower than Bayonet Point's. To make up for the imperfection of use of Bayonet Point as an "expenses" proxy, Brandon's financial expert in opining that the project was feasible in the long-term, considered two factors with regard to expenses. First, it included its projected $1.8 million in salary expenses as a separate line item over and above the salary expenses contained in the Bayonet Point data. (This amounted to a "double" counting of salary expenses.) Second, it recognized HCA's ability to obtain competitive pricing with respect to equipment and services for its affiliated hospitals, Brandon being one of them. Brandon projected utilization of 249 and 279 cases in its second and third year of operations. These projections are reasonable. (See the testimony of Mr. Balsano on rebuttal and Brandon Ex. 74). Comparison of Agency Action in CONs 9169 and 9239 Brandon's application in this case, CON 9239, was filed within a six-month period of the filing of an earlier application, CON 9169. The Agency found the two applications to be similar. Indeed, the facts and circumstances at issue in the two applications other than the updating of the financial and volume numbers are similar. So is the argument made in favor of the applications. Yet, the first application was denied by the Agency while the second received preliminary approval. The difference in the Agency's action taken on the later application (the one with which this case is concerned), i.e., approval, versus the action taken on the earlier, denial, was explained by Scott Hopes, the Chief of the Bureau of Certificate of Need at the time the later application was considered: The [later] Brandon application . . ., which is what we're addressing here today, included more substantial information from providers, both cardiologists, internists, family practitioners and surgeons with specific case examples by patient age [and] other demographics, the diagnoses, outcomes, how delays impacted outcomes, what permanent impact those adverse outcomes left the patient in, where earlier . . . there weren't as many specifics. (Tr. 1536, 1537). A comparison of the application in CON 9169 and the record in this case bears out Mr. Hopes' assessment that there is a significant difference between the two applications. Comparison of the Agency Action with the District 9 Application During the same batching cycle in which CON 9239 was considered, five open heart surgery applications were considered from health care providers in District 9. Unlike Brandon's application, these were all denied. In the District 9 SAAR, the Agency found that transfers are an inherent part of OHS as a tertiary service. The Agency concluded that, "[O]pen heart surgery is a tertiary service and patients are routinely transferred between hospitals for this procedure." (UCH Ex. 7, pp. 51-54). In particular, the Agency recognized Boca Raton's claim that it had provided "extensive discussion of the quality implications of attempting to deal with cardiac emergencies through transfer to other facilities." (UCH Ex. 7, p. 52). Unlike the specific information referred to by Mr. Hopes in his testimony quoted, above, however, the foundation for Boca Raton's argument is a 1999 study published in the periodical Circulation, entitled "Relationship Between Delay in Performing Direct Coronary Angioplasty and Early Clinical Outcomes." (UCH Ex. 7, p. 21). This publication was cited by the Agency in its SAAR on the application in this case. Nonetheless, a fundamental difference remains between this case and the District 9 applications, including Boca Raton's. The application in this case is distinguished by the specific information to which Mr. Hopes alluded in his testimony, quoted above.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered granting the application of Galencare, Inc., d/b/a Brandon Regional Hospital for open heart surgery, CON 9239. DONE AND ENTERED this 30th day of March, 2001, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 2001. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Richard A. Patterson, Esquire Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 North Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 James C. Hauser, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 John H. Parker, Jr., Esquire Jonathan L. Rue, Esquire Sarah E. Evans, Esquire Parker, Hudson, Rainer & Dobbs 1500 Marquis Two Tower 285 Peachtree Center Avenue, Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Monroe Street Tallahassee, Florida 32301
The Issue Whether the Certificate of Need (CON) Application No. 10420 submitted by Baptist Hospital of Miami, Inc. (Baptist Hospital or Baptist), to establish a new adult autologous and allogeneic bone marrow transplant (BMT) program in Florida’s Organ Transplant Service Area 4 (TSA 4) should be approved.
Findings Of Fact OVERVIEW Blood and Marrow Transplant BMT is the infusion of blood progenitor cells, generally referred to as “blood stem cells,” into a patient after the patient has received high-dose chemotherapy to treat a blood cancer or disorder.1/ Blood stem cells are hematopoietic, or blood-producing progenitor cells that manufacture the cellular components of blood, i.e., white blood cells, red blood cells, and platelets. While high-dose chemotherapy may cure a patient’s blood cancer or disease, it also eliminates the body’s ability to produce normal blood cells. The ability to produce normal blood cells may be restored by the infusion of blood progenitor stem cells after the patient has completed high-dose chemotherapy treatment. Standard of Care Once considered experimental, over the past 20 to 30 years, BMT has become the standard of care for an increasing number of blood cancers and disorders, including leukemia, lymphoma, multiple myeloma, myelodysplastic syndrome, myelofibrosis, myeloproliferative neoplasm, paroxysmal nocturnal hemoglobinuria, primary amyloidosis, severe aplastic anemia, testicular cancer, Waldenstrom’s macroglobulinemia, essential thrombocytosis, and Ewing’s sarcoma. In most instances, the goal of BMT therapy is cure. Autologous Transplant “Autologous” transplant involves the extraction or collection of a patient’s own stem cells through a process known as “apheresis” prior to treating the patient with high-dose chemotherapy. Once collected, the patient’s stem cells must be frozen and stored while the patient is undergoing high-dose chemotherapy, after which the cells are reinfused. After reinfusion, the stem cells migrate to the bone marrow, where they produce normal blood. All autologous transplants require freezing (cryopreservation) and storage of the patient’s stem cells for preservation while the patient is receiving high-dose chemotherapy. In most cases, the time from collection and preservation of the patient’s stem cells to the time of complete recovery is approximately six weeks. Allogeneic Transplant “Allogeneic” transplant is a blood stem cell transplant using stem cells from either a related or unrelated donor, which may be necessary for certain cancers and disorders in which the patient's own stem cells cannot be used. Allogeneic transplant is the standard of care for acute myeloid leukemia. Potential candidates for allogeneic transplant are often identified very early on in their disease. The first and most important goal of therapy in such cases is to put the patient’s cancer into complete remission. Once a patient is verified as in complete remission, the transplant process must proceed as rapidly as possible, including the identification of a donor. The process of finding a donor may take two to three months, and does not begin until the patient is seen by a transplant center. Thus, the sooner the patient has access to a transplant center, the greater the chance of a successful allogeneic transplant. Most patients requiring allogeneic transplants will not have a donor within their family. Siblings are the most likely donors, but have only a 25-percent chance of being an appropriate “match.” The search for a donor is worldwide. Donors are initially identified through national and international BMT donor registries, and confirmed through human leukocyte antigen tissue-typing performed on a DNA sample collected by buccal swab or a blood sample. In allogeneic transplants, the blood stem cells are not usually frozen. Rather, the stem cells remain in the donor while the patient is undergoing high-dose chemotherapy. Donors frequently are found as far as halfway across the world from the patient's location, and it is standard practice to have the donor’s stem cells collected in a transplant facility local to the donor when the patient is ready to accept them and to transport the cells by specialized overnight air service for infusion “fresh” into the patient. Medical Advances in Blood and Marrow Transplant Remarkable progress has been made in the field of hematologic malignancies in the past five years. A major advancement is the ability to induce remission in cases in which remission previously was not possible. A number of new technologies have emerged in the past few years that are making it easier for doctors to move forward with transplants, and it is known that transplant is a treatment modality that time and again, in appropriately selected patients, offers the only hope for cure. Whether the transplant is autologous or allogeneic, timeliness of access is important. Outcomes are best when transplants are done when the patient is in a state of complete remission, or when their disease is optimally controlled. For many patients with aggressive diseases, for which transplant is the only potentially curative therapy, it may be a relatively short window of time between achievement of remission or control of the disease and the opportunity for transplant. Patients who are put into remission in anticipation of transplant, who then must wait a prolonged period of time, may relapse. After relapse, most often the disease becomes more aggressive and more difficult to get back into remission. The CON Application The Application proposes to establish a six-bed inpatient BMT unit within Baptist Hospital in Miami, Florida, TSA 4, to serve autologous and allogeneic BMT patients. Under the Application, the proposed inpatient unit will be integrated with outpatient BMT services facilities to be located in the MCI on the campus of Baptist Hospital. THE PARTIES Baptist Hospital of Miami, Inc. Baptist Hospital is a large not-for-profit secondary and tertiary acute care hospital with over 700 inpatient beds, located at 8900 North Kendall Drive in Miami, Florida, TSA 4, and is the Applicant for CON No. 10420. Baptist is part of Baptist Health South Florida (BHSF), the largest not-for-profit, community-based health care system in the region, comprised of six acute care hospitals, over 30 outpatient centers, and Baptist Health Medical Group. In addition to Baptist Hospital (which includes Baptist Children’s Hospital), the six BHSF hospitals include Mariner’s Hospital in Monroe County, Doctors Hospital in Broward County, and West Kendall Hospital, South Miami Hospital, and Homestead Hospital in Miami-Dade County. Baptist originated as a faith-based community service organization and “principally exists to provide high quality, cost-effective, compassionate health services to all comers, irrespective of religion, creed, race or national origin, or ability to pay.” The Baptist mission and vision include the commitment “to serve as a lifeline for uninsured people,” to “be the preeminent health care provider in the communities, the organization that people instinctively turn to for their health care needs,” and to be a “national and international leader in health care innovation.” The BHSF hospitals are recognized by national evidence-based survey and benchmarking organizations for high quality of care, with a focus on patient satisfaction. Baptist Hospital was named the “Best Full-Service Hospital in South Florida” by U.S. News & World Report, and was awarded service- specific awards in 12 specialties, including oncology. BHSF is ranked fifth among the 18 top-performing hospitals and academic medical centers in the United States in patient satisfaction and is the only community health system in the nation to be ranked among the top 18. Baptist has a reputation for physician and employee satisfaction. Among the 500 hospitals participating in the HealthStream national survey group, BHSF ranks No. 1 with respect to physician satisfaction. Among the more than 400 hospitals participating in a national survey of employee satisfaction, BHSF again ranked No. 1. BHSF’s inpatient oncology programs, primarily located at Baptist Hospital, Baptist Children’s Hospital, and South Miami Hospital, recently were awarded the Outstanding Achievement Award by the American College of Surgeons Commission on Cancer, the highest accolade an inpatient cancer program can achieve. Baptist Hospital has approximately 1,500 physicians on its medical staff, covering all specialties. Baptist Health Medical Group is a large specialty physician group practice comprised of approximately 200 employed specialist and subspecialists, including a large number of medical, surgical, and radiation oncologists, as well as orthopedic surgeons, cardiac surgeons, neurosurgeons, primary care physicians, and hospitalists. The specialized oncology services within Baptist Health Medical Group include hematologic malignancies (including two physicians experienced in BMT), lung cancer, gastrointestinal malignancies, breast cancer, head and neck cancer, genitourinary cancer, and gynecological malignancies. MCI is a comprehensive outpatient oncology facility formed by the consolidation, expansion, and programmatic standardization of all of BHSF’s existing outpatient oncology services and oncology clinical research programs into a new $430 million, 400,000-square foot oncology research and clinical care facility located on the campus of, and physically attached to, Baptist Hospital. The new MCI facility is comprised of two physically connected buildings, one designated as the “research building” that is designed to house state-of-the-art technology and proposed clinical research facilities, and the other focused on clinical care. The first floor of the research building houses MCI’s proton and radiation therapy. The three-gantry proton therapy installation at MCI is one of only a handful in the nation, the only one in South Florida, and will be used for both clinical research and interventional therapy. The second floor of the research building is designed to house a BMT outpatient services facility, with all related equipment, including apheresis and infusion areas, for the collection and infusion of blood stem cells for outpatient BMT. It is anticipated that the medical staff of MCI will be open to BHSF physicians and community physicians. Membership on the MCI medical staff, however, requires additional evidence- based physician credentialing standards and obligations that are set forth in the aspects of care. At the time of the final hearing, Baptist anticipated that MCI would begin serving patients in the new facility in January 2017. MCI has recruited Dr. Minesh Mehta, a nationally recognized radiation oncologist and clinical research scientist to head MCI’s radiation oncology program. Dr. Mehta’s expertise is in brain tumors and in proton therapy and research. Proton therapy is the latest, highest technology radiation therapy that exists. BHSF, however, does not expect that its oncology proton therapy and research program will be immediately financially viable and acknowledges that it may take 15 years before the program begins to break even. MCI has also hired Dr. Michael Zinner, a preeminent surgical oncologist and clinical researcher who has published more than 230 academic papers in the field of surgical oncology, to serve as CEO and executive medical director of MCI. Dr. Zinner has an expertise in an emerging model of cancer care known as the "hybrid academic-community cancer center." The hybrid academic-community model is a relatively new concept and is based on the concept of taking the best of the community hospital setting and affiliating with a teaching hospital or clinical research institution to form a hybrid academic- community cancer center that supports advanced translational research and offers patients local access to more and earlier- phase clinical trials. Baptist plans to establish the next hybrid academic-community cancer center in South Florida. MCI also recruited Dr. Miguel Villalona-Calero, a nationally and internationally recognized medical oncologist and scientist known for his innovative work in the field of medical oncology and translational research, who has special expertise in integrating academic clinical research in a community hospital setting. Dr. Villalona will lead MCI’s planned Phase I Laboratory and direct translational research, as well as MCI’s Clinical Research Program. Dr. Villalona is in the process of developing an expanded clinical trials office at MCI designed to expand clinical research programs. The expansion of the MCI Clinical Trials Office is occurring in phases, and the office currently is budgeted for 50 non-physician positions, 20 of which have been filled. So far, Dr. Villalona has successfully recruited a number of experienced personnel to staff MCI’s Clinical Trials Office. BHSF has provided Dr. Villalona with resources to support his work at MCI, and also has facilitated the relocation of Dr. Villalona’s personal basic research laboratory, including key personnel, from the James Cancer Research Institute in Ohio to Florida International University (FIU). MCI hired Dr. Jeff Boyd to serve as director of Translational Research and director of the Center for Genomic Medicine at MCI. Dr. Boyd also serves as professor and chair of the Department of Human and Molecular Genetics and associate dean for Basic Research and Graduate Programs at the Herbert Wertheim College of Medicine at FIU. Dr. Boyd is nationally and internationally recognized for his work in molecular diagnostics, translational research, and gynecologic and breast cancer research. In the past, Dr. Boyd established the gynecologic and breast cancer research lab at Memorial Sloan Kettering Cancer Center, and founded and directed the Cancer Genome Institute at Fox Chase Cancer Center in Philadelphia, an NCI-designated cancer center. He is also a founding member of the National Comprehensive Cancer Network. MCI’s resources and successful recruitment of Dr. Boyd places BHSF at the forefront of this precision therapy endeavor. BHSF has provided all necessary resources, including highly specialized next-generation technology and equipment, and dedicated space and staffing for MCI’s Center for Genomic Medicine. BHSF also has relocated Dr. Boyd’s personal oncology basic research laboratory to FIU. It is planned that resources of MCI’s Center for Genomic Medicine will be made available to Baptist’s proposed BMT program and other institutions. Approval of the Application is conditioned on the successful recruitment of a fully qualified adult allogeneic and autologous BMT medical director, meeting all allogeneic and autologous criteria requirements. While Baptist asserts that, through MCI, it has already identified a preeminent BMT physician scientist currently serving in a leadership role at a national cancer center to assume leadership of the BMT program, contingent on issuance of a CON to Baptist for an autologous and allogeneic adult BMT program, the name of that person was not revealed in the Application or at the final hearing. University of Miami, d/b/a University of Miami Hospital and Clinics. UM is a prominent university established in Florida in 1925. It is a single corporate, not-for-profit organization whose mission focuses on education, including the awarding of scholarships, basic and applied research activities, and delivery of public health and medical services. UM has a school of medicine, i.e., the Miller School of Medicine, a national research institution. UM does not operate its various programs under subsidiaries, but rather organizes its operations under divisions within the UM corporate entity. UM operates its health care services and facilities under various fictitious names, including "University of Miami Hospital and Clinics," "University of Miami Hospital," and "Sylvester Comprehensive Cancer Center." The University of Miami Hospital and Clinics is a comprehensive cancer treatment service and program that UM operates in TSA 4. The facilities used by UM to deliver those services include Sylvester Comprehensive Cancer Center (Sylvester), a specialty-licensed hospital, and a group of five satellite outpatient clinics. The northernmost clinic is on the southern border of Palm Beach County, and the southernmost clinic is located in the southern portion of Miami Dade County, in the Kendall Area. Sylvester is a 40-bed, Class III specialty cancer hospital that, by virtue of its limited size and its separation from the UM academic medical center, is exempt from the acute care Prospective Payment System (PPS). Under PPS, hospitals are paid a flat rate for services regardless of the actual cost of care. Sylvester, exempt from PPS, receives substantially higher, “cost-based” reimbursement for providing the same services. Sylvester has 12 beds dedicated to BMT services and an additional six intensive care beds at Sylvester available for BMT patients. Sylvester does a significant amount of clinical research, and has extensive laboratory space, clinical research space, and academic offices. At one time Sylvester was a National Cancer Institute (NCI)-designated comprehensive cancer center, but lost its NCI designation. Regaining that NCI designation is currently a focus for Sylvester. All of the approximately 300 researchers and physicians at Sylvester are employed directly by UM and are faculty members of various UM schools or the UM Miller School of Medicine, which are all part of the UM university system. The University of Miami Hospital is UM's in-house, statutorily-designated teaching hospital. The facility is a 560-bed general acute care hospital across the street from Sylvester. UM's medical facilities (the Miller School of Medicine, University of Miami Hospital, Sylvester and Anne Bates Leach Eye Center) are located on a medical campus that is co-located adjacent to Jackson Memorial Hospital (Jackson Memorial or Jackson), Miami-Dade County's “safety net” hospital. Jackson Memorial is a significant provider of transplant services in South Florida. Sylvester works in collaboration with Jackson, providing the entire physician staffing for cancer care to Jackson. UM also provides the staffing and outpatient pre- transplant and post-transplant services to the pediatric BMT program at Jackson. There are many other academic, clinical and research initiatives and services in which the two programs collaborate. The medical campus includes a 13-story medical research building called the Don Soffer Clinical Research Center, with laboratories and staffed by various cancer center researchers. UM also has an interdisciplinary Stem Cell Institute doing basic research on stem cells, which works in collaboration with Sylvester. Sylvester is part of the Comprehensive Cancer Center Consortium for Quality Improvement, which is a network of 19 preeminent national cancer centers, including notable institutions such as Dana-Farber, Memorial Sloan-Kettering, MD Anderson, and Duke University that review various clinical best practices and regularly share data and outcomes. UM has been operating an adult allogeneic and autologous BMT program at Sylvester since 2008, when it was awarded a CON to transfer the existing adult BMT program at Jackson (who had the program since 1994). The first census of BMT patients at Sylvester began in 2010. Agency for Health Care Administration. AHCA is the state agency responsible for administering the state CON program. Following review and analysis of Baptist’s Application, and independent analysis of state BMT utilization data, AHCA preliminarily determined that there is a need for an additional adult autologous and allogeneic BMT program in TSA 4 and that, considering the applicable statutory and rule criteria on balance, Baptist’s Application should be approved. STATUTORY AND RULE REVIEW CRITERIA Pursuant to section 408.036(1)(f), Florida Statutes,2/ AHCA has designated BMT programs as a tertiary health care service subject to the requirements of CON application and review. Section 408.032(17) defines a tertiary health care service as a health care service which, "due to its high level of intensity, complexity, specialized applicability, and cost, should be limited to, and concentrated in a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service." Florida Administrative Code Rule 59C-1.044, entitled “Organ Transplantation,” requires AHCA to review the establishment of organ transplantation programs under the CON program pursuant to the review criteria in section 408.035, including need determination criteria. Need for BMT services is not determined by health service planning districts as defined by section 408.032(5). Rather, rule 59C-1.044(2)(f) aggregates health planning service on a regionalized basis. TSA 4 consists of District 10 (Broward County), District 11 (Miami-Dade County), a portion of District 8 (Collier County), and a portion of District 9 (Palm Beach County). The current inventory of approved BMT programs by service areas is as follows: TSA 1, Mayo Clinic (Jacksonville) and Shands Hospital (Gainesville); TSA 2, H. Lee Moffitt Cancer Center (Tampa); TSA 3, Florida Hospital (Orlando); TSA 4, Good Samaritan (West Palm Beach), Memorial West (Pembroke Pines) and UM (Miami). TSA 4, with three programs, has more adult BMT programs than any other service area in Florida. Section 408.035(1)(a), Florida Statutes: The Need for the Health Care Facilities and Health Services Being Proposed AHCA does not publish a fixed-need pool projection for BMT programs. Rule 59C-1.008(2)(e) provides that if no need methodology exists for a proposed project, the applicant is responsible for demonstrating need through a needs assessment methodology, which must include consideration of (1) population demographics and dynamics; (2) availability, utilization and quality of like services in the district; (3) medical treatment trends; and (4) market conditions. These criteria are largely subsumed within section 408.035(1)(a), (b), and (f) and were addressed under those provisions in the Application. Rule 59C-1.044(9) requires applicants for BMT programs to be able to project at least 10 allogeneic and 10 autologous transplants for the third year of operation. Utilization of BMT Services in Florida and in TSA 4 The provision of BMT services typically involves both inpatient and outpatient care. In general, autologous BMT involves a shorter inpatient stay, while allogeneic services require an extended inpatient stay. AHCA maintains two distinct databases of information reflecting utilization of BMT services in Florida. The first is “local health council” data, which combines, but does not distinguish between inpatient and outpatient, or autologous and allogeneic utilization. The second data set, known as “AHCA discharge data,” differentiates between autologous and allogeneic BMT procedures and, by definition, reflects only inpatient utilization. Neither database captures the number of Florida residents who leave the state to obtain BMT services. Both AHCA datasets show growth in overall utilization of BMT services statewide and in TSA 4. The compound average growth rate (which is an average annual growth rate over a multi-year time frame) for BMT services in Florida for the 5-year period from January 2010 to December 2015 was +8.5 percent per year, and the corresponding average yearly growth in actual BMT case volume was +73 cases per year. In addition to the growth in the number of BMT cases, the rate of utilization of BMT services increased statewide, with the greatest percentage of growth occurring in TSA 4, which saw a +27 percent overall growth in utilization of BMT services from June 2012 to June 2015, with a compound average annual growth rate of +29.8 percent per year over the 5-year period ending December 2015. The AHCA data is consistent with the independent data collected by the Center for International Blood and Marrow Transplant Research. Even though there has been an increase in utilization of BMT services in TSA 4, the overall volume of BMT cases in TSA 4 is below the case volume that would be expected by applying the statewide average use rate to TSA 4. Sylvester performed 170 BMTs in 2015, all of which were inpatient cases. Moffitt Cancer Center in Tampa is also experiencing increases in BMT case volume. 2. Population Dynamics The population age 15+ in South Florida is increasing at a rate of one to two percent per year, which reflects growth, but not substantially greater than the growth in population age 15+ statewide. Accordingly, the rate of growth in utilization of BMT services in TSA 4, which is greater than the rate of growth in utilization of BMT services statewide, is attributable to an increase in the actual use rate of BMT services in TSA 4, rather than straight population growth. 3. Market Trends for BMT Services in TSA 4 Baptist assessed the overall market, or volume of BMT cases arising within TSA 4 using AHCA utilization data, and verified the analysis using BMT use rates. The AHCA data shows that 284 adult BMTs, both inpatient and outpatient, were performed by facilities in TSA 4 in calendar year 2015. In addition to the 284 inpatient and outpatient procedures performed in TSA 4, an additional 51 residents of TSA 4 out- migrated from TSA 4 to receive inpatient BMT services at Moffitt Cancer Center (Moffitt), located approximately 300 miles away in Tampa, Florida. In addition, it is known that a number of patients out-migrated from TSA 4 for outpatient BMT services at facilities in other TSAs in Florida in 2015. There is no publicly available database showing the precise number of residents of TSA 4 who received outpatient BMT services in other TSAs. Baptist’s health planning expert estimated the volume of outpatient out-migration to other TSAs in Florida at 16 to 20 outpatients in 2015, by multiplying the 51 TSA residents known to have out-migrated to Moffitt for inpatient BMT services by approximately 30 percent. While it is reasonable to conclude that an additional number of residents of TSA 4 out-migrated from TSA 4 to receive BMT services at transplant centers outside the state of Florida, because this data is not reported to any publicly available database, Baptist did not include these patient volumes in its utilization projections. Based on the AHCA data, Baptist estimated the 2015 BMT case volume (net market size), for both inpatient and outpatient BMT services in TSA 4, at 343 to 347 BMT cases (i.e., 284 cases performed in TSA 4, minus 8 cases of in-migration, plus 51 inpatient cases that out-migrated to Moffitt, plus 16 to 20 outpatient cases that out-migrated from TSA 4 to receive outpatient BMT services). Baptist verified its assessment of the 2015 TSA 4 market size for BMT services by applying the 2015 average statewide use rate for BMT services for the population age 15+ (66.5 cases per million population) to the 2015 age 15+ population in TSA 4, resulting in a calculation of approximately 344 BMT cases in TSA 4 for calendar year 2015, which is consistent with its analysis of AHCA utilization data showing 343 to 347 cases for the same time period. 4. Forecast of 2020 BMT Case Volume in TSA 4 Using its calculated 2015 net market size for BMT in TSA 4, Baptist projected a net market size in BMT case volume for TSA 4 for the year 2020, using both the national compound average annual growth rate of +5 percent per year and the higher Florida growth rate of +8.5 percent per year, resulting in a projection of 439 to 517 BMT cases in TSA 4 in 2020. This estimate does not use the higher TSA 4 compound average growth rate observed in BMT utilization in TSA 4. Although Baptist projects growth rate for both inpatient and outpatient BMT procedures, the two AHCA databases utilized by Baptist do not specifically identify outpatient procedures. Therefore, Baptist’s health planner devised a method for estimating the number of outpatient procedures. For purposes of the projection, Baptist’s health planner assumed that the vast majority of the gap between the “local health council” data and the “AHCA discharge data” constitutes outpatient utilization. To approximate that gap, he doubled the reported inpatient autologous cases and used that number as the estimate for outpatient cases used in Baptist’s projections. However, as explained by the credible testimony of Dr. Claudio Anasetti, chair of Moffitt Cancer Center and Research Institute’s Department of Blood and Marrow Transplantation, Baptist’s methodology of estimating outpatient procedures by arbitrarily doubling autologous cases is inaccurate. The actual ratio of outpatient procedures observed at Moffitt is only between 10 to 20 percent of all transplant activity. While Baptist’s method may reflect current numbers, utilization of that methodology, in light of actual outpatient experience at Moffitt, is questionable as a method of projecting future utilization. Baptist’s projections directed no analysis exclusively to adult inpatient procedures, which is the focus of Baptist’s Application. In fact, outpatient procedures are not material to the Application. Because Baptist’s projection methodology doubles the number of autologous procedures to estimate the number of outpatients in the total procedures calculation, less than half of the projected total procedures are pertinent to inpatient procedures for BMT residents. Under Baptist’s projection methodology,3/ less than half of the 439 to 517 BMT patients projected for TSA 4 in 2020 will be inpatient procedures, yielding about 220 to 259 total inpatient cases. After subtracting 51 inpatient cases out- migrating to Moffitt used in calculating the baseline number for year 2015, Baptist’s projected volume for inpatient BMT cases in TSA 4 for 2020 is approximately 169 to 208. This number of inpatient cases is within the current capacity of UM and the other two adult BMT service providers in TSA 4. Under Baptist’s projections, while it appears that Baptist’s proposed program could serve at least 10 allogeneic and 10 autologous transplants for the third year of operation as required by rule 59C-1.044(9), that service would be at the expense of existing TSA 4 providers. Section 408.035(1)(b): The Availability, Quality of Care, Accessibility, and Extent of Utilization of Existing Health Care Facilities and Health Services in TSA 4 Availability, Utilization, and Quality of Existing BMT Programs in TSA 4 Sylvester is the dominant provider of BMT services in TSA 4. Baptist does not take issue with the quality of care Sylvester provides to BMT patients once the patient is admitted to Sylvester, but argues that the rate of out-migration of TSA 4 residents to obtain BMT services is evidence of problems in the availability and accessibility of existing BMT services within TSA 4. Out-migration of 51 BMT inpatient TSA 4 residents to Moffit in 2015 does not establish need for Baptist's adult BMT program. The 2015 inpatient out-migration is slightly less than the number in 2008. The percentage of out-migration from TSA 4 over the years has been decreasing, to about 22 percent of total inpatient procedures in 2015. In fact, the number of TSA 4 adult inpatient cases going to Moffitt is actually declining, from 67 in 2013, 62 in 2014, to 51 in 2015. Current out- migration is not excessive in relation to other TSAs. Baptist's primary argument as to out-migration is that it is an imposition on patients from South Florida to have to travel to Moffitt given the length of time that one has to be on-site during the primary course of treatment. Nothing in Baptist's proposal, however, significantly alleviates this concern and no real harm to patients in South Florida was demonstrated. Some out-migration can be explained by the complexity of patient cases, and possibly by referral preference of Baptist’s physicians. Out-migration to Moffitt can also be explained by the fact that Moffitt is a preeminent cancer center. It is currently the only NCI-designated cancer center in Florida, with the third highest volume of cancer patients in the country. Moffitt is ranked sixth in the country in overall performance as a cancer center. AHCA's health care planner, Marisol Fitch, recognized that out-migration is not proof of need and acknowledged the preference of some residents to receive BMT services outside the TSA 4. Out-migration of TSA 4 residents to nationally prominent centers is unavoidable, and some out-migration is expected to continue even as the use rate for TSA 4 residents increases. 2. Alleged Underutilization The Application includes an analysis of the use rate of BMT services in TSA 4 reflecting that the observed BMT case volume in TSA 4 is lower than would be expected by applying the statewide average-use rate for BMT services to the TSA 4 population. According to Baptist, the lower-use rate suggests that BMT services in TSA 4 are not equally accessible or available when compared to accessibility of services elsewhere in the state. Instead of indicating accessibility or availability problems in TSA 4, however, the evidence established that BMT use rate is somewhat skewed in favor of TSA 2, where Moffitt is the only provider. There is no question that Moffitt, because of its prominence, has an extraordinary draw of patients to its facility. Moffitt draws two-thirds of its BMT patient volume from outside of the Tampa Bay area. Under the circumstances, comparing use rates is not indicative of lack of accessibility or availability, and is not a good predictor of need. To the contrary, the evidence indicates that the vast majority of Florida residents who need BMT services are currently being served by existing Florida BMT programs. In addition, there is credible evidence that inpatient BMT use rates are likely to decrease because of an increase in outpatient care and a new, alternative technology known as “CAR-T cell therapy.” 3. Accessibility--Alleged Capacity Constraints According to Baptist, AHCA’s inpatient utilization data shows that Sylvester, a 40-bed hospital, is currently operating at capacity. Indeed, at present, UM is using the equivalent of 10 beds annually out of the 12 beds designated to accommodate BMT patients. There are an additional six intensive care beds at Sylvester that are presently considered available for BMT patients. UM also has available another entire floor (the second floor) with 22 beds at Sylvester, which is already hepa-filtered and otherwise meets all of the physical plant requirements for delivering BMT services. UM has capacity without any changes to its current facilities, to accommodate 250 transplants a year. UM is already repurposing beds in University of Miami Hospital across the street to accommodate commercial pay cancer patients, in order to allow Sylvester's beds to be used for BMT patients. In sum, UM's BMT physical facilities have room to accommodate new growth in BMT program services for the next five years of the growth forecast by Baptist health planners. Ample capacity at Sylvester and the fact that TSA 4 has the largest number of BMT providers in the state support the SAAR’s finding that Baptist had not shown lack of availability or accessibility in TSA 4 for the proposed BMT services. 4. Accessibility--Alleged Delays and Problems with Intake in TSA 4 At the final hearing, Baptist physicians testified that they are generally satisfied with the quality of care provided by Sylvester’s BMT program once their patients were admitted to Sylvester, but expressed frustration with delays in getting patients seen or admitted at Sylvester. They attributed the delay to lack of adequate communication after patient referral. Baptist’s Application did not advance the theory that poor referral communications resulted in lack of accessibility to BMT services in TSA 4. Therefore, that theory is not properly considered. Even with consideration of that theory, the evidence does not support a finding that communication errors caused lack of access. While there was evidence of occasional communication issues in referring BMT patients to UM, the evidence was not sufficient to reasonably infer lack of quality of care or accessibility for BMT inpatient services in TSA 4. Handoff communication issues among health care personnel are globally true. However, at the final hearing, UM demonstrated that personnel involved in its BMT program proactively engage in marketing, program monitoring, auditing, and prospective patient counseling efforts to reduce barriers to admission and reduce the time between patient referral and initial consult. As for physician communications, the evidence indicated that BMT physicians at UM regularly consult with their referring physicians at Baptist. Consistent with these findings is the fact that surveys of patient experience for the last two years have ranked UM in the 91st percentile and the 97th percentile ranking against other hospitals of similar size for BMT services. Section 408.035(1)(c), Fla. Stat.: The Ability of the Applicant to Provide Quality of Care and the Applicant’s Record of Providing Quality of Care Baptist is a well-regarded community hospital in Miami, with over 700 beds and over 1,800 nurses. Baptist's ability to provide quality health care in the areas where it is already providing care was not questioned. However, at the final hearing, Dr. Claudio Anasetti expressed concern about quality of care during the start-up period of Baptist’s proposed BMT program. Those start-up concerns, as well as questionable future program volume estimates, are issues that would confront any applicant for a new BMT program in TSA 4. Nevertheless, consideration of Baptist’s patient- focused care initiatives, “House ARNP” staffing model, oncology navigation program, and nursing program, supports a finding that Baptist has the ability to establish a new program with a focus on quality of care. Whether Baptist’s acumen for quality of care translates into the ability to establish a new adult autologous and allogeneic BMT program in TSA 4, however, depends on its ability to fulfill all of the statutory and rule criteria. Section 408.035(1)(d): The Availability of Resources, Including Health Personnel, Management Personnel, and Funds for Capital and Operating Expenditures, for Project Accomplishment and Operation Baptist did not demonstrate that it has the requisite resources and health or management personnel to implement the service. The specifics of the deficiencies are discussed under heading III, J, entitled “Florida Administrative Code Rule 59C-1.044, ,” infra. Section 408.035(1)(e), Fla. Stat.: The Extent to Which the Proposed Services Will Enhance Access to Health Care for Residents of the Service District As previously discussed under headings III. A. and B., above, lack of access or availability that would support the need for a new adult BMT program in TSA 4 has not been shown. Access to BMT clinical services is currently met by existing programs. TSA 4 has more BMT programs and facilities than any other TSA in Florida. The proposed services will not enhance clinical access to health care for residents of TSA 4. Further, it was not shown that the proposed program will enhance transportation or geographic access. Baptist plans to consolidate all of its cancer services currently provided at its hospital chain's facilities disbursed throughout southern Miami-Dade County into MCI. Although there is a bus line, it is anticipated that most transportation to MCI will be by automobile. Lack of financial access to current BMT programs in TSA 4 was not demonstrated. A facility's reimbursement is "driven by a patient's health insurance." Dr. Feinstein acknowledged that the low-volume numbers achieved during his nine years as program director at the Broward County Memorial West BMT program was because delay in obtaining Foundation for Accreditation of Cellular Therapy (FACT) accreditation. FACT accreditation assures that reimbursement can be obtained from all payers, including Medicare, Medicaid, and commercial. Unless the proposed new program obtains FACT accreditation, the proposal will actually provide less financial access. Baptist acknowledged that there would be a delay in obtaining FACT accreditation for its proposed program. Although Baptist suggested that it had access to some managed health care providers that were not accessible to UM, Baptist did not demonstrate any gaps in managed care coverage that would be filled by Baptist’s proposal, or that UM was not effective in assisting its patients in obtaining coverage. Rather, the evidence indicated that personnel at Sylvester have developed expertise over the years to resolve financial coverage issues for its BMT patients. Section 408.035(f), Fla. Stat.: The Immediate and Long-Term Financial Feasibility of the Proposal UM’s financial expert, Tom Davidson, testified that the Baptist’s proposed BMT program is not financially feasible because the Application leaves out costs for several leadership and clinical positions that must be filled. Salary costs for a program director and staff omitted from the Application exceed one million dollars. A comparison of Baptist’s cost estimates for its proposal against UM’s actual costs for Sylvester’s BMT operations reveals significant discrepancies. For example, Baptist projects $178 a day in laboratory costs per patient, while UM expends $1,000 a day. For pharmacy costs, Baptist projects $450 per day while UM’s pharmacy costs are $2,000 a day. While UM’s costs include expenditures for outpatient services and Baptist’s estimates do not, the discrepancies are still significant, especially considering the fact that BMT services are paid on a global, flat fee basis that takes into account all services, including post-procedure outpatient care. Baptist acknowledges that it does not currently have requisite skilled and experienced staff for much of the program, but proposes that nursing and other professionals will be given extensive training. Baptist’s projected costs do not include many of the costs for training staff and other startup costs which will have to be incurred to have a functioning BMT program. Further, delay in FACT accreditation, which Baptist acknowledged may take up to two years to achieve, will interfere with Baptist’s ability to achieve reimbursement. Considering these factors, Mr. Davidson’s analysis projected a 1.6 million dollar deficit instead of a $500,000 surplus projected by Baptist for year 2 of its proposed BMT program. Mr. Davidson’s analysis is credited. Even considering Mr. Davidson’s analysis with projected deficits, Baptist’s proposed BMT program is financially feasible in the short-term. Baptist is a large hospital system that could take on the costs associated with the proposed BMT program. The Application included a complete listing of all capital projects approved, underway, pending approval, or planned by Baptist Hospital at the time of submission of the Application. Baptist Hospital’s audited financial statements included in the Application demonstrate that Baptist Hospital has the financial wherewithal to implement the project. Whether short-term ability will translate into long-term feasibility is less certain, especially considering the capacity of existing programs to meet future BMT needs in TSA 4. Section 408.035(1)(g), Fla. Stat.: The Extent to Which the Proposal Will Foster Competition that Promotes Quality and Cost- Effectiveness As concluded by AHCA in the SAAR, the proposed project “will not likely foster the type of competition generally expected to promote quality and cost effectiveness.” In explaining the rationale for this conclusion, the SAAR listed a number of barriers to competition in the health care industry, including the fact that: 1) price-based competition is limited due to Medicare and Medicaid’s impact on pricing, accounting for over 41 percent of hospital charges in Florida; 2) most users do not shop around for pricing because 87.1 percent are covered by Medicaid, Medicare, or managed-care plans; and 3) lack of information available to consumers regarding quality measures that could affect choice. Contrary to AHCA’s conclusion, Baptist contends that approval of the Application will introduce both additional capacity and patient choice for BMT services within TSA 4, which will promote quality and cost-effectiveness. However, considering the fact that TSA 4 has more BMT programs than any other TSA in Florida, as well as the capacity of existing TSA 4 BMT programs to serve projected need, Baptist’s contention must fail. In addition, UM demonstrated that cases lost to Baptist’s new program would negatively affect UM’s program. UM’s expert reasonably estimated that the cases lost to Baptist would result in a loss between $6.2 million and $14 million in revenue over a three-year period. Section 408.035(1)(h): The Costs and Methods of the Proposed Construction, Including the Costs and Methods of Energy Provision and the Availability of Alternative, Less Costly, or More Effective Methods of Construction The parties stipulated that Baptist's BMT facility design, construction cost, and timeline are reasonable and appropriate for the autologous and allogeneic transplant program proposed by Baptist Hospital, in satisfaction of rule 59C- 1.044(9)(b)5. and (c)5. and rule 59C-1.044(3)(c). I. Section 408.035(i), Fla. Stat.: The Applicant’s Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent Baptist Hospital has a long-established commitment and history of providing care to Medicaid, medically indigent, and charity care patients. Approximately 19 percent of Baptist Hospital’s total acute care hospital activity consists of services provided to Medicaid patients, and an additional five to six percent consists of unreimbursed charity care. In 2013, BHSF contributed more than $292 million for total charity care, community clinics, and community benefit, serving more than 24,000 charity care patients. The Application includes, as a condition of approval, Baptist Hospital’s commitment to provide at least 10 percent of its BMT case volume on an annual basis to Medicaid, charity, and self-pay patients. J. Florida Administrative Code Rule 59C-1.044 Rule 59C-1.044, entitled “Organ Transplantation,” provides that, in addition to review under applicable criteria in section 408.035, organ transplant programs must meet the minimum requirements set forth in the rule. Subsections (3) and of rule 59C-1.044 set forth minimum requirements for personnel, equipment, and support services for all transplantation programs. Subsections 9(b) and 9(c) provide specific clinical and program requirements for adult allogeneic and autologous BMT program applicants, respectively. Research Criteria In the last sentence of its initial subsection, rule 59C-1.044(1) states in pertinent part: The following organ transplantation programs shall be restricted to teaching or research hospitals: . . . adult allogeneic bone marrow . . . . This restriction is reiterated in subsection (9)(b) of rule 59C-1.044, which states, in pertinent part: (b) Adult Allogeneic Bone Marrow Transplantation Programs. Adult allogeneic bone marrow transplantation programs shall be limited to teaching and research hospitals. Additional research requirements for adult allogeneic BMT programs are found in rule 59C-1.044(9)(b)9. and 10., which require applicants to have: An ongoing research program that is integrated either within the hospital or by written agreement with a bone marrow transplantation center operated by a teaching hospital. The program must include outcome monitoring and long-term patient follow-up; An established research-oriented oncology program; . . . . At the final hearing, the parties stipulated that none of the hospitals under BHSF’s umbrella are teaching hospitals. Subsection (2) of rule 59C-1.044 sets forth applicable definitions. Rule 59C-1.044(2)(d) defines research hospital as: A hospital which devotes clearly defined space, staff, equipment, and other resources for research purposes, and has documented teaching affiliations with an accredited school of medicine in Florida or another state. “Research Program” is defined in rule 59C-1.044(2)(e) as: An organized program that conducts clinical trial research, collects treatment data, assesses outcome data, and publishes statistical reports showing research activity and findings. Neither Baptist nor other hospitals in the Baptist Health System are generally regarded as being a research hospital. None of Baptist’s promotional and marketing materials disseminated to the public and contained in the Application make any claim that any hospital in BHSF’s system is a research hospital. While the Application points out BHSF’s many accolades and honors as a community hospital system, the evidence did not show its hospitals have received distinctions for research activities. BHSF’s financial statements do not indicate expenditures for research and its mission statement does not mention pursuit of a research hospital designation. Rather, Baptist’s mission statement and accompanying value statements are consistent with a religious-based community hospital and business model. In support of its contention that it is a research hospital, Baptist asserts the following: (1) A teaching affiliation with FIU; (2) Baptist has more than 220 active clinical research studies; (3) Cancer research is a major portion of Baptist’s research activity with over 90 current cancer studies underway; (4) Baptist’s hospital system has a unit entitled "The Center for Research & Grants"; (5) MCI has a research building under construction to be completed in the summer of 2017; (6) BHSF has recently hired researchers--one to be the scientific officer of MCI (Dr. Miguel A. Villalona- Calero), one to be director of translational research and genomic medicine at MCI (Dr. Jeffery Boyd), Dr. Michael Zinner as the director of MCI, and Dr. Minesh Mehta as chief of radiation oncology; and (7) BHSF has a rigorous "nurse research" program. The evidence supports some of these assertions better than others. There is, indeed, a teaching affiliation between BHSF and FIU. Graduate medical education is occurring at the West Kendall Baptist Hospital, with a family medicine residency program, and at Doctors Hospital, which has a sports medicine fellowship program. The evidence did not indicate how many physicians with staff privileges at Baptist are FIU faculty members. As to clinical studies, Baptist presented a listing of "220+ active clinical research studies" and made a claim that of those studies, "90+ current cancer studies are underway." The number of clinical trials, however, both in aggregate and specific to "cancer studies" did not match the government reporting data base entitled “clinicaltrials.gov” from the federal regulatory body that requires registration of clinical trials. Only seven trials in adult oncology were registered. There were also some trials in the data base designated as "not yet accruing,” without sufficient information regarding whether they were open or not. MCI recently created a clinical trials office different from BHSF’s research and grants program. While it is reasonably expected that MCI’s new program will someday administer clinical trials to patients in a safe manner with new protocols, when Dr. Villalona-Calero arrived to set up the new program, he stopped accrual of clinical trials. MCI is in the process of recruiting, but at the time of the final hearing had not yet hired, a medical director for its new clinical trials office. MCI’s first clinical scientific review committee meeting for the new clinical trials office was September 14, 2016. MCI just finished screening their medical oncology patients for eligibility to participate in clinical trials and still had several other patient populations to screen. Baptist’s evidence revealed some effort to acquire staff for research activities. While 50 persons were designated as support for anticipated research activities, at the time of hearing, only 20 persons were employed. The credible testimony of Dr. Michael Andrew Samuels cast doubt on the sufficiency of those designated by Baptist to support the claimed portfolio size of 220+ active hospital-based clinical trials. Further, of the 220+ clinical trials listed in the Application, most were national trials that would be generally available to a community hospital, and were trials produced by other investigators at other institutions. Many of the listed clinical trials appear to be observational or quality improvement initiatives. In addition, many of the trials had very old dates and no information was provided as to whether the listed trials were active and registering patients. The Application provides that support infrastructure for Baptist’s current research activities is provided by a group called "The Center for Research & Grants." At the hearing, however, Baptist provided information that support and administrative services for research are provided by a unit called “Baptist Health South Florida Research Enterprise,” a federally recognized parent institution. That institution is not mentioned in the Application. Further, no specific or detailed evidence was provided as to what space or equipment is currently being dedicated for research activities, at either Baptist’s facilities or anywhere in the Baptist health care system. As to future research facilities, it was acknowledged that no portion of any research activities would be housed at Baptist facilities. Rather, Baptist described MCI as the place where all the research capabilities will be housed. Those "research facilities" will not be opened until the summer of 2017. The MCI facility designated as the "research building" will have, as its third floor, outpatient facilities to operate the Baptist’s BMT outpatient program described in the Application; and the fourth floor would be dedicated to conducting pharmaceutical company-sponsored phase 1 clinical drug trials, a molecular diagnostic lab, and the bio-specimen depository. Other than one laboratory for Dr. Boyd (on the fourth floor), no other laboratory space was identified for the research building. Any research hospital or program is expected to have a significant amount of laboratory space. However, there is no laboratory space dedicated anywhere to the proposed BMT program or any other oncology research activities. No laboratory space will be made available for the processing and handling of stem cell products, which the Application states will be commercially acquired from OneBlood. Dr. Michael Zinner, Dr. Minesh Mehta, Dr. Miguel A. Villalona-Calero and Dr. Jeffery Boyd, all have significant research credentials. While they may be inclined to continue pursuit of their research interests, their new positions are now essentially administrative, with significant duties that would distract them from pursuing hospital-based clinical research. There was testimony indicating that certain Baptist nurses engage in research activities that are assigned an Institutional Review Board number. The nature of that nursing “research” activity, however, can best be described as quality assurance and customer satisfaction research as opposed to the high-level oncology research that would benefit patient outcomes. Baptist’s nursing research does not show that Baptist is a research hospital or that it has a research program. Baptist further asserts that combining with MCI would satisfy the research criteria by the creation of a “hybrid” cancer center that is both a community hospital and research center. The anticipated research to be undertaken at Baptist's concept of a hybrid cancer center will be primarily composed of reimbursed pharmaceutical trials. Expert testimony presented by UM demonstrated that research takes a tremendous amount of time for physicians and for investigators, and raised doubt as to Baptist’s ability to follow through on claims that it will be able to change the current corporate culture of Baptist from a community hospital to a research hospital. In reviewing the Application for AHCA, CON supervisor and health planning expert, Marisol Fitch, felt as though Baptist “had made a point that they were a research hospital, not a community hospital just having a research program.” In support of this contention, in addition to mentioning Baptist Health System’s teaching activity with FIU, the SAAR cites Baptist’s access to clinical trials and ongoing studies, as well as MCI’s announcement of its intention to affiliate with Memorial Sloan Kettering Cancer Center. Baptist, however, has not shown that it is presently a research hospital, nor can BHSF currently make that claim. While it is apparent that MCI anticipates an affiliation with Memorial Sloan Kettering, Baptist failed to provide sufficient evidence of the nature of that relationship. Instead of providing a copy of an agreement between MCI and Memorial Sloan Kettering, at the final hearing, Baptist attempted to introduce a highly redacted version of an agreement between the two institutions. The proffer, even if accepted into evidence, is insufficient to prove the nature of the purported relationship.4/ The redacted version omitted the operative terms of the arrangement. The only language available for review was the recital portion of the alleged agreement. While there was some testimony by Baptist witnesses as to such affiliation, it was insufficient to explain the true nature or extent of the anticipated relationship. Therefore, the evidence does not support the SAAR's recognition of such affiliation as a factor qualifying Baptist as a research hospital. In sum, the evidence did not demonstrate that Baptist qualifies as a research hospital, that it has an ongoing research program that is integrated either within the hospital or by written agreement with a BMT center operated by a teaching hospital, or that it has a an established research-oriented oncology program to satisfy the research hospital or research criteria set forth in rule 59C-1.044(1) or rule 59C- 1.044(9)(b)9. and 10. Autologous BMT programs are not restricted to only teaching or research hospitals. Rule 59C-1.044(9)(c)7. and 8., applicable to applicants for autologous BMT programs, have somewhat redundant research requirements as required of autologous program applicants under subsection (9)(b). Rule 59C-1.044(9)(c)7. and 8. provide: c) Adult Autologous Bone Marrow Transplantation Programs. Adult autologous bone marrow transplantation programs can be established at teaching hospitals or research hospitals; or at community hospitals having a research program, or who are affiliated with a research program, as defined in this rule. An ongoing research program that is integrated either within the hospital or by written agreement with a bone marrow transplantation center operated by a teaching hospital; or the applicant may enter into an agreement with an outpatient provider having a research program, as defined in this rule. Under the agreement, the outpatient research program may perform specified outpatient phases of adult autologous bone marrow transplantation, including blood screening tests, mobilization of stem cells, stem cell rescue, chemotherapy, and reinfusion of stem cells; and, An established research-oriented oncology program As previously discussed, rather than demonstrating an active research program, the evidence indicates that Baptist had suspended its clinical trials programs and activities. Further, the evidence did not show a written agreement between Baptist and a BMT center operated by a teaching hospital. The evidence does not otherwise support a finding that there is an "established research-oriented oncology program" at Baptist. The productivity and output from Baptist’s past oncology research activities has been low, even by community hospital standards. While the physician staff identified as researchers in the Application had appropriate training, evidence of their academic, research, and laboratory investigative productivity was lacking. Rather than showing that Baptist has existing research program capabilities, the evidence demonstrated Baptist Health System’s intention of building a future research program at MCI by constructing facilities, pursuing administrative activities and hiring leadership. Much of the evidence was aspirational or conceptual as opposed to demonstrative of an existing research program. 2. Criteria Applicable to All Types of Transplant Programs Not specific to BMT, subsections (3) and (4) of rule 59C-1.044 set forth general transplant requirements, regardless of the transplant program, and apply to both allogeneic and autologous BMT programs. Rule 59C-1.044(3)(a) requires that applicants for all types of transplant programs have: Staff and other resources necessary to care for the patient’s chronic illness prior to transplantation, during transplantation, and in the post-operative period. Services and facilities for inpatient and outpatient care shall be available on a 24-hour basis. As to these criteria, Baptist proposes to use current staff and hire additional staff. And, for all of the specialty blood product evaluation, processing, and storage capabilities unique to BMT programs, Baptist proposes to use a contract vendor named “OneBlood.” Because Baptist has hired Memorial West’s BMT program director, head nurse, lead ARNP, and pharmacist, it demonstrated the capability to at least address those criteria as they apply to an autologous BMT program. However, as no other proposed physician, nursing, or ancillary staff were shown to have BMT experience or skills, additional training would be required to adequately meet these criteria for autologous BMTs. As for an allogeneic program, however, as further discussed below, many of these criteria were not met. Rule 59C-1.044(3)(d), (e), and (f), requires all transplant program applicants to have: (3)(d) A clinical review committee for evaluation and decision-making regarding the suitability of a transplant candidate. (3)(e) Written protocols for patient care for each type of organ transplantation program including, at a minimum, patient selection criteria for patient management and evaluation during the pre-hospital, in- hospital, and immediate post-discharge phases of the program. (3)(f) Detailed therapeutic and evaluative procedures for the acute and long term management of each transplant program patient, including the management of commonly encountered complications. Clinical review committees require a critical mass of people actively engaged in patient decisions. Review committees for established BMT programs typically schedule weekly meetings of between 10 and 20 people, half of whom are physicians, to discuss the feasibility of proposed BMT transplants. At the time of the Application and final hearing, Baptist only identified four to eight competent staff members available to serve on a clinical review committee for the proposed program. With regard to the requirements for written protocols and evaluative procedures required by rule 59C-1.044(3)(e) and (f), while there are apparently some draft protocols, the evidence indicates that the actual written protocols have not yet been developed. Subsections (h) and (i) of rule 59C-1.044(3) require all transplant program applicants to have: (3)(h) An on-site tissue-typing laboratory or a contractual arrangement with an outside laboratory within the State of Florida, which meets the requirements of the American Society of Histocompatibility. (3)(i) Pathology services with the capability of studying and promptly reporting the patient's response to the organ transplantation surgery, and analyzing appropriate biopsy material. Baptist does not have an on-site tissue-typing laboratory. The rule allows an applicant without an on-site laboratory to contract with an outside laboratory located within the state of Florida. While the Application claims that Baptist would contract with OneBlood to provide tissue typing for histocompatibility, OneBlood is not certified, licensed, or otherwise capable of performing histocompatibility lab services. Without the requisite certification, Baptist would not be able to bill Medicare for OneBlood to perform histocompatibility services. While it was suggested at the final hearing that Baptist could perhaps contract with LabCorp for the histocompatibility services, the evidence did not show that such services would be performed by a laboratory located within the state of Florida. With regard to the requisite pathology services, the Application states: "This in house expertise and infrastructure, combined with OneBlood external resources, will ensure that all BMT patients will have the required laboratory support to optimally meet their needs." Baptist's nursing expert testified at hearing that pathology services would be involved in diagnosis of graft versus host disease. However, both the testimony and Application were lacking specifics as to how these complex services would be provided. Rule 59C-1.044(3)(j) requires transplant program applicants to have “[b]lood banking facilities.” Baptist’s Application provides that this criterion will be met by existing blood banking facilities, and that OneBlood would provide a "centralized blood collection, storage and distribution hub." Baptist's blood banking capabilities were not explained. As to reliance on OneBlood, there was no evidence of an existing contract or of OneBlood's capability to provide the required services. Rule 59C-1.044(3)(k) and (l) require transplant program applicants to have: (3)(k) A program for the education and training of staff regarding the special care of transplantation patients. (3)(1) Education programs for patients, their families and the patient's primary care physician regarding aftercare for transplantation patients. Baptist proved its ability to establish a program for staff training and education. BHSF has a clinical learning department. The Application states that BHSF’s resources will be used to establish a comprehensive training program for the proposed BMT program. BHSF, through MCI, has developed a BMT program education plan. Although the Application lists more than 30 clinicians who support the clinical learning department, none have experience in BMT. While BHSF's training program will undoubtedly be able to adjust to meet the requirements of rule 59C-1.044(3)(k), it stands to reason that lack of immediate experienced staff may cause some delay in implementation. Likewise, regarding rule 59C-1.044(3)(1) requirements for educational programs for BMT patients, families, and patient's primary care physicians, while Baptist introduced an exhibit entitled “Transplant Basics” that addresses issues confronting transplant patients, families and caregivers, there was no elaboration as to whether the training programs have been developed. Rule 59C-1.044(4)(a), relating to staff requirements for all transplant program applicants, requires applicants to have: (a) A staff of physicians with expertise in caring for patients with end-stage disease requiring transplantation. The staff shall have medical specialties or sub-specialties appropriate for the type of transplantation program to be established. The program shall employ a transplant physician, and a transplant surgeon, if applicable, as defined by the United Network for Organ Sharing (UNOS) June 1994. The UNOS definitions are incorporated herein by reference. A physician with one year experience in the management of infectious diseases in the transplant patient shall be a member of the transplant team. The only physician staffing that Baptist identified for its proposed BMT program is Dr. Lyle Feinstein. He was hired in September 2015 by Baptist Health System. Dr. Feinstein is the former BMT program director and physician for the Memorial Health System program located in Broward County, also in TSA 4. Dr. Citron was the only other physician identified as having any experience in performing BMT procedures. However, his medical group stopped doing BMT, around 1999, when it was no longer indicated as the standard of care for breast cancer. While the Application and SAAR note that there are 19 certified hematologists and oncologists on Baptist's staff, only four of the 19 are hematologists. Further, as correctly noted in the SAAR, “the Application did not address the infectious disease criteria.” The evidence at the final hearing did not further expound on how Baptist would address the infectious disease criteria. Rule 59C-1.044(4)(b) requires transplant program applicants to have: A program director who shall have a minimum of 1 year of formal training and 1 year of experience at a transplantation program for the same type of organ transplantation program proposed. Provided, however, that an applicant for a bone marrow transplantation program shall meet the requirements in subsection (9). While Baptist is in the process of recruiting, a program director with all the required experience and training was not identified either in the Application or at the final hearing. Baptist is recruiting outside the BHSF organization. As previously noted, the salary expense on the staffing schedule in the Application does not show this position funded or filled for the 2019 year of operation. Rule 59C-1.044(4)(d) requires applicants to have: (4)(d) A staff of nurses, and nurse practitioners with experience in the care of chronically ill patients and their families. Baptist met this criterion with evidence showing that it has sufficient nursing staff to treat patients with other forms of cancer and with experience in the care of chronically ill patients and their families. Rule 59-C 1.044(4)(e) requires all transplant program applicants to have: (4)(e) Contractual agreements with consultants who have expertise in blood banking and are capable of meeting the unique needs of transplant patients on a long term basis. Again, Baptist identifies OneBlood as satisfying this criteria. The evidence, however, did not show that Baptist has a contract with OneBlood. No representative from OneBlood testified as to any of its capabilities or whether it could provide the services needed for either an allogeneic or autologous BMT program. As further discussed below, OneBlood does not have the capabilities, facilities, or licensures to provide services for an allogeneic program. Subsections (f), (g), and (h) of rule 59C-1.044(4), require transplantation program applicants to have: Nutritionists with expertise in the nutritional needs of transplant patients; Respiratory therapists with expertise in the needs of transplant patients; and, Social workers, psychologists, psychiatrists, and other individuals skilled in performing comprehensive psychological assessments, counselling patients, and families of patients, providing assistance with financial arrangements, and making arrangements for use of community resources. With regard to subsection (f), the Application lists a core group of three registered and licensed dietician/nutrition staff, plus three additional credentialed nutritional support team members. However, as noted in the SAAR, Baptist does not state whether the listed nutritionists have experience in meeting the needs of transplant patients. The drug regimens required to be delivered by respiratory therapists to allogeneic transplant patients are unique and complex. Baptist states in the Application that it has 83 registered respiratory therapists in its respiratory department. As noted in the SAAR, however, the Application does not affirmatively state whether any of its respiratory therapists have expertise in the respiratory needs of transplant patients. While the Application states that the respiratory therapists who will provide services to BMT patients will receive additional education, Baptist did not adequately address its ability to provide adequate respiratory therapist services for BMT procedures. As to the requirements of rule 59C-1.044(4)(h), Baptist does not currently have social workers to assist families concerning the impacts of a BMT. However, UM does not contest Baptist’s ability to meet that requirement and the Application and evidence otherwise demonstrated Baptist’s capability of fulfilling those requirements in the future. 3. Additional Criteria for Allogeneic BMT Program Applicants In addition to the minimum projections of 10 allogeneic transplants each year required by rule 59C- 1.044(9)(b)1., and the research requirements set forth in rule 59C-1.044(9)(b)9. and 10., addressed above, rule 59C- 1.044(9)(b)1. through 8. and 10. through 12. have additional requirements that applicants for adult allogeneic BMT programs must meet. Rule 59C-1.044(9)(b)2. requires allogeneic BMT program applicants to have: A program director who is a board certified hematologist or oncologist with experience in the treatment and management of adult acute oncological cases involving high dose chemotherapy or high dose radiation therapy. The program director must have formal training in bone marrow transplantation. These criteria for a program director are essentially the same as set forth in rule 59C-1.044(4)(b) and rule 59C- 1.044(9)(c)2. As previously discussed, Baptist has not hired a program director. Rule 59C-1.044(9)(b)3. requires applicants for allogeneic BMT programs to have: Clinical nurses with experience in the care of critically ill immuno-suppressed patients. Nursing staff shall be dedicated full time to the program; Baptist identified two nurses with experience in treating BMT patients. Baptist did not specify the number of nurses with the requisite experience to be transferred from other areas or the number who will be new hires for the proposed BMT program. 161. Rule 59C-1.044(9)(b)4. requires: An interdisciplinary transplantation team with expertise in hematology, oncology, immunologic diseases, neoplastic diseases, including hematopoietic and lymphopoietic malignancies, and non- neoplastic disorders. The team shall direct permanent follow-up care of the bone marrow transplantation patients, including the maintenance of immunosuppressive therapy and treatment of complications. While Baptist identified the physicians and nurses who came from Memorial West with experience in BMT procedures, it did not provide evidence of who would comprise an "interdisciplinary transplantation team." Further, Baptist did not identify staff that would provide services for "maintenance of immunosuppressive therapy and treatment of complications" for allogeneic patients. While Baptist has 1,800 nurses on staff, only two have BMT experience, both of whom were recruited away from the Memorial West BMT program. Baptist has not identified any other staff ready to perform allogeneic BMT services. Rather, Baptist proposes to train staff to comprise the interdisciplinary team. Nurse Rios, who will be doing the training for Baptist, testified that, at Memorial West, it took one year before they performed their first outpatient autologous transplant, and three years before Memorial West applied for a CON for an inpatient and allogeneic transplant program. This evidence calls into question Baptist's proposed ability to implement an allogeneic program in 18 months. Under rule 59C-1.044(9)(b)6., applicants must have: A radiation therapy division on-site which is capable of sub-lethal x- irradiation and total lymphoid irradiation. The division shall be under the direction of a board certified radiation oncologist. Radiation therapy is a highly skilled and complex service for BMT patients. Baptist failed to demonstrate, either in the Application or at the final hearing, that it has the requisite staff to handle this service for BMT patients. 166. Rule 59C-1.044(9)(b)7. requires: A laboratory equipped to handle studies including the use of monoclonal antibodies, if this procedure is employed by the hospital, or T-cell depletion, separation of lymphocyte and hematological cell subpopulations and their removal for prevention of graft versus host disease. This requirement may be met through contractual arrangements. The Application addresses the requirement of 59C- 1.044(9)(b)7. by explaining that, "Cellular processing services will be provided by OneBlood or other external specialty providers with applicable accreditation and certification." The Application also cites a letter from OneBlood to support a claim that it can perform T-Cell depletion. Review of the letter, which was introduced as an exhibit during the final hearing and is otherwise hearsay, indicates that OneBlood can perform T-Cell subsets, not T-Cell depletion. There was no evidence demonstrating OneBlood's ability to perform T-Cell depletion. T-Cell depletion is a preventative measure against Graft versus Host disease, a serious and anticipated complication of an allogeneic BMT. And yet, it is not anticipated that T-Cell depletion will initially be available for Baptist's proposed program. At the final hearing, when Baptist's nursing witness, Ms. Rios, was asked how Baptist will comply with 59C- 1.044(9)(b)7., she replied, "I don't know at this point." When Baptist's counsel followed up and asked how Memorial West complied with this criterion, Ms. Rios replied, "We did not do T-Cell depletion at Memorial." Further, the evidence did not demonstrate that OneBlood is FACT-accredited to do the blood processing services, like T-Cell depletion, which are required for allogeneic BMT programs. Baptist's reliance on OneBlood to perform services is contrary to objective evidence as to what OneBlood can actually perform. Baptist failed to demonstrate that it has a feasible proposal to provide for T-Cell depletion. Rule 59C-1.044(9)(b)8. requires allogeneic BMT program applicants to have: An on-site laboratory equipped for the evaluation and cryopreservation of bone marrow. The Application does not provide for and Baptist does not plan to have an on-site laboratory equipped for the evaluation and cryopreservation of bone marrow. Rather, the Application states that "[b]one marrow evaluation and cryopreservation will be provided by the OneBlood organization." Baptist’s intent in this regard was confirmed by testimony. The requirement is that the laboratory be on-site. Instead, Baptist proposes to ship blood product to a OneBlood facility more than 40 miles from Baptist. When blood product is cryopreserved, its temperature is extremely low and very susceptible to fractures. Serious complications could occur if there are any issues with the transport of a donor's blood. Baptist’s proposed contractual arrangement with OneBlood is not in compliance with the rule requirement for an on-site laboratory for allogeneic BMT transplants. The SAAR does not address Baptist’s failure to meet this requirement for an on-site lab. When confronted with the issue at the final hearing, AHCA’s expert, Ms. Fitch, took the position that language under the recitation on page 26 of the SAAR, that an “on-site tissue- typing laboratory or a contractual arraignment with an outside laboratory within the State of Florida, which meets the requirements of the American Society of Histocompatibility,” was an acknowledgment that Baptist met the requirement in rule 59C- 1.044(9)(b)8. Ms. Fitch testified that the above quote from the SAAR was borrowed from language used for evaluations of past applications, and that contractual arrangements should be sufficient. A comparison of that language from the SAAR, however, with the general requirement under rule 59C-1.044(3)(h) applicable to all types of transplantation programs, makes it clear that Ms. Fitch confused the two laboratory requirements. The general requirement for all transplant programs under 59C- 1.044(3)(h) is for an “on-site tissue-typing laboratory or a contractual arrangement with an outside laboratory within the State of Florida, which meets the requirements of the American Society of Histocompatibility.” The requirement for an on-site laboratory for allogeneic BMT programs under 59C-1.044(9)(b)8., however, does not allow for contracting with an outside laboratory, but simply provides that an applicant shall have “[a]n on site laboratory equipped for the evaluation and cryopreservation of bone marrow.” While Ms. Fitch testified that none of the rule requirements were “100 percent mandatory,” allowing Baptist to meet the requirement for an on-site laboratory through contractual arrangement with an outside laboratory would violate the express terms of rule 59C-1.044(9)(b)8. Rule 59C-1.044(9)(b)11. requires allogeneic BMT program applicants to have: A patient convalescent facility to provide a temporary residence setting for transplant patients during the prolonged convalescence. Baptist meets this requirement with a new facility adjacent to Baptist Hospital and MCI, charging standard rates for the facility as would be paid in comparable area hotels. Rule 59C-1.044(9)(b)12. requires allogeneic program applicants to have: An outpatient unit for close supervision of discharged patients. Baptist proposes to provide those outpatient services at MCI, and is closing its outpatient cancer facilities at its other hospitals, except for its chemotherapy unit at Mariner Hospital in Monroe County, so that they will all be housed under MCI. Specific information as to how the outpatient unit at MCI will be staffed is lacking. In particular, there are no specifics as to the staffing and qualifications for those at MCI who will be providing the "collection and reinfusion of stem cells." Collection and reinfusion of stem cell is accomplished with the use of an apheresis machine. While the evidence indicates this activity will be undertaken on the third floor of MCI’s “research building,” Schedule 6 of the Application does not identify nursing or other staff or personnel. 4. Allogeneic BMT Program Applicant Criteria Rule 59C-1.044(9)(c) contains requirements specific to autologous BMT program applicants. Subsections (c)2., (c)3., and (c)6. of that rule are the same requirements for allogeneic programs provided in rule 59C-1.044(9)(b)2., (b)3., and (b)6., addressed above. The requirements under 59C-1.044(9)(c)4., are the same as for allogeneic programs under 59C-1.044(9)(b)4., except (c)4. does not require “the maintenance of immunosuppressive therapy and treatment complications” as required for allogeneic programs. While additional staff training will be required, Baptist has demonstrated the capability to commence autologous BMT transplants in the not-so-distant future. This capability was largely acquired by hiring away the primary BMT medical professionals who conducted that program at Memorial West. Many of Baptist’s other clinical requirements for an autologous program will have to be acquired. While Baptist will depend on contractual agreements with OneBlood, corroborating evidence from OneBlood regarding its capabilities in that regard was not provided, nor was there evidence of an existing contractual agreement with OneBlood. As for the clinical proposal to deliver autologous BMT transplants, while attainable, Baptist’s proposed program does not add any new clinical capabilities or experience that are not already being provided in the service area. As far as an allogeneic program, rather than demonstrating current capability, the evidence indicates that Baptist would start with autologous transplants, and begin allogeneic transplants only after sufficient institutional skills and staff training are obtained. A specific timetable as to when such skills would be acquired was not supplied. ADVERSE IMPACT UM demonstrated that it will lose $111,019 of revenue per transplant episode for each procedure not served by UM. There was credible, expert opinion that projected a range of total financial adverse impact to UM in the form of income loss between $6.2 million and $14 million over a three-year period. As demonstrated by the fact that Baptist has hired away Memorial West's program director, head nurse, one of its most skilled ARNPs, and its main pharmacist, approval of Baptist’s program could also adversely impact UM by drawing staff and personnel away from UM. Baptist has already undermined the services available in TSA 4 by depleting the staffing at the BMT program of Memorial West at the expense of Memorial West’s BMT program. A new program in TSA 4 will also adversely affect the capability for effective research efforts in existing programs. The relatively small population of BMT patients makes program volume critical for clinical research. The small patient population is also characterized by having significant subgroups with individual uniqueness by patient. By disbursing this small population among yet another provider, advancements in research are hampered by reducing the critical and varied mass of patients who present to a given set of physicians and staff, thereby diluting those researchers’ ability to learn by experience, experimentation, and observation. This same phenomenon occurs with the dilution of BMT candidates for clinical trials. The de-concentration of research, experimentation, and clinical effort for this specialized transplant service is contrary to the statutory and public policy contained in section 408.032(17), which recognizes that tertiary health services, (which include BMT programs), “due to [their] high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service.”
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying CON Application No. 10420. DONE AND ENTERED this 30th day of March, 2017, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 2017.
The Issue Whether osteochondral autograft transplant surgery should be authorized for Petitioner pursuant to Workers' Compensation Law.
Findings Of Fact In 1998, Jackson fell at work and sustained an injury to her left knee. Jackson made a workers' compensation claim for the treatment of the injuries. She underwent treatment for her injuries, and her treating physician requested authorization from Jackson's Employer/Carrier to perform a surgical procedure commonly referred to by the trade name of OATS, but also known as mosaicplasty. The Employer/Carrier denied the authorization on the ground that OATS was investigative or experimental within the meaning of Rule 59B-11.002, Florida Administrative Code, and referred the request to the Agency for a determination under Section 440.13(1)(m), Florida Statutes, and Rule 59B-11.002(4), Florida Administrative Code. The Agency requested Dr. B. Hudson Berrey, the Chair of the Department of Orthopedics and Rehabilitation at Shands Hospital and Clinic at the University of Florida, to review Jackson's case to determine whether the procedure was investigative and whether the procedure would provide significant benefits to the recovery and well-being of Jackson. Dr. Berrey has been board certified in orthopedic surgery since 1982. After three years of practice, he took a fellowship in orthopedic oncology at Massachusetts General Hospital in Boston, Massachusetts. He then served as Chief of Orthopedic Oncology and, later, as Chief of Orthopedic Surgery at Walter Reed Army Medical Center in Washington, D. C. After his retirement in 1993, he served on the faculty of the University of Texas Southwestern Medical Center. He has been the Chair of the Department of Orthopedics and Rehabilitation at the University of Florida College of Medicine since 1996. In addition to his teaching duties, he continues to see patients weekly and to perform orthopedic surgery twice a week. His duties require him to keep abreast of developments in the field of orthopedic surgery. In preparation for rendering his opinion for the Agency, Dr. Berrey reviewed the medical literature, seeking articles discussing clinical trials of OATS. A clinical trial is an investigation in which patients with a certain condition may receive a treatment under study if they meet certain objective standards for inclusion. The treatment parameters are defined and outcomes are assessed according to objective criteria. Dr. Berrey found very little in peer-reviewed literature discussing clinical trials of OATS or mosiacplasty. Instead he found retrospective reviews and case reports. Based on his review of the medical literature, Dr. Berrey formed the opinion that mosaicplasty may be safe and efficacious; however, because the procedure has not been subjected to clinical trials, the procedure remains investigative. OATS involves the transfer of a patient's cartilage from one portion of the knee that is not considered weight- bearing or that is considered as having a minimal weight-bearing load to an area that receives greater force or is more weight- bearing. Dr. Berrey is of the opinion that OATS may be effective to treat isolated chondral defects on the weight- bearing surface of the knee. He describes the type of injury for which the procedure is effective as a focal lesion in an otherwise normal knee. Three components comprise the knee: the patella, the femoral articulating surface, or femoral condyle, and the tibial articulating surface or tibial plateau. The femoral condyle and tibial plateau are bony structures lined with articular cartilage that provide the gliding surface of the knee. The patella articulates with the femur at the patellar femoral joint, and the tibia articulates with the femur at the tibial femoral joint. The tibial femoral joint is made up of medial and lateral components. Other structures present in and about the knee include the menisici, the cruciate ligaments, and the collateral ligaments. Jackson's medical records, including the MRI report, show that there is a subchondral cyst and/or osteochondral defect on the anterior articular margin of the mid-media femoral condyle. There are subchondral cysts along the posterior portion of the mid-tibial plateau. In addition, there is a prominent osteochondral defect involving the patella. Jackson has articular damage to all three compartments of the knee: the femoral condyle, the patella, and the tibial plateau. Based on the degenerative changes in all three compartments of the knee, Jackson's changes are probably generalized. She does not have a focal defect of the articular cartilage of the knee. Her symptoms relate primarily to the patellar femoral joint. Her medical records describe her injuries as including chondromalacia of the patella. The term "chondromalacia" applies to a continuum of deterioration of the articular cartilage of the patella, from softening to frank fraying to fibrillation where the cartilage may be worn down to the bare bone. OATS or mosiacplasty is designed to address a localized, focal lesion. Because of the generalized nature of the diseased condition of Jackson's knee and the probability that her symptoms are related to the deterioration of her patellar femoral joint, the proposed procedure is not likely to improve her condition or to enable her to return to work.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying authorization for the OATS or mosaicplasty to be performed on Virginia Jackson. DONE AND ENTERED this 14th day of June, 2000, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 2000. COPIES FURNISHED: Michelle L. Oxman, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Building 3, Suite 3421 Tallahassee, Florida 32308-5403 Virginia Jackson 5555 Northwest 17th Avenue Apartment 2 Miami, Florida 33142 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact The Parties With Shands Teaching Hospital prevented by law from participating, there are only two parties to this proceeding: the applicant, St. Luke's Hospital Association d/b/a St. Luke's Hospital, and the Agency for Health Care Administration. St. Luke's St. Luke's is a 289-bed not-for-profit hospital located in the southeast part of the City of Jacksonville, Duval County. Jacksonville is in Agency District 4. The District includes Baker, Nassau, Clay, St. John's, Flagler and Volusia Counties as well as Duval. St. Luke's is one of a number of affiliates of the Mayo Foundation whose mission it is to provide excellent medical care through practice, education, and research on a multi-campus but unified approach. Other affiliates of the Mayo Foundation are Mayo Clinic Jacksonville (located about 9 miles east of St. Luke's), Mayo Clinic Scottsdale, Arizona and three organizations in Rochester, Minnesota: St. Mary's Hospital, Methodist Hospital and Mayo Clinic Rochester, the famed "Mayo Clinic." Founded prior to the turn of the century, Mayo Clinic was the first multi-specialty medical group practice in the country. It delivers health care based on an integrated, team approach to medicine in which specialists from many different areas consult together for the benefit of the patient, and in which a single medical record accompanies the patient through all phases of care, outpatient or inpatient. The mission of the Mayo Foundation is also that of Mayo Clinic Jacksonville. Providing outpatient services at its campus, Mayo Clinic Jacksonville employs approximately 170 physicians covering all specialties and sub-specialties for adult patients with the exception of obstetrics. The primary role of St. Luke's in the Mayo organization is to provide the inpatient component for the Mayo Clinic Jacksonville medical practice, including provision of tertiary services. In light of this arrangement, St. Luke's patients tend to be more acutely ill than the average hospital patient so that the typical St. Luke's patient has more complex, resource consuming medical problems than the typical hospital patient. Through the arrangement with Mayo Clinic Jacksonville, St. Luke's has evolved into a tertiary care facility serving Florida and beyond. Among the complex tertiary services provided at St. Luke's that require a certificate of need are open heart surgery and bone marrow transplantation. But liver transplantation is not presently authorized at St. Luke's. Others under the Mayo Foundation umbrella, however, have experience in liver transplantation. In fact, Mayo Clinic Rochester operates one of the most successful liver transplant programs in the United States. Its outcome experience, (transplant patient survival rates for one and three years), ranks in the top 3 of the nation's transplant programs, with its 3-year survival rate being ranked first. The Mayo Clinic Rochester program, therefore, has an excellent national and international reputation. The St. Luke's program will rely and benefit from the resources, experience, efficiencies and clinical and research protocols of the Mayo Clinic Rochester program. But neither the Rochester program nor the Mayo Foundation, itself, controls St. Luke's. St. Luke's Health System has the controlling interest in the hospital. St. Luke's Hospital did not need the approval of any of the Mayo Foundation affiliates or the Foundation, itself, to apply for the CON at issue in this proceeding. The Agency for Health Care Administration The Agency for Health Care Administration is the "single state agency [designated by statute] to issue, revoke, or deny certificates of need and to issue, revoke, or deny exemptions review in accordance with the district plans, the statewide health plan, and present and future federal and state statutes." Section 408.034(1), F.S. The Service Planning Area and Existing Providers in the State. In addition to being located in AHCA District 3, St. Luke's is within Service Planning Area One. Described by Rule 59C-1.044, Florida Administrative Code as "district 1, district 2, district 3 excluding Lake County and district 4 excluding Volusia County," Service Planning Area One, from the perspective of land mass, is the largest of the state's four service planning areas. It covers almost half of the state's territory from just north of Orlando through the western panhandle. Another liver transplantation center already exists in service planning area one: the Shands Teaching Hospital at the University of Florida, in Gainesville. Elsewhere in the state, Jackson Memorial Hospital (located in Dade County) provides for liver transplantation services. There is a third facility with a certificate of need allowing it to provide liver transplantation services: Tampa General Hospital. But Tampa General's program is inactive and has been for some time. The Application's Projection for Start-Up Originally, St. Luke's projected that its first year of operation would be 1995. Due to litigation, the program would not now begin until sometime in 1997, with the second year in the 1998/1999 time frame. Pre-hearing Stipulation The parties stipulated to the findings listed in findings of fact Nos. 16 - 20. St. Luke's has a record of providing quality of care and it will provide quality of care in its liver transplantation program. The St. Luke's application demonstrates the availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures and for project accomplishment and operation. The St. Luke's application proposes reasonable costs and methods of proposed construction to implement the liver transplantation program. Rule 59C-1.044, Florida Administrative Code, sets forth standards and need determination criteria for liver transplantation programs. The St. Luke's application satisfies all staffing, other operational and teaching/research requirements set forth therein such as found at (3), (4), (7)(b), and (7)(c). The St. Luke's application also must meet the five transplant minimum volume requirement found at subsection (7)(d). The St. Luke's application, to the extent it involves new construction, has considered alternatives to new construction such as modernization or sharing arrangements which have been implemented to the maximum extent practicable. Considerations Relating to Need 1. History and Current Status of Florida Liver Transplantation Programs Under CON Regulation. On August 7, 1988, AHCA's predecessor, the Department of Health and Rehabilitative Services, adopted what is now the "Organ Transplantation" rule, Rule 59C-1.044, Florida Administrative Code. The rule provided for a "grandfather" process to recognize programs in existence prior to the date of the legislation requiring certificate of need review for such programs, October 1, 1987. The grandfather process allowed Shands, Jackson and Tampa General to receive certificates of need for liver transplantation programs without the normal certificate of need scrutiny. Like St. Luke's, Shands is located in Service Planning Area One; Jackson is in Service Planning Area Four, and Tampa General in Service Planning Area Two. Shands and Jackson Memorial Of the three, Shands and Jackson are highly productive, very active liver transplantation programs. The two transplant programs have been in existence for more than 10 years. Growth of the programs has been slow and gradual. For Shands, growth has been intermittent with stops and starts but toward the end of 1993, it began to experience significant volume. Likewise, after 7 years or so of gradual growth, Jackson began to achieve significant volume in late 1993. Today, both have evolved to the point that in addition to active adult programs, they have active pediatric programs as well. The medical component of the Shands program is provided by the University of Florida and its employed physicians; likewise, the Jackson Memorial program is served by University of Miami physicians. Forty percent of Shands' volume comes from Service Planning Area One, 57 percent from elsewhere in the state, and 3 percent from out of state. Sixty percent of Jackson's liver transplant volume comes from Service Planning Area Four, twenty percent from out of state, ten percent from out of the country and the remainder from Florida outside Service Planning Area Four. There is little, if any, competition between the two. In fiscal year 1995, Shands performed 43 adult liver transplants and 11 pediatric transplants. Shands for calendar year 1995 through September 1 performed 49 adult liver transplants and 7 pediatric transplants. For the twelve months ending in August, 1995, Jackson Memorial handled a total volume of 170 liver transplants, with approximately 148 being adult cases. The volumes of both programs are sustainable. They depict, furthermore, mature and viable programs. In short, after slow growth until late 1993, both Shands and Jackson Memorial are well on their way to becoming liver transplantation centers of excellence. b. Tampa General Quite the opposite is the situation for Tampa General. It has performed only seven or eight transplants over the last 5-year period with four of those in 1992. At the time of hearing, three of the 1992 patients had expired. Moreover, no transplants had been performed in 1995. In actuality, Tampa General as of September, 1995, had not added any patients to its liver transplantation wait list through the first three quarters of 1995 and all of 1994, the previous calendar year. There has not been, therefore, an evaluation process in place at Tampa General which would place transplant candidates in a position to receive the service since 1993. Tampa General's liver transplantation CON is on the verge of being abandoned in fact, if not in law. 2. Projected Growth at Shands and Jackson It is reasonable to assume that 10 to 15 percent of liver transplants at Shands will be performed on pediatric patients in the near future. But, the number of children who have end stage liver disease is not increasing as rapidly as the number of adults. This increase in adult need surpassing the increase in pediatric need will continue so that the ratio of adults to children will increase over the long term. For calendar year 1995, it was anticipated at time of hearing that Shands will perform 70 total liver transplants, with approximately 60 adult cases. The current ratio of adult to pediatric cases will hold for 1996 at Shands. It is anticipated that Shands will handle 80 to 90 transplants in 1996, of which 70 to 80 will be adult cases. If the percentage of pediatric cases holds through 1998/1999 (the second year of St. Luke's program, assuming it receives a CON) Shands should handle a total of 90 to 100 liver transplants, with 77 to 90 of those being adult cases. Approximately 13 percent of Jackson's transplant volume is attributable to pediatric patients. For the 12 months ending in August of 1995, Jackson handled a total of 170 liver transplants, with approximately 148 being adult cases. For calendar year 1995 and annually thereafter, Jackson expects to handle 175 to 200 total transplants, or 153 to 174 adult patients, assuming the current ratio of adult to pediatric cases holds. 3. Demand and Florida Resident Outmigration St. Luke's application, using 1991 data, showed that 598 patients were dying annually in Florida from end-stage liver disease. The figure is minimal however; it excludes those under the age of 15 and over the age of 64. Even more significantly, it excludes patients whose liver damage was caused by alcoholism. It excluded alcoholic liver patients because in 1991 they were not considered good candidates for liver transplantation. Today, however, 25 percent of liver transplants are done on patients with alcoholism. Furthermore, it has become more common for patients older than 64 to be accepted for liver transplantation. In sum, there are well in excess of 600 patients in Florida every year who need liver transplantation services. A great number of those in need of liver transplantation services in Florida, Service Planning Area One and AHCA Districts 3 and 4 are not receiving needed services. It is undisputed that in the United States there is tremendous number of patients with end stage liver disease who could benefit from liver transplantation services. For example, there are 30,000 deaths per year due to alcoholism-induced liver disease, alone. At the same time, Hepatitis C is on the rise. While not all Hepatitis C patients suffer end-stage liver disease, a stable percentage do. The rise in Hepatis C, therefore, creates an ever- increasing demand for liver transplants. The current system for liver transplantation comes nowhere close to providing services to all of those in need. In short, the nation's current system is overwhelmed by demand. The same is true at the state level for Florida, and at a micro-level for Service Planning Area One and AHCA Districts 3 and 4. The inability of the Florida liver transplantation centers to meet the needs of Florida's end-stage liver patients has forced some patients to resort to out-of-state services. In 1994, for example, one-third of all Florida residents who received liver transplants did so at an out-of-state program. By sending 10 Florida residents to Mayo Clinic Rochester, four of whom received livers, St. Luke's, itself, has contributed to this outmigration. But its contribution is relatively minor, and if St. Luke's application were granted, St. Luke's will certainly meet the majority of the needs of these patients, itself. Despite the growth of the Shands and Jackson Memorial programs, the number of patients leaving the state for such service has consistently been in the 60's range over the last five years. Indeed, as of July 1995, more than 50 percent of Florida residents awaiting liver transplants were on wait lists maintained by programs located outside the State of Florida. Recent approval by Medicare of the Shands and Jackson Memorial programs may decrease the number of patients leaving Florida but by precisely how much did not come to light at the hearing. Despite the consistency in the numbers of Florida patients seeking liver transplantation out-of-state, the percentage of potential patients doing so has declined in recent years. From 1991, when 54 percent of patients left the state, the percentage declined to 25.3 percent in 1994, the last full year of data available at the time of hearing. The percentage decline is due, no doubt, to the dramatic improvement in the Shands and Jackson Memorial progress. Recent additions of Drs. Rosen and Tzakis (particularly of Dr. Tzakis), to the programs of Shands and Jackson Memorial, respectively, have enhanced the standings of the programs, and should further propel the decrease in percentage of patients seeking service out-of- state. But, of course, just how much the percentage will decrease is unknown and even if the percentage continues to drop, the raw number of patients leaving the state is not dropping. Raw numbers are not dropping because the raw number of those seeking liver transplant services of the many in need of such services is rising. At bottom, outmigration is a problem and demonstrates a need. While the reasons patients leave Florida for liver transplantation services are complex, including the need to be near out-of-state family members, and the effects of managed care contracts and Medicare administration, there is a significant number of patients leaving Florida for liver transplant programs elsewhere. The addition of another program, one that promises to be active as well as of high quality can only assist in meeting the presently unmet need in Florida demonstrated by outmigration. 4. Key Issue The group of patients with end stage liver disease in Florida and elsewhere cannot all be saved, however, because there are not enough organ donors. There are not, therefore, sufficient livers available for transplantation to meet the enormous demand. Thus, the key factual "need" issue in this proceeding is not whether there is an adequate pool of Florida residents with end-stage liver disease who could benefit from access to a new liver transplantation program. The key issue, instead, is whether adequate donor livers are available to meet the increased ability a St. Luke's program would offer to serve the demand overwhelming the current system. Likely Increase in the Number of Donors UNOS In the 1980's, Congress passed the National Organ Transplantation Act. A task force was set up to look at the issues of organ donation and allocation in the United States. Among the task force's recommendations was to establish a national system for organ allocation. The Executive Branch was authorized by Congress to set up such a national network. The Department of Health and Human Services opted to contract the responsibility for national organ allocation to a private organization: the United Network for Organ Sharing (UNOS). UNOS has a Board of Directors with both physician and non-physician representatives. The board is composed of members from the public, including patients, representatives of allied health fields (such as the American Hospital Association and the American Nursing Association), and representatives from other walks of life. UNOS has an extensive committee structure designed to facilitate the development of policy. Allocation programs have been developed. Although they do not yet have the force of law, these programs are generally voluntarily followed nationwide. OPOs An "Organ Procurement Organization," (OPO), set up to serve a specific geographic region, handles the actual organ procurement and distribution. Florida has five OPOs. They are located in Miami, Southwest Florida, Tampa, Orlando and Gainesville. The Florida OPOs utilize a single statewide liver transplant candidate wait list for determining which patients should receive the next donor liver procured by any one of the five OPOs. Each name on the list is given a ranking, with the allocation decision being based on that priority. The ranking is based on numerous factors, including severity of the patient's condition and length of time on the wait list. The Florida OPOs are part of UNOS Region 3, which consists of Florida, Louisiana, Arkansas, Mississippi, Alabama and Georgia. If a procured organ is not suitable for transplant on any patient found on any local or statewide list in a particular state of a UNOS Region, then transplant centers within other states which are a part of the region have the next allocation priority for that donor organ. If the procured organ is not suitable for use at any transplant center within the region, then the organ is made available on a national network basis. Numbers rising Based on the analysis of forecast ranges which follows, it is reasonable to expect that, at least by 1997, there will be 300 livers retrieved in Florida available for use by Florida's adult programs, including St. Luke's. Moreover, a conservative minimum of 165 donor livers procured in other states within UNOS Region 3 are available, and will continue to be available, to the Florida programs, including the St. Luke's program. Current literature projects between 28 and 44 donors per one million population as a reasonable range of expectation for the donor cadaver rate in the United States. A number of OPOs are currently retrieving organs at a rate of over 30 per one million population. For example, the Orlando OPO, TransLife, achieved an organ donor rate of 33.9 per one million population in 1994. Two of the other Florida OPOs have also experienced organ donor rates in excess of 33 per one million population. In 1994, the State of Florida had 351 organ donor cadavers, which translates to 25 donors per one million population. Historically, there has been a 6 percent annual growth rate in the number of organ donor cadavers. Based upon the most recent Florida data, the 6 percent annual growth rate assumption for organ donor cadavers is conservative. Florida realized 203 such organ donors for the first six months of 1995 which, on an annualized basis, constitutes a 16 percent increase over 1994. This annualized data yields a 1995 Florida organ donor rate of 29 per one million population, compared to the 25 per one million population in 1994. In order to determine the number of donor livers available from any given pool of donor cadavers, it is reasonable to assume a conversion ratio (a percentage representing organs donated which will be suitable for use) of between 70 to 80 percent. In the case of individual OPOs, on occasion, the rate can even be as high as 85 percent but all the experts in this case agreed that 70 percent is achievable. The most likely point at which the conversion ratio would fall is somewhere between 70 and 80 percent with 80 percent being the maximum if providers were aggressive in using all available organs appropriate for transplantation. In comparison, the 1994 Florida conversion rate was 66 percent. For the first six months of 1995, the ration was 118 out of 203 making the conversion rate 58 percent. These lower than normal conversion rates for Florida are indicative of a situation in which there is still a large, untapped pool of donor livers which could be utilized in Florida because only the most ideal livers have been used by Florida's two active programs. In other words, donor livers have been available that programs more aggressive than Shands and Jackson would be able to utilize. Based upon the annualized 1995 data as a benchmark, but assuming the more appropriate 70 to 80 percent conversion rate range (instead of 50 percent) yields 284 to 325 total adult donor livers that should have been available to Florida programs in 1995. Applying the TransLife donor rate of 33.9 per one million population, (a reasonable rate to use in this proceeding because of the national range of 28 to 44 per million and since Translife is located in Florida) to a projected 1997 Florida population of 14.5 million yields 334 to 393 total livers. Accounting for the fact that 85 percent of liver transplants are for adults, adjusting the range of total livers by 15 percent yields 292 to 334 adult livers by 1997. Given that the 1995 annualized rate is already at 29 per one million population, a 30 per one million population rate is a reasonable expectation for the immediate future. Applying a rate of 30 per million population rate, a rate more conservative than the actual TransLife rate, to the 1997 Florida population projection yields 435 donor livers. Applying the same conversion rate and pediatric adjustment methodology then yields a range of 259 to 296 adult donor livers available to Florida programs by 1997. Applying the historical growth rate of 6 percent to the 1995 base of 406 total donor organs yields 456 donor livers by 1997. Applying the conversion rate range and pediatric adjustment to this projection then yields 271 to 310 adult donor livers from Florida in 1997, or 319 to 365 total livers. Available UNOS Region 3 Livers not Utilized by Florida Programs Florida programs do not have to rely upon donor livers procured in Florida alone because supply is available from UNOS Region 3, a net exporter of donor livers nationwide. Shands has used relatively few livers procured in other states in Region 3. For example, 95 percent of the donor livers utilized by Shands were procured in Florida. Jackson has used more from out of state but still the great majority of the livers procured for its program come from within Florida. Between January and June of 1995, 20 percent of the livers used by Jackson came from other states within Region 3. Of the 505 Region 3 livers retrieved in 1994, 236 were used in the Region 3 state in which they were retrieved. Accordingly 269 livers were used in other states within the Region or elsewhere in the United States. Of these 269 donor livers, 104 were livers generated from Florida that were used at a program outside of Florida. Of the remaining net result, 165 livers, a substantial number could have been used in Florida. Coincidentally, in 1994 exactly 165 donor livers were exported from Region 3 to transplant centers in other regions. The 165 pool of donor livers available from other states within UNOS Region 3 is a conservative level. The overall donor rate for Region 3 during 1994 was 20.3 per one million population. This rate should increase substantially given the fact that it is below Florida and national levels. The number of donors generated in UNOS Region 3 is also growing yearly at a 6 percent rate. Moreover, increased awareness among potential donors is influencing the development of more effective, efficient donor rate levels for Region 3. Under a reasonable projection that the Region 3 use rate should soon hit at least 29 donors per one million population, applying the 70-80 percent conversion range, Region 3 should reasonably produce at least 131-150 additional livers in comparison to the 1994 level. Moreover, a driving force in donor organ awareness is promotion by successful transplant patients who become active in supporting such programs in their communities. The increase in Florida programs' transplant volumes indicates that community awareness has increased. St. Luke's application includes a plan to increase potential donor awareness acceptable to AHCA. Nationally, the average wait list time for a liver transplant candidate is 8 to 12 months. The Shands and Jackson Memorial programs have significantly shorter wait list times for their patients. The Shands wait list time, for example, is 30 to 60 days with a median of 28 days. These shorter wait list times reveal that the Shands and Jackson programs are not experiencing the pressure necessary to force the Florida programs to expand the criteria for donor liver selection, to thereby increase the donor liver conversion rate, and to take advantage of donor livers available from other states in Region 3. There is, in other words, no strain on the system. Currently, because the system is functioning so well for Shands and Jackson Memorial, the two are able to utilize only the most ideal donor livers available. But, with experience, it has become common practice to use livers less than ideal. For example, 10 years ago using a liver donated by a person above the age of 70 was considered absolutely unacceptable. Today, these organs are being utilized. There is room, therefore, in the system for more donor livers to become available. Being more aggressive in the donor liver selection process and using more high risk donors, thereby increasing the number of donor livers available to the Florida programs, need not have an unacceptable impact upon outcomes. Mayo Clinic Rochester provides an example. The liver transplant wait list there is comparable to the national average. The resulting pressure causes its surgeons to be aggressive in selecting donor livers. Their aggressive selection manifests itself in the 85 percent conversion rate of the OPO serving the clinic. Nonetheless, Mayo Clinic Rochester produces the best outcomes among programs in the United States. The lack of pressure on Florida explains why Shands and Jackson Memorial are not utilizing to any significant degree organs which become available from other states within Region 3. If wait list pressure builds, UNOS Region 3 should serve as a source of alleviation. The shorter wait list times and corresponding lack of system pressure, too, given the overwhelming demand for services, demonstrates room for another program to identify and serve those with needs that could be met for liver transplantation services. In short, there should be enough livers available for an active third program, without compromise to the ability of either Shands or Jackson to continue to strive towards becoming centers of excellence, goals within reach in the near future, whether St. Luke's CON is approved or not. 6. Forecast of Transplant Volumes St. Luke's reasonably projects that it will perform at least 15 transplants in year one and at least 30 in year two of operation. These projections underlie St. Luke's financial feasibility forecast. Although it is not possible to predict with precision, it is reasonable to assume 80 percent of St. Luke's liver transplant patients will be Florida residents with the remaining 20 percent coming from primarily UNOS Region 3, the southeast portion of the United States. The St. Luke's program will draw patients from throughout the State of Florida. It is expected that roughly 45 percent will be from Service Planning Area One and the remainder from the southern half of the state. The magnitude of demand and the supply of donor livers will allow St. Luke's to reach these start-up volumes, which constitute reasonable market share. In fact, on the demand side, the magnitude of the current outmigration of Florida residents for liver transplantation services is enough, in and of itself, to support these start-up volumes. Quality and resulting reputation of a liver transplant program has a positive influence on whether physicians refer liver transplants to a facility. The success, efficiency and reputation of the Mayo Clinic Rochester program will enhance the St. Luke's program and promote referrals. Furthermore, St. Luke's will have the ability to tap into Mayo Rochester's proven infrastructure and protocols which will significantly facilitate program implementation. Since the filing of the application in this case, St. Luke's has secured the services of a hepatologist who conducts a liver pre-transplant and post-transplant program at Mayo Clinic Jacksonville. It has also hired a second hepatologist to build additional program strength. St. Luke's is already developing a significant pool of patients in need of liver transplantation which will enable a rapid start-up for the St. Luke's program. Since 1994, St. Luke's has referred 12 patients for placement on a liver transplant wait list. It is expected that the volume of referrals will double before the St. Luke's program comes on line. In sum, St. Luke's volume projections are reasonable. 7. Financial Feasibility The St. Luke's program is financially feasible in the near term. St. Luke's itself has over $54 million in liquid assets and its parent, the Mayo Foundation, has over $1 billion in liquid assets and over $1 billion in total assets. The Foundation fully supports the proposed St. Luke's program from both a start-up and operational standpoint. The Foundation will provide financial support in the unlikely event money is lost in the immediate or long term and St. Luke's finds itself in need of outside support. In any event, there is little likelihood that there will be a cash shortfall to operate the program as proposed in the application. If there were any shortfalls, St. Luke's itself has more than ample cash on hand to ensure its viability. The St. Luke's application contains a hospital-wide budget projection for St. Luke's in 1994 of $4,672,000 in net income. The actual St. Luke's experience in 1994 was a net income of $81,000. The reduction of actual income over the projected income was the result of several extraordinary events, not likely to recur. They either will not be perpetuated or have been accounted for in future years. Indeed, St. Luke's income through the first eight months of 1995 was on the rebound with a net income of $3.8 million. St. Luke's reasonably and conservatively projected its revenues and costs to demonstrate long-term financial feasibility of its program. The program will make a positive contribution of approximately $900,000 to the St. Luke's hospital-wide margin by the second year of operation. Each of the line-items and underlying assumptions related to the calculation of revenues and costs are reasonable and achievable. In fact, they are conservative. For example, St. Luke's marginal costs per case are probably overstated in comparison to Shands current costs. Shands marginal cost per case is $58,000, compared to a projected cost of $75,000, for St. Luke's. The results of St. Luke's financial projections for the project would not be materially affected given that the program will not now be implemented any earlier than 1997. 8. Medicaid Patients According to St. Luke's application, the St. Luke's Hospital proposed liver transplant program is being developed to provide care primarily to Florida residents who are medically in need of transplantation. Medicaid and indigent patients who traditionally have trouble accessing this expensive and sophisticated care will be included in the patients expected to be served. In support of this commitment, St. Luke's Hospital commits to provide care to all patients in need of the proposed service, regardless of ability to pay, up to the point that the financial viability of the program is impaired. Translation of this commitment into action is the representation in Table 7 of the application (Utilization By Class of Pay) that three Medicaid/Indigent patients are expected to be served in Year 1 and an additional four Medicaid/Indigent patients are to be served in Year 2. Petitioner's Ex. 1c., Omissions Response, CON Application, Vol. 4, p. 9. St. Luke's application stresses, however, that its commitment is not limited to just three and four Medicaid/Indigent patients in years one and two: It must be understood, however, that as stated above, St. Luke's commits to provide care to all patients, regardless of ability to pay. If additional Medicaid/Indigent patients are identified they, too, will be served. (e.s.) Id. Lest the agency be misled into thinking that St. Luke's will not make serious effort to identify Medicaid and indigent patients in need of liver transplantation services, the application follows with a statement promising beneficial advancement in medicaid and indigent patient access to liver transplantation services: The result of this commitment will be a significant improvement in access to liver transplant care for those with limited financial resources in Florida. Id. St. Luke's pledge to provide liver transplantation care to medicaid and indigent patients is central to its case that its application be granted. This is because St. Luke's has neither a generous nor dependable history in this regard. Between 1991 and 1994, St. Luke's provided medicaid and indigent patient days as follows: 0.9 percent in 1991, 1.1 percent in both 1992 and 1993, and 0.8 percent in 1994. Its record with regard to tertiary services is even poorer. Of the 17 bone marrow transplants done between 1992 and 1994, none was Medicaid. Of the 975 open heart surgeries analyzed since 1992 only five were Medicaid, less than 0.6. St. Luke's record stands in stark contrast to the record of its nearest prospective competitor: Shands. In its most recent year, 31 percent of the bone marrow transplants done at Shands were Medicaid while 17 percent of its open heart surgeries were Medicaid. Shands, operating five organ transplant programs (heart, liver, kidney, lung and pancreas) is a disproportionate share provider of Medicaid services. Jackson Memorial provides even a larger percentage of its services to Medicaid patients and, in fact, is by far the largest disproportionate Medicaid provider in the state. Much of Shands' patient care of Medicaid patients is in the areas of obstetrical and general pediatric care, neither of which is provided by St. Luke's. But even with these areas of care excluded, the comparison is not favorable; Shands still provides 13 percent of its care to Medicaid patients, as opposed to St. Luke's 0.8 percent for 1994 and the beginning of 1995. For 1995, through July (two months prior to hearing), St. Luke's Medicare and Medicaid rates were at even lower levels than its historic levels. All of the other hospitals in Duval County have higher Medicaid and indigent patient loads than St. Luke's. The lower percentages have been true for St. Luke's even when it has had a strong profit margin. The decrease in the number of Medicare and Medicaid patients at St. Luke's is due, in part, to its costs increasing at a rate greater than its revenue in recent years. This, in turn, is due, at least in part, to the increase in managed care patients among the number of patients overall. Managed care is a less favorable payor on average than insurance. Hospital patients covered by insurance are decreasing as managed care patients increase. The percentages for St. Luke's is not likely to increase given data reflecting past performance. Thus, its pledge becomes all important. Provided St. Luke's satisfies its promise to treat all patients regardless of their ability to pay and as long as St. Luke's identifies patients who fall into this category, then by the second year of the program's operation, percent of the patient days will be attributable to Medicaid and 87 percent will attributable to patients covered with some type of insurance. Out of the insurance, approximately 25 percent or 8 cases would be covered by managed care insurance product, with 55 to 60 percent covered by commercial insurance product. Given the firmness of St. Luke's pledge with regard to Medicaid patients, its financial projections demonstrate reasonable payor mix calculations. 9. Improved Access for Florida Residents Access to a new program at St. Luke's will place the competitive pressure on Florida's system necessary to procure and utilize every possible donor liver from UNOS Region 3 as well as from Florida. The addition of a larger portion of Florida's liver transplant demand pool to a wait list at the St. Luke's program alone will have the positive benefit of creating this pressure. Since St. Luke's began seeking a certificate of need, both programs have made a significant investment in terms of staff and resources and significantly increased their volumes to evolve into mature, strong programs. There is no evidence, however, to suggest that the Shands and Jackson Memorial program developments are in reaction to the St. Luke's application. Nonetheless, given Mayo Clinic's reputation and the quality of care rendered within the Mayo Clinic system, the establishment of a program at St. Luke's will have a material impact on reversing outmigration by Florida residents for liver transplantation services. Patient outmigration for this type of service is undesirable from a health planning perspective and does not represent optimal or cost efficient care. This outmigration disturbs the continuity of care for the patient. The patient is unable to maintain close contact with his or her local physician. This patient outmigration also causes adverse impacts upon the patient's family infrastructure in cases in which outmigration occurs for reasons other than to be with family. The patient not only has to deal with the emotional trauma of having a terminal illness in the absence of a transplant, but also with having to be dislocated from familiar surroundings and the emotional and family support system that may already exist. This outmigration causes the patient or the patient's third party reimburser to incur significant costs due to transportation, temporary housing, and other expenses attendant to leaving Florida. The Agency and the 1994 State Health Plan recognize that this patient outmigration is undesirable, and agree that Florida's health planning should encourage an environment to reduce such outmigration. The level of outmigration for programs located in other states is indicative of inability, for whatever reason, of Florida's two active programs to serve the need in Florida. 10. Compliance with State and Local Health Plan Preferences The St. Luke's application satisfies to a significant degree almost all of the State and Local Health Plan preferences. For the remainder, the application complies with the intent, but not necessarily the letter. District 4 Local Health Plan contains eight "allocation factors". There is no dispute that the St. Luke's application satisfies the first criterion that transplant centers be located in a major metropolitan area with a county population of 250,000 or more "so that access to the services would be enhanced". There is no dispute that the St. Luke's application satisfies the second criterion requiring the applicant to document written relationships with a broad spectrum of other health care providers, thereby helping to ensure continuity of care and non-duplication of costly services. The third Local Health Plan criterion addresses stand-alone regional or national referral centers. The Agency unreasonably found that the St. Luke's application did not satisfy this criterion because the majority of its patients reside in District 4. The St. Luke's application did demonstrate, however, that St. Luke's/Mayo Clinic Jacksonville is a regional provider. Moreover, affiliation of the St. Luke's liver transplant program with the nationally recognized Mayo Clinic Rochester program would be relevant to this criterion once the program was initiated in Jacksonville. The District 4 Local Health Council supports approval of the St. Luke's application. The Local Health Council itself agreed that the proposed St. Luke's program "will serve a national clientele whose needs cannot be reflected within a formula designed to serve a portion of a single state". There is no dispute that the St. Luke's application satisfies the fourth allocation factor which gives preference to hospitals and program which have a significant role in regional or national research efforts. St. Luke's/Mayo Clinic Jacksonville is already substantially involved with and committed to medical research, including research related to liver disease. That research effort will be even further enhanced because of the leading national and international role of the Mayo Rochester liver transplantation program in research, and the participation of St. Luke's in that research. The fifth and sixth allocation factors are not applicable because they address regional matters related to pediatric programs. There is no dispute that the St. Luke's application satisfies the seventh Local Health Plan criterion which prefers applicants "who submit a plan to increase local organ donations." There is no dispute that the St. Luke's application satisfies the eighth Local Health Plan criterion which prefers applicants who formally commit to charity care in the application. St. Luke's application was preliminarily reviewed under allocation factors contained in the 1989 State Health Plan. There is no dispute that the St. Luke's application satisfies the first criterion which requires assurance that it will accept transplant patients regardless of ability to pay. There is no dispute that St. Luke's satisfies the third State Health Plan criterion preferring applicants with the other organ transplantation programs. St. Luke's has an adult bone marrow transplantation service. As an affiliate of St. Luke's, Mayo Clinic Rochester, in addition to liver transplantation, has heart, kidney, bone marrow, and pancreas transplantation programs. There is no dispute that St. Luke's satisfies the fourth State Health Plan criterion which prefers teaching hospitals for the establishment of any organ transplant program. Although the Agency notes that St. Luke's is not a statutorily-designated teaching hospital, this particular State Health Plan criterion does not impose any such restriction upon the term "teaching hospitals". The St. Luke's application satisfies the fifth State Health Plan criterion given to a member of UNOS because of its close affiliation with Mayo Clinic Rochester, a member of UNOS. There is no dispute that the St. Luke's application satisfies the sixth State Health Plan criterion requiring implementation of the Uniform Anatomical Gift Act. There is no dispute that the St. Luke's application satisfies the seventh State Health Plan criterion preferring teaching hospitals which document the establishment of a residency program related to the proposed transplant program. The St. Luke's application also satisfies the eighth State Health Plan preference for NIH-approved facilities in Medicare designated centers. Again, affiliation with the Mayo Clinic Rochester program is relevant, with Mayo Clinic Rochester participating in NIH transplant data base research and being Medicare certified. The more recent 1993 and 1994 State Health Plans adopted most of the criterion found in the 1989 Plan. Moreover, the 1994 Plan addresses a goal of enhancing Florida's health care system. In that regard, the 1994 Plan addresses the establishment of centers of excellence, stating that "Florida should ensure that its consumers have a choice of outstanding medical and specialized care centers within the State and not be forced to seek better reputation out-of-state". Given the positive attributes of establishing a Mayo Clinic liver transplant program and the benefits to the system which can be achieved, St. Luke's application satisfies this State Health Plan goal. That same discussion in the 1994 Plan concerning centers of excellence also relies upon the National Opinion Research Center (NORC) mathematical model for measuring the best hospitals in the United States. The NORC published rankings in July, 1995, which rated Mayo Clinic's gastroenterology program as the number one program in the U.S. This ranking is relevant to the St. Luke's application because St. Luke's/Mayo Clinic Jacksonville has direct access to that program, and because the Mayo Clinic Rochester liver transplantation program will be installed at St. Luke's. Moreover, the NORC rating is relevant to support the notion that Mayo Clinic's reputation will give St. Luke's the ability to support its volume forecasts, to redirect outmigration, and to achieve the quality goals of its application. The 1994 Plan also emphasizes managed care as a means to develop a better Florida health care system. The Mayo Clinic Rochester program is a strong, viable, and aggressive participant in the managed care arena nationwide, presenting a tangible benefit to the St. Luke's program. Further, the St. Luke's application addresses the legislative approach in Florida which encourages the establishment of integrated systems and programs because they will have the best opportunity to control costs and assure quality and succeed in the market place. St. Luke's and Mayo Clinic Jacksonville already operate as part of an integrated system with enhanced opportunities to control costs and ensure quality. 11. Impact to Existing Providers The addition of the St. Luke's program will have competitive impact upon the two existing programs. At their current volumes, both the Shands and Jackson Memorial programs far exceed the quality volume standard of 35 transplants annually as set forth by UNOS, and both are financially healthy. When assessing the financial performance of a specific program which has been added to hospital operations, the analysis should assess the "contribution margin" performance of the program. Also known as "incremental analysis," assessment of the contribution margin involves determining the difference between program net revenues and the variable costs of providing the service (i.e., those costs that vary either up or down depending upon volume and which are directly attributable to providing the service.) Accordingly, the contribution margin analysis appropriately disregards hospital-wide overhead which would already be incurred and absorbed by the hospital in the absence of the specific service and which would be reflected in the hospital-wide profit margin experienced before the new program came on line. Under this incremental analysis approach, the Shands adult and pediatric programs are profitable, with both making a positive contribution to overall hospital margin. In the fiscal year 1995, the Shands adult program generated a contribution of $1.7 million and the pediatric program generated a $16,000 contribution to Shands hospital-wide margin. These profitable results are based upon Shands having performed 43 adult cases and 11 pediatric cases. Hospital-wide, Shands finds itself in a very strong financial position. For example, in fiscal year 1994, Shands' net income was $20.6 million. For fiscal year 1995, Shands did even better, generating a net income of $21.2 million, with $15 million being attributable to operating profit. In comparison, in its 1995 budget, Shands projected a net profit of $8 million with an operating profit of $4 million to $5 million, so its actual 1995 performance far exceeded its budget expectations. Shands has cash and investments available to it in the amount of $78 million. Its fund balance is $275 million. The significant degree of Shands' financial health is also emphasized by its intent to purchase five hospitals within the Santa Fe Health System. This acquisition is being undertaken with the hospital now being on a more conservative course for the future. It is possible that Shands will finance the five-hospital acquisition entirely through a bond issue, relying upon the net income of the purchased hospitals to pay back principal and interest on the bonds. Shands will have to incur exposure and risk and pledge its full faith and credit behind this financing as a covenant of the bond issue. An earlier $265 million 1993 capital expansion project was also to be financed out of bond proceeds. Shands intended, however, to contribute substantial cash to that product in order to reduce the level of exposure and risk that it would incur. For the Santa Fe Health System acquisition, Shands will not be making any equity contribution to the project, and instead will rely totally upon bond proceeds for financing. Shands' willingness to take risks in regards to the Santa Fe Health System acquisition that it was not willing to take in 1993 is another strong indicator of its financial health. The Agency has raised a concern over whether the St. Luke's program would divert paying patients and somehow hinder Shands' ability to provide liver transplantation services to Medicaid patients. It readily appears, however, that Shands enjoys tremendous financial means to continue to carry out any indigent care role it desires in its liver transplantation program. Achievement by St. Luke's of its second year volumes is not likely to come at unacceptable expense to Shands so long as St. Luke's fulfills its promises with regard to Medicaid and Indigent cases. Given that Shands' program is already profitable at a volume of 43 adult and 11 pediatric cases, based upon fiscal year 1995 data, there is no evidence to suggest that it would not continue to be profitable with Shands growing to 68 or even 76 adult cases by 1996, prior to the St. Luke's program coming on line. Likewise, there is no evidence to suggest that the Shands program would not remain profitable assuming it lost 24 cases to St. Luke's in the 1998- 1999 time frame "redirected" from what would be a volume of 77 to 90 adult cases at Shands in the absence of the St. Luke's program. The St. Luke's program will have the ability to offer liver transplantation at a significantly lower charge than currently available in the market place, thereby resulting in lower costs to the system and enhancing price competition. The St. Luke's projected charge for its second year of operation at $180,000 compares favorably with a projected comparable Shands charge of $191,000 per case. The St. Luke's charge at $180,000 per case compares favorably with a projected $257,000 per case at the Jackson Memorial program. Furthermore, it is likely that the St. Luke's program will achieve a reduction in both costs and charges as the St. Luke's program matures and becomes more "Rochester-like". St. Luke's also compares favorably with the Jackson and Shands programs on other relevant charges. Major Diagnostic Category (MDC) 7 contains most of the Diagnostic Related Groups (DRGs) related to liver disease. Shands DRG-specific rates with an MDC-7 are approximately 20 percent higher than St. Luke's charges. Jackson Memorial Hospital's DRG specific rates under MDC-7 are approximately 40 percent higher than St. Luke's charges in MDC- 7. A "case mix index" adjustment accounts for differences in intensity and resource consumption among hospitals. For 1994, Shands' overall case mix index adjusted inpatient revenue per admission was approximately 15 percent higher than the comparable benchmark for St. Luke's. Jackson's case mix adjusted inpatient revenue per admission was approximately 41 percent higher than the St. Luke's benchmark. Shands and Jackson also have higher charges than St. Luke's when comparing tertiary services already offered by each of the three hospitals. The DRGs applicable to open heart surgery are 104 through 108. Shands' revenues per discharge are significantly higher than St. Luke's revenues per discharge for each of those DRGs, by 54 percent for DRG 107, and by 56 percent for DRG 108. Jackson's revenues per discharge are significantly higher than St. Luke's revenues per discharge for each of those DRGs, by 97 percent for DRG 104, by 62 percent for DRG 105, by 94 percent for DRG 106, by 86 percent for DRG 107, and by 44 percent for DRG 108. For DRG 481, bone marrow transplant, Shands' revenues per discharge are 13 percent higher than St. Luke's revenues per discharge. Unable to fend for itself in this proceeding, Shands' case was left to the agency But in AHCA, Shands finds a worthy ally. The point was well- made by the agency that Shands will suffer if it is left to care for all the Medicaid and indigent patients in need of liver transplantation services without a fair number of such patients being served by a new program at St. Luke's. Shands, it is true, receives state funds for indigent patient care, under-funded state programs, and non-reimbursable teaching costs. But these funds are susceptible to reimbursement rate declines. Worse, there are no guarantees that these funds will continue. The loss of commercial paying patient would be a net incremental loss to Shands of $69,000. It is expected that due to the proximity of Shands and St. Luke's, and the overlap in geographic service areas, up to 12 patients could be pulled from Shands in the first year of St. Luke's operation and up to 24 of St. Luke's 30 patients in year two of St. Luke's operation could come from the area of overlap with Shands. The impact of these numbers will be lessened by the increase in livers suitable for use and the concomitant increase in the number of procedures performable in Service Planning Area One, as well as statewide. Nonetheless, there will be an adverse impact to Shands, making St. Luke's pledge to identify and treat certain numbers of Medicaid patients all the more important. 12. Analysis of Agency Policy Relevant To Review of Application Since the preliminary denial of the St. Luke's application, the Agency has approved a heart transplant program at University Hospital in Jacksonville, and a kidney transplant program at Florida Medical Center in Broward County. The Agency preliminarily denied the University application, seeing no need for a fifth heart transplantation program in Florida. The University Hospital application was approved through litigation settlement just six months prior to the final hearing involving the St. Luke's application. The University of Florida and Shands supported approval of the University application. They would provide operational and resource support for the University program. Comparing the heart transplant market place to the liver transplant market place, the justification for approving a new heart transplant program is significantly less than the justification for approving a new liver transplant program. From a comparative standpoint, the market for heart transplantation in Florida in about half of the size of the market for liver transplantation. The two existing liver transplant programs that perform twice the volume of the four existing heart programs. The available pool of donor hearts available in Florida is 60 to 70 percent less than the current pool for liver donors. In fact, like donor livers, donor hearts are a scarce resource. Compared to liver transplantation, there is significantly less outmigration for heart transplant services by Florida residents, and there is significantly less Florida residents on out-of-state wait lists for heart transplantation services. Through witnesses from Jackson and Shands, the Agency expressed reservations about approving an organ transplantation program at a hospital which did not already have a solid organ transplant program of any other type in existence. University Hospital, however, prior to receiving approval for its heart transplant program did not have any other type of solid organ transplant program. Like St. Luke's, University does have a bone marrow transplant program. Approval of the University application added a third heart transplantation program to Service Planning Area One. The existing programs are located at Shands and at Tallahassee, Memorial Hospital in Tallahassee, Leon County, Florida. Rule 59C-1.044 sets forth a requirement that existing programs within the service planning area be performing at least 24 heart transplants a year before approval of a new program. At the time the University program was approved, the Tallahassee program was operating, and has been consistently operating, at below 10 transplants per year. At the time that the University application was approved, the Shands program was handling 38 heart transplants per year above the minimum, but well below its current liver transplantation volume. In not opposing approval of the University application, Shands realized that the University program would draw private pay patients away from Shands' heart transplant program. Likewise, in deciding to approve the University application, the Agency recognized the same impact. A primary factor the Agency relied upon to support approval of the University program was improving access for Medicaid patients. The health planner from Shands who testified for the Agency explained that University of Florida/Shands found there to be a need for an additional heart transplant program in Service Planning Area One but not for a liver transplant program because "University of Florida physicians...propos[ed] the service," (Tr.1125), and they felt need was demonstrated. The University heart transplantation program CON contains a condition that, by the second year of operation, three transplants must be provided to charity care/Medicaid patients on an annual basis. In its application, St. Luke's included a hospital-wide pro forma; the University application did not. The service specific pro forma in the University application projected only a $5,000 profit for its heart transplant program, while St. Luke's projected $900,000. The settlement agreement entered into between University and the Agency predicted approval upon a "weighing of all applicable statutory and rule review criteria." The Agency approved a new kidney transplant program at Florida Medical Center in December 1993. The University of Miami transplant program supports, and would specifically provide operational and other resource support to, the Florida Medical Center program. The Florida Medical Center application projects financial losses for its program, including a $150,000 loss by the second year of operation and a $100,000 loss by the third year of operation. Both Jackson and Florida Medical Center are located within Service Planning Area Four. Rule 59C-1.044 requires that existing programs be handling a minimum volume of 30 cases prior to the approval of new programs. At the time the Florida Medical Center application was approved, the Jackson kidney transplant program was handling 86 kidney transplants annually, well below its current liver transplantation volume. An Agency witness who opposed the St. Luke's program was Dr. Joshua Miller, director of the JMH/University of Miami transplant program. Dr. Miller argued that, among other reasons, the St. Luke's application should not be approved because St. Luke's does not have a solid organ transplant program. He also asserted that the St. Luke's program would not increase donor organ awareness and would not improve access. Dr. Miller joined in the University of Miami's support for the Florida Medical Center kidney transplant application, arguing that it would enhance donor awareness and improve access. In approving the Florida Medical Center application, the Agency found that the Florida Medical Center program would improve donor organ awareness, improve access, and that it had the capability to bring on line a quality program. Like St. Luke's, Florida Medical Center did not have any solid organ transplant program. Florida Medical Center is significantly closer to the existing kidney transplant program at Jackson Memorial Hospital than Shands is to St. Luke's. Geographically, Service Planning Area One is much larger than Service Planning Area Four. Subsequent to approval of Florida Medical Center application, Florida Medical Center attempted to transfer the CON to Cleveland Clinic Hospital located in Broward County. The University of Miami transplant program opposed implementation of the project at Cleveland Clinic. The Agency espoused a planning policy through one of its physician experts that in assessing the need for a new liver transplant program, the Agency should not approve a new program is there is ample capacity already within the system or, alternatively, if the existing programs express a willingness or intent to continue to expand capacity. This policy is unreasonable because both of the existing programs have the ability to expand their capacity at will and the policy effectively gives the existing providers absolute veto power over any new program. Moreover, it nullifies the liver transplant rule and its need methodology. Since the rule grandfathered three programs, if capacity controls then the promulgation of the rule was meaningless as to allowing any more programs. The Agency's original denial of the St. Luke's application was predicated upon the position that allowing a new program to come on line would be "a bit premature". The Agency found that the existing programs had not yet matured. A liver transplantation program is mature when it is handling 50 transplants annually. This total could include pediatric cases as long as the majority are adults. Under Agency rules, a CON reviewable service which fails to show any utilization for a 1-year period of time must secure a new CON to reactivate. Presumably, this rule applies to Tampa General. The potential for a new liver transplant program to increase the availability of donor organs is an appropriate factor to be taken under consideration of need for the new program. The Agency stresses the importance of demonstrating enhanced access for those who require a service but who are unable to obtain it. On the other hand, fostering competition and the benefits that could be derived through new competition is an irrelevant inquiry for purposes of balancing the statutory and rule criteria when considering the St. Luke's application, according to the Agency. Florida programs should wait-list as many liver transplant candidates as possible. Even if a patient expires while on the wait list, it was better to have had the individual on a wait list with the opportunity for a transplant. Once on the wait list, any available organ that is suitable for use in the patient should be obtained for transplantation. With this background, the Agency urged the adoption of a policy in regards to the St. Luke's application which finds that the existing lack of pressure on the system and the resulting "equilibrium" enjoyed by the Shands and Jackson program was somehow the most desirable, optimal situation. The Agency believes that when there is "strain" on Florida's liver transplantation system, then it is appropriate to consider the addition of a new program. With regards to assessing adverse impact on existing programs, the Agency looks at the existing provider's present scheme, health, what impact will not hurt the program, and overlap in the event a new program comes on line. Moreover, when assessing the need for organ transplantation services, it is not Agency policy to guarantee a particular volume level for existing programs. Instead, it is Agency policy to achieve a comfort level that there is an adequate volume pool under which all programs can operate effectively.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED That St. Luke's CON Application No. 7202 for a liver transplantation program be GRANTED; That the granting of the application be conditioned upon St. Luke's pledge to provide three Medicaid patients in year 1 and four Medicaid patients in year 2 of operation with liver transplants and that thereafter at least 10 percent per year (averaged every 3 years) of liver transplants performed at St. Luke's be provided to indigent and/or Medicaid patients. DONE AND ENTERED this 29th day of March, 1996 in Tallahassee, Leon County, Florida. DAVID M. MALONEY, 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 29th day of March, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4890 The following rulings are made on the parties, proposed findings of facts: St. Luke's: 1. Paragraphs 1 - 93, 97 - 113, 115, 116 - 126, 128, 132, 133, 134 - 138, 140 - 146, 154 - 166, 176 - 182, 188, 190, 193 - 240, 245 - 260, 271 are accepted. 2. Paragraphs 94 - 96, 114, 117, 127, 130, 134, 139, 148, 150 - 152, 167, 168, 170 - 173, 175, 183, 184, 192, 241 - 244, 262 - 270, 272 are subordinate. Paragraph 129 is rejected on the basis of past performance. This finding of fact is accurate only if St. Luke's meets its pledge to provide liver transplantation services to indigent and Medicaid patients. Paragraph 131 is rejected. A St. Luke's program will have competitive impact that is negative as well as positive. The impact will be detrimental to Shands unless St. Luke's provides its fair share of liver transplantation services to Medicaid and charity cases. Paragraph 147 is accepted in part and rejected in part. Again, competitive impact to Shands will be detrimental unless St. Luke's fulfills its promise to provide an adequate number of Medicaid and charity cases with liver transplantation services. Paragraph 149 is rejected. See Rulings on St. Luke's proposed findings of fact nos. 129, 131 and 147 above. Paragraph 153 is rejected. There is no evidence to support such an assumption. Paragraph 169 is accepted. The second sentence is rejected for lack of evidence. Paragraph 174 is accepted except when patient outmigration is due to the patient's need to be close to family members who reside out of Florida. Paragraph 185 is accepted, provided St. Luke's meets its commitment to provide liver transplantation services to Medicaid patients. Paragraph 186 is accepted as a statement made in the application and therefore as a basis underlying St. Luke's pledge toward treating a fair number of Medicaid patients to alleviate negative competitive impact on Shands. It is rejected, however, as a commitment St. Luke's could, in fact, fulfill. As Dr. Schiff testified, no liver transplant center could take all suitable indigent patients and remain fiscally sound. Vol. V, p. 542 of the transcript. Paragraph 187 is accepted that St. Luke's commitment is the same as Mayo Clinic Rochester's. Rejected otherwise for the same reason in the ruling on Proposed Finding of Fact No. 186, above. Paragraph 189 is rejected as to the first sentence. While not providing obstetrical, pediatrics, mental health, or substance abuse services explains in part St. Luke's low levels of Medicaid cases, it does not explain St. Luke's low levels in other areas of practice and delivery of medical services. To the contrary, not providing these services, since they are areas of medicine tending to generate great numbers of Medicaid cases, is consistent with St. Luke's low level of providing Medicaid services in other areas of service. The second sentence is accepted to the extent it explains Medicaid demand lower than in other areas in Jacksonville. St. Luke's location does not, however, justify its low level of Medicaid cases. Paragraph 191 is rejected. Paragraph 261 is irrelevant. AHCA: 1. Paragraphs 1, 2, 4, 5, 7 - 10, 14 - 17, 21, 23 - 25, 27 - 30, 32, 34, 38, 44, 47 - 52, 63, 68, 69, 71 - 76, 78 are accepted. 2. Paragraphs 6, 11, 12, 20, 22, 36, 41, 53, 55, 56, 59, 80, 82 are subordinate. Paragraph 3 is accepted in part. The finances of the Mayo Foundation bear some relationship to the case since they are available if St. Luke's should ever find itself in the unlikely position of needing them. Paragraph 13 is accepted in part. It is rejected as not relevant to the extent that granting the application is conditioned upon requiring St. Luke's to fulfill its pledge to provide liver transplantation services to Medicaid and/or indigent patients. Paragraph 18 is rejected. St. Luke's expectations are legitimately based on performance in years other than in 1993 and 1994, including performance during the months in 1995 for which data was available at the time of hearing. 6. Paragraphs 19, 31, 33, 40, 42 - 45, 66, 67, 54, 58, 60 - 62 are rejected as against the greater weight of the evidence. Paragraph 26 is rejected. Despite the dramatic development of the Shands and Jackson Memorial program, substantial need exists in Florida for liver transplantation services. Paragraph 35 is rejected in part. That Mr. Richardson's projections were unreasonably optimistic is rejected as against the greater weight of the evidence including the assumptions contained in this proposed findings which are accepted. Paragraph 37 is accepted in part and subordinate in part. Despite agreement as to a 70 percent conversion rate as a minimum, it was not unreasonable for Mr. Richardson to use an 80 percent conversion rate since such a rate is achievable if aggressive use is made of available livers as promised by St. Luke's. Paragraph 39 is accepted in part and rejected in part. The first sentence is rejected. See rulings on AHCA's paragraphs 35 and 37, in 8., and 9., above. Paragraph 46 is rejected in part as argumentative. That St. Luke's approach was a "a sort of hybrid ... between proposing to fill an unmet need, and simply squeezing into the market," is argumentative. Otherwise accepted. Paragraph 57 is rejected as against the greater weight of the evidence. Paragraph 64 is accepted except for the 4th and 6th sentences. No party suggested the building of a hospital to serve liver transplant patients, alone. Each of the existing liver transplantation centers in Florida and St. Luke's have or propose the centers within existing hospitals. The 6th sentence is rejected as opinion without factual support and contrary to the greater weight of the evidence which showed more liver transplantation services could be conducted to serve Florida citizens if the St. Luke's application is granted. Paragraph 65 is rejected as primarily argumentative and reciting conclusions as opposed to findings of fact. Paragraph 70 is rejected. Paragraph 77 is accepted as to the facts with the exception of the last sentence which is against the greater weight of the evidence and with the exception of the implication that having Mayo-trained physicians creates a "Mayo South." Paragraph 79 is rejected as to the first sentence since it is a conclusion rather than a finding of fact. Otherwise, accepted. Paragraph 81 is accepted in part, rejected in part as against the greater weight of the evidence. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, FL 32308-5403 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, FL 32308-5403 John F. Gilroy, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, FL 32308-5403 Michael J. Cherniga, Esquire Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentil, P.A. Post Office Drawer 1838 Tallahassee, FL 32302
The Issue Whether Certificate of Need application (Number 9078) for an adult kidney transplantation program, filed by St. Luke's Hospital Association, meets the statutory and rule criteria for approval.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the state agency authorized to administer the Certificate of Need (CON) program for health care facilities and services in Florida. Pursuant to Rule 59C-1.044, Florida Administrative Code, AHCA requires applicants to obtain separate CONs for the establishment of each adult or pediatric organ transplantation program, including heart, kidney, liver, bone marrow, lung, lung and heart, pancreas and islet cells, and intestines transplantations. For purposes of determining the need for organ transplantation services, the State of Florida is divided, by rule, into four service planning areas, corresponding generally with the northern, western central, eastern central and southern regions of the state. St. Luke's and Existing Providers St. Luke's Hospital Association operates St. Luke's Hospital (St. Luke's), a 289-bed, non-for-profit hospital with 17 beds for skilled nursing care and 272 acute care beds. St. Luke's is located on Belfort Road in Jacksonville, Duval County, Florida, AHCA, District 4, organ transplantation service planning area one. Available services at St. Luke's include obstetrics, open heart surgery, neurosurgery, adult bone marrow, and adult liver transplantation. The transplant services have been added during the last six or seven years. The severity of the illnesses and diseases treated at St. Luke's is represented by its relatively high Medicare case weight of 1.7 in 1997, after the addition of relatively low intensity obstetrics services. In 1998, St. Luke's applied for CONs to establish adult pancreas and islet cell, and adult kidney transplant programs. St. Luke's received the CON to establish the pancreas and islet cell transplant program. The application for a CON to establish an adult kidney transplant program is at issue in this proceeding. The parties stipulated that the letter of intent and application, for CON Number 9078, to establish the adult kidney transplant program, were timely filed. Methodist Medical Center, Inc., d/b/a Methodist Medical Center (Methodist) is a 244-bed acute care hospital, serving primarily adults, with special units for diabetes, hospice, and occupational medicine programs. The services do not include either obstetrics or pediatrics. In 1989, Methodist received a CON allowing its establishment of kidney transplant services. Methodist is located approximately one and a half miles north of downtown Jacksonville. Methodist's representatives contend that an additional kidney transplant program in Jacksonville, at St. Luke's, is not needed and will be detrimental to Methodist. St. Luke's, it was argued, will draw from a limited supply of organs and increase Methodist's financial losses. Those losses at Methodist were expected to range between $5 million and $8 million in 1999. Methodist's accountant described the hospital's financial health as poor to critical. The kidney transplant program provides a positive financial contribution at Methodist, largely due to Medicare reimbursements. At the time of the final hearing, Methodist was managed by Shands-Jacksonville, an affiliate of Shands Teaching Hospital and Clinics (Shands) at the University of Florida in Gainesville, and of University Medical Center in Jacksonville (University Hospital). Shands is also located in organ transplant service area one, but Gainesville is in AHCA District 3, not in 4 like Jacksonville. University Hospital is located across the street from Methodist and serves essentially the same inner-city, lower socio-economic population. St. Luke's was first established in the late 1800's. Previously located directly across the street from Methodist, St. Luke's was relocated near the intersection of J. Turner Butler Boulevard at Interstate 95, south of downtown Jacksonville in 1984. In 1987, St. Luke's became affiliated with the Mayo Clinic in Jacksonville (Mayo-Jacksonville). The two facilities share an administrator. St. Luke's receives approximately three- fourths of its admissions from Mayo-Jacksonville physicians. The Mayo-Jacksonville clinic is located approximately 12 miles from St. Luke's at J. Turner Butler Boulevard and Highway A-1-A. The multi-specialty and multi-subspecialty clinic, is staffed by 230 full-time salaried physicians. The governing board of Mayo-Jacksonville reports to the executive committee of its sole corporate member, the Mayo Foundation for Medical Education and Research (Foundation) in Rochester, Minnesota. The Foundation is the parent organization for the original Mayo Clinic in Rochester (Mayo-Rochester) and its affiliated hospitals, St. Mary's Hospital (with 1100 beds) and Methodist Hospital (with 700 to 800 beds), both in Rochester, Minnesota. In addition to the one in Jacksonville, the Foundation has also established a clinic in Scottsdale, Arizona (Mayo-Scottsdale). The Mayo-Scottsdale clinic is affiliated with a local inpatient hospital. Other related organizations include the Mayo Medical School and the Mayo Graduate School of Medicine. Issues Related to Need St. Luke's contends that its transplant surgeons would increase the total number of kidney transplants in Florida, by using less than ideal donor organs and by expanding waiting lists to enhance the possibility of donor/recipient matches. St. Luke's expects to overcome some of the usual limitations on available cadaveric organs because living donors can also be used to provide kidneys. Finally, St. Luke's maintains that a need exists for dual transplant programs, particularity the combination of kidney and pancreas programs. St. Luke's proposes to provide adult kidney transplants as an alternative to life-long dialysis or death for patients suffering from end-stage renal disease. Nationally, the number of dialysis patients increased from 123,822 in 1987 to 287,000 in 1996. The number of patients waiting for kidney transplants increased from 13,000 in 1987 to 41,000 in 1999. The mortality for patients on waiting lists also increased from over 1700 in 1996 to over 2000 in 1997. Due to the large and growing demand for organs, the federal government contracts with the United Network for Organ Sharing (UNOS) to coordinate the allocation of cadaveric organs. UNOS has designated five organ procurement organizations (OPOs) in Florida, one at the University of Florida in Gainesville (the UF OPO), and the others at centers in Orlando, Tampa, Fort Myers, and Miami. When cadaveric organs become available and are retrieved by surgeons from the nearest OPO, UNOS governs the priority in offering the organs. Organs are offered first to the United States military transplant centers, second to potential recipients who are six antigen or "perfect matches," then as paybacks to OPOs who have provided "perfect matches," and finally to various categories of other high-grade matches. After the organ is offered but not taken in the mandatory UNOS sharing hierarchy, the organ becomes available to local programs within the procuring OPO. St. Luke's will participate in the UNOS program for kidneys as it currently does for other organs, and expects to follow the medical protocols established at Mayo-Rochester, where kidney transplants have been performed for 30 years. St. Luke's has included $100,000 in start-up costs for Mayo-Rochester staff to train the St. Luke's staff. In establishing its successful liver transplant program, St. Luke's allocated $75,000 for comparable start-up costs. Rule 59C-1.044(8)(d), Florida Administrative Code, provides for the determination of the need for new programs, in part, based on the number of transplants performed at existing providers, which must exceed 30. An applicant must also provide a reasonable projection of volume, in excess of 15 a year by the second year of the proposed new program. Currently, two adult kidney transplant programs are approved or operational in each of the four service planning areas of Florida: at Shands in Gainesville and Methodist in Jacksonville in the north, which is service planning area one and coincides with the UF OPO; at Southwest Florida Regional in Fort Myers and Tampa General in western central Florida, which is service planning area two; at Florida Hospital in Orlando and Bert Fish Memorial in Volusia County in eastern central Florida, in service planning area three; and at the Cleveland Clinic Florida in Broward County and Jackson Memorial in Miami in the south, in service planning area four. At the time of this hearing, Bert Fish Memorial and the Cleveland Clinic were approved but not operational. The six operational Florida programs increased in volume from 442 transplants in 1994 to 641 in 1997, or an average increase of 13.2% a year. However, recent growth has been less dramatic. Using one year longer to establish a trend, from 1994 to 1998 data, the average annual increase was 9% a year. Kidney transplant volumes ranged, in 1997, from a low of 45 at Southwest Florida to highs of 150 at Jackson Memorial and 162 at Tampa General. From 1994 to 1997, the volume of kidney transplants within service planning area one increased from 35 to 52 at Methodist, and from 106 to 127 at Shands. As the parties stipulated, that volume exceeds the required minimum of 30 transplants at each provider in the service planning area. As also required by rule and stipulated by the parties, there are no new approved but not yet operational providers within service planning area one. Methodist notes that St. Luke's would be the first Florida program approved in a city which already has an existing kidney transplant service. The United States Renal Disease System (USRDS) is a national organization which collects and reports statistics on patients with end-stage renal disease (ESRD). USRDS is divided into regional networks, including Network Seven which is the ESRD Network of Florida, Inc. The Board of Directors of Network Seven adopted the following motion: The Network Seven Board of Directors reviewed the report of the Network's task force regarding the need for additional renal transplant resources for Service Area 1. After a lengthy discussion, the Board unanimously agreed that the Standardized Transplantation Ratio for Florida's Service Area 1 would not justify the establishment of a new stand-alone renal transplant program in this area. However, it agreed that the availability of a multi-organ transplant service (ie: pancreas and kidney) would be beneficial to those ESRD patients in residing [sic] Service Area 1. Two dual organ kidney and pancreas transplant programs are currently located in Florida, at Shands in Gainesville and at Jackson Memorial in Miami. Methodist notes that both are associated with medical schools at teaching hospitals, and are geographically well-suited to serve north and south Florida. Methodist's transplant surgeon who is the medical director of its program, and served on the Network 7 task force, agreed that a kidney/pancreas program is desirable. Apparently, most pancreas transplants are also done with kidneys but not vice versa. Relatively, few kidney/pancreas transplants are performed, although the number has doubled nationally since 1991. In 1997, there were 3 kidney/pancreas transplants at Shands, 3 at Mayo- Rochester and 33 at Jackson Memorial. The low volume of the dual transplant procedures reflected both medical skepticism and the absence of insurance reimbursement for the procedure when it was considered experimental. Having performed six dual transplants for no charge in 1998, Shands has been able to convince a majority of its third-party payors in Florida to pay for the procedure. The federal government, through the Medicare program, also changed its policy and now reimburses for kidney/pancreas transplants. As a result, the number of dual transplants is reasonably expected to increase. No CON is issued, under the Florida system, to authorize the dual kidney/pancreas program only. As Methodist noted, St. Luke's did not offer to condition its CON by limiting itself to a dual transplant program. The standardized transplantation ratio (STR), on which the Network Seven Board relied, is the ratio of first kidney transplants to the expected number based on the estimated national rate adjusted for age. For the four Florida organ transplant service planning areas, the STRs reported by Network Seven are as follows: Region 1 (North) 1.00 Region 2 (West Central) 1.35 Region 3 (East Central) 1.19 Region 4 (South) .66 A STR of 1.0 indicates generally, that a region is performing transplants as expected based on the national average. Therefore, the suggestion that the performance is mediocre is rejected. Methodist supports its argument that no need exists for an additional kidney transplant program at St. Luke's, based on Network Seven's finding that the STR for the region is roughly what should be expected. St. Luke's, however, asserted that the STR could be raised to the level of region two with the approval of a new program. In fact, the approval of a program at the Cleveland Clinic in Broward County, in region four, was supported by Methodist's expert health planner, among others, in part, by the desire to raise the STR. That situation can be distinguished based on geography and the failure in region four to meet expectations, while a better performance than the national average is not to be expected necessarily from the approval of another program in the same city in region one. While the STR is helpful in an analysis of need, Rule 59C-1.044(8)(d), Florida Administrative Code, requires consideration of the projected transplant volume based on the number of end-stage renal disease patients. Basically, these are patients whose kidneys have ceased to function. From June to December 1998, Network Seven estimated that the number of patients with kidney failure in service planning area one increased from approximately 2800 to 3000. Using expected population growth only, not the historical growth rate, St. Luke's conservatively estimated in its CON that number of patients would reach approximately 2900 by the end of the year 2000. Because some patients are not medically appropriate transplant candidates or will, for other reasons, never receive the service, St. Luke's used a ratio of patients to project transplant cases. Using only 20% of patients between ages 14 and 65, St. Luke's reasonably projects a need for over 300 kidney transplant surgeries in service planning area one in the year 2000. Using population increase and the lower historical growth rate of 9.5%, St. Luke's established a need for up to 450 kidney transplants in 2000 in service planning area one. Either number is sufficient to document St. Luke's ability to perform at least 15 kidney transplants by the end of the second year of operation, as required by rule. Methodist's expert further reduced by 40% the number of potential transplant patients to get what the projected to be the actual number of surgeries. This number is intended to take into consideration the limited number of cadaveric organs. The result is, however, unrealistically lower numbers, in the range of the actual number of surgeries currently performed in area one and is, therefore, rejected. In fact, despite the limitations on cadaveric organs, the number of kidney transplants has continued to increase. St. Luke's experience with liver transplants is also evidence of its ability to exceed the minimum number of 15 kidney transplants in the second year of operation. Specifically, St. Luke's expects to perform 15 kidney transplants in the first year, and 30 in the second year. More than double the projected number of Florida residents received liver transplants, 25 or 26 as compared to 12 or 13 cases in the first seven months of that program at St. Luke's. Compared to projections of 15 liver transplants in year one, 30 in year two, St. Luke's transplant surgeons actually performed 113 after 18 months. Significantly, the volume at Shands has also increased based on the annualized volume for the first quarter of 1999. St. Luke's also demonstrated that it is successfully transplanting livers which were rejected by other Florida programs. Currently, the same team of transplant surgeons harvests all abdominal organs, livers, kidneys, and pancreases, but can use only the livers at St. Luke's. The surgeons who perform the liver transplants at St. Luke's will also perform kidney transplants. As a result of the team's aggressive use of organs and recent changes in federal government requirements for notice of potential donors and reimbursement policies, St. Luke's is reasonably expected to assist in expanding the available supply of cadaveric organs and in increasing the number of transplant surgeries. Subsection 408.035(1)(a) - need in relation to district plan The District 4 health plan, developed by the Health Planning Council of Northeast Florida, Inc., includes preferences applicable to the evaluation of St. Luke's application. Preference one applies to applicants who will meet identified needs with acceptable quality in an economical manner. St. Luke's expert conceded that its proposal will be more costly and require longer average lengths of stay when compared to that at Methodist but not as compared to other Florida programs. St. Luke's projected an average length of stay of 7.6 days at $50,123 per case, but the Florida average is 10.5 days at $81,048. No construction is required for implementation of the project which has a total cost of $238,450. Therefore, St. Luke's proposal generally meets the requirements of preference one. Preference two, for applicants who will alleviate a geographic access problem, is not met by St. Luke's. One argument advanced by St. Luke's and rejected is that the existing providers are not using organs at the appropriate rate. Considering 1997 data, Shands and Methodist appear not to accept and use kidneys at the expected rate, as calculated and assigned by UNOS. The reported expected acceptance rate for Methodist is 30.7% in contrast to an actual rate of 11.5%. Shand's assigned expected rate is reported to be 53.8% but its actual rate of acceptance is shown as 37.4%. Corrected UNOS data shows the opposite result, that acceptance rates are higher than expected. UNOS data is inconsistent and inconclusive. In general, the data is so unreliable as to have no significant probative value. St. Luke's meets preference three by caring for HIV positive patients. St. Luke's also demonstrated its access to adequate staff for a kidney transplant program, meeting the requirement of preference four. Methodist questioned St. Luke's failure to list a certified transplant nephrologist on its staff, but physician services are provided by salaried employees of Mayo-Jacksonville. Preference five favors applicants who demonstrate that a new service will not have a significant negative impact on similar facilities. Even though there may be sufficient numbers of kidney disease patients who qualify for and have access to transplants in service area one, the geographic overlap of the programs is an issue of concern related to impact. Methodist primarily serves transplant service area one patients. St. Luke's draws 50% of its patients from Duval and the five surrounding counties, 35% from other areas of Florida, and 15% from elsewhere, primarily Georgia and the southeastern United States, but that also includes 3% of international origin. It is reasonable to expect St. Luke's to maintain approximately the same patient origin mix in a kidney program. This mix will require St. Luke's to perform only 8 kidney transplants on patients from service area one in order to reach the minimum volume requirement of 15 in the second year, which is actually projected for the first year. Currently, 16 Mayo-Jacksonville patients who are on the waiting list for kidney transplants at Methodist would likely receive transplants at St. Luke's if it had a program. Taking into consideration growth and applying a traditional impact analysis, Methodist will lose two to four cases, and Shands will lose nine cases in the first year of a competing program at St. Luke's. With that level of impact, both programs remain substantially above the minimum required by AHCA rule. One expert equated the loss of ten cases from Methodist, to a financial loss of $100,000, after reimbursement deductions and reduced expenses. The overall magnitude of Methodist's financial losses is so great that the loss of the contribution from the kidney transplant program is insufficient to affect the hospital's profitability. Similarly, the loss of nine cases from Shands leaves volume significantly above the minimum required. Methodist and St. Luke's differ in their reliance on cadaveric and living donors, which also should help alleviate any impact of competition for cadaveric organs on the existing program at Methodist. While Methodist uses 50% living donors, St. Luke's projects a more traditional mix of 30% living. It is reasonable to expect that the growth in transplants, and the differences in patient and organ origins will allow Methodist to avoid any detrimental effect from the establishment of a program at St. Luke's. Methodist suggested that the approved program in Volusia County, and to a lesser extent, that in Broward County will also be unable to achieve minimum volumes if a program is established at St. Luke's. Methodist's support for the Volusia County program, however, lends credence to St. Luke's assertion that the geographic overlap is minimal. St. Luke's demonstrated that the number of projected transplants, taking into consideration the approved programs, is considerably lower than the expected numerical increase in surgeries. Projections of 30 at St. Luke's, six at the Cleveland Clinic, and 25 at Bert Fish during the year 2000 are achievable from the projected growth in kidney transplants. The data also indicates that the Florida waiting lists for transplant candidates could and should be expanded. Separate transplant provider lists are coordinated into the organ sharing list maintained by UNOS. Nationally, 150 people for every one million are on waiting lists for kidney transplants. That number, even adjusted to exclude older patients, is double the ratio for the Florida waiting list. Some expansion is reasonably expected as a result of the establishment of a new Florida program. The numbers needed and projected at each program, the differences in projected patient origins, the ability to expand the waiting list and the absence of an adverse impact from the establishment of the liver transplant program at St. Luke's provide some assurance that a kidney transplant program will not be detrimental to the existing providers. Preference six, for applicants who will maximize services to rural county residents, is met by St. Luke's service to surrounding rural areas. In addition to the general health plan preferences for CON applicants, the District 4 health plan includes specific preferences for transplant services. The parties stipulated that preferences one and five for applicants in major population areas (over 250,000) and for pediatric services are not at issue. Specific preference two applies to applicants with relationships with a broad spectrum of other health care providers, including agreements for patient transfers and organ procurement. In response, St. Luke's refers to its active participation in the UF OPO. As Methodist notes, however, a continuation of the existing relationship, with Mayo physicians performing kidney transplants at Methodist, is the most cost- effective and non-duplicative alternative. St. Luke's transplant surgeons will continue to provide coverage for the surgeons at Methodist. Transplant-specific preference three favors applicants who have a significant role in regional and national research efforts, including by government contracts or research grants. Methodist insists that a distinction be made between the well- known work of the Mayo Foundation and that of St. Luke's. The Mayo Foundation divides its services into three major segments - medical care, medical research, and medical education. Research is supported by over $100 million from government agencies and $80 million from the Foundation. Over a thousand residents and fellows are enrolled in Mayo educational programs. Over 75 transplant-specific research projects within the Mayo system are coordinated by a single institutional review board. Admittedly, a non-university facility, St. Luke's does participate in Mayo educational and research activities. Over 60 Mayo-Rochester physicians, residents, and fellows were rotating through Mayo-Jacksonville and practicing at St. Luke's at the time the CON application was filed. St. Luke's separate budget for basic science research also exceeded $10 million for over 200 active research protocols. The medical research building at Mayo-Jacksonville exceeds 80,000 square feet in size. For these reasons, St. Luke's demonstrated that its participation in educational and research activities satisfies the preference. Transplant preference four favors applicants with a specific commitment to provide charity care. In its application, St. Luke's commits to providing 6% of total kidney transplants to Medicaid or charity patients. One expert witness noted that St. Luke's commitment exceeds the statewide volume of 4% Medicaid/charity kidney transplant patients, which was the condition for approval of the Bert Fish CON. Most patients with end-stage renal disease are covered by Medicare. In calendar years 1996-1998, Shands provided over 30% Medicaid and from 4 to 8% charity care. Methodist provided from 9 to 11% Medicaid and approximately 2% charity care. By contrast, St. Luke's provided from .7% to 1.2% Medicaid and just over 2% charity case. St. Luke's meets the preferences by specifying a reasonable commitment for the kidney transplant program, although it has historically provided comparatively insignificant Medicaid and charity care. Since organ transplant service area one includes Districts 1, 2, and 3, as well as 4, St. Luke's and AHCA also considered the local health plans for those districts. Both noted that District 3 has a preference for organ transplant applicants which are teaching hospitals, as defined by Florida Statutes. St. Luke's does not meet that preference. It is not a statutory teaching hospital. On balance, St. Luke's does meet the intent of local health plans preferences and, therefore, the requirements of Subsection 408.035(1)(a), Florida Statutes. Subsection 408.035(1)(b) - increase/improve availability, access, quality of care, efficiency, utilization, and adequacy of like and existing facilities in the district In its application, St. Luke's illustrated the concern for renal patients as follows: End-stage renal disease is a large and growing problem in Florida and north Florida. with 14,168 ESRD patients in Florida and 2,822 ESRD patients in service planning area one during 1998, with 787 Florida residents added to the kidney waiting list during 1997, and with Florida resident deaths due to diabetes growing to 3,828 deaths by 1997, the magnitude of the ESRD problem is evident. St. Luke's Exhibit 1 at p. 96. St. Luke's plans to serve an increasing pool of patients within the District and the service planning area. With its aggressive use of organs, St. Luke's can also increase available cadaveric organs, thus increasing numerically, the accessibility, availability and utilization of kidney transplant services in the district. The efficiency of all providers is also reasonably expected to be enhanced due to the introduction of competition into the market. Currently, the relationship between Methodist and Shands is not competitive. Subsection 408.035(1)(c) - quality of care Modeled after that of the Mayo Clinic Rochester, St. Luke's kidney transplant program will be emulating a program with the nation's best survival rates despite its use of organs which have been rejected by others. St. Luke's is licensed by the AHCA, certified to participate in the Medicare and Medicaid programs, accredited by the Joint Commission on the Accreditation of Health Care Organizations (JCAHO), and certified by UNOS to perform transplants. The parties stipulated that St. Luke's has a history of providing a high quality of care. The evidence also supported a finding that St. Luke's will also provide the same high quality of care in kidney transplantation services, using the same physical spaces, by essentially the same staff. St. Luke's staff will require only specialized kidney transplant training and equipment. Subsection 408.035(1)(d) - available and adequate alternatives An alternative to a new kidney transplant provider is the expansion of the volume of cases performed at existing providers. There are no physical constraints to the alternative, only the need for additional staff and supplies. Methodist and Shands can absorb the projected increase in kidney transplant surgeries in the service planning area. Given that lack of constraint, the minimum volume established for existing providers by rule, gives the guidance to determine whether it is appropriate to expand volumes at existing providers or to introduce a new provider. Because there is no competition in the service area in which the existing providers are well above the minimum volume, and the projected volumes for the new programs are exceeded by the projected additional transplants, the establishment of an additional program is appropriate. Subsection 408.035(1)(e) - economies and improvements from joint operative or shared resources The advantages of developing a kidney transplant program at St. Luke's include: the ability to utilize the existing infrastructure which supports the liver and bone marrow transplant programs; and the ability to adopt Mayo Rochester's treatment protocols, standards, and training resources, and to participate in its research projects. The only clearly identified disadvantage is the risk of undermining the cooperation of Mayo-Jacksonville transplant surgeons with Methodist and the loss of some transplant surgeries from Methodist and Shands. On balance, the introduction of a kidney program in Florida, emulating the Mayo-Rochester program, offers a valuable sharing of Mayo resources. Subsection 408.035(1)(f) - need for equipment or services not accessible in adjoining areas St. Luke's proposal will not result in the introduction of any special equipment or services which are not reasonably or economically accessible in adjoining areas. Subsection 408.035(1)(g) - need for research and educational facilities; (1)(h) - needs of training programs and schools for health professionals Mayo-Jacksonville has active research, medical residency, and fellowship training programs in Jacksonville. Most of the inpatient care associated with the research and educational programs is provided at St. Luke's. A new program at St. Luke's offers new educational opportunities for Mayo- Jacksonville physicians. Subsection 408.035(1)(h) - availability of personnel for project accomplishment (see also Rule 59C-1.044) While the statutory criteria generally, considers whether CON proposals include plans to employ the necessary personnel, the organ transplant rule gives much greater detail. As required by rule, St. Luke's has the staff needed to care for the transplant patients. It offers 24-hour on-site dialysis, and is staffed by renal care and dialysis nurses, nutritionists, respiratory therapists, social workers, psychologists, dialysis laboratory workers and administrators. Physicians include board and UNOS certified transplant surgeons, anesthesiologists, pathologists, psychiatrists, nephrologists, endocrinologists, and immunologists and infectious disease specialists. In addition to the health care professionals needed for operation of a kidney transplant program, St. Luke's has significant experience with the data collection process necessary to evaluate adequately a transplant program. Among the requirements of the Rule are a 24-hour shared call system for organ procurement, and clinical review committees, which already exist. St. Luke's operates a 17-bed intensive care transplant unit capable of prolonged reverse isolation, if required. Equipment is available and in operation for cooling, flushing, and transporting organs, as are an on-site tissue typing laboratory and an in-house blood bank, as the parties stipulated. Subsection 408.035(1)(h) - availability of funds for project accomplishment and Subsection 408.035(1)(i) - immediate and long-term financial feasibility The total project cost is $238,450, which covers filing fees, staff training, and equipment. No renovation or construction costs are anticipated because St. Luke's has adequate capacity to implement the kidney program in existing spaces. Methodist's expert testified that the financial feasibility of the project cannot be determined due to errors on Schedule 2 of the CON application and the lack of reliable utilization projections. As previously determined, the utilization projections are supported by the projected number of area one patients with kidney failure who ultimately have transplant surgeries. Schedule 2 of the CON application lists the capital project commitments of the applicant. St. Luke's listed projects which total $35.9 million taken from a "1998 Capital Budget Request Summary." The total, in excess of $35 million, represents the budget request summary of just over 34 million, minus approximately $4 million that had already been spent, plus a little over $5 million for the two pending CONs and expansion of an intensive care unit (ICU). The ICU expansion cost of $500,000, was understated by $766,000. At the hearing, however, St. Luke's expert testified that he mistakenly listed St. Luke's "wish list," when he used $34 million, which exceeded "approved" projects by $17 to $18 million. That total would have been approximately $16,974,000. The available cash and investments for St. Luke's, approximately $80 million, is sufficient to cover the project costs and other capital projects at either $35 million or $16 million, or $21 million if, as asserted at hearing, the $16 million is understated by $5 million. The proposal is financially feasible in the short-term, even considering the decline in available cash and investments to $65 million at the time of the final hearing. In terms of long-term financial feasibility, the experts considered profits or losses from operations. St. Luke's experienced losses from operations of $4.5 million, $4 million, and $12.9 million in the years 1996, 1997, and 1998, respectively. When investment income is considered, however, St. Luke's had a positive income figure of $5.2 million in 1997 and losses reduced to $.7 million in 1998. St. Luke's explained the losses as temporary due to the initiation of costly new services, the enhancement of information systems, and an increase in charity care. The charges for kidney transplants at St. Luke's are expected to equal $57,200 a case, or $1.7 million in gross revenue for 30 cases at the end of the second year of operations. The expected charges are reasonable when compared to charges, in 1996, of $50,000 at Mayo-Rochester, $42,000 at Shands, $38,000 at Methodist, and a Florida average of $81,000. Kidney transplants continue to receive cost-based reimbursements from Medicare. From the $1.7 million in gross revenue, St. Luke's expert projected an incremental profit of approximately $100,000. In addition, the audited financial statements of the Foundation were submitted with St. Luke's CON, with a statement of the Foundation's willingness to fund the project. With over $1 billion in cash and investments and, for 1997, net income over $31 million, the Foundation is able to assure the short and long- term financial feasibility of the kidney transplant program at St. Luke's. Subsection 408.035(1)(j) - needs of a health maintenance organization (HMO) Although the Mayo organization includes a licensed Florida HMO, the proposal is not intended to serve its needs any more than those of any other potential patients. Mayo- Jacksonville and St. Luke's have contracts to provide services to a number of other HMOs. Subsection 408.035(1)(k) - substantial services to non-resident of the district or adjacent districts Currently, St. Luke's attracts 51% of its patients from Duval County, another 21% from the other counties in District 4, 16% from the rest of Florida, and the remaining 12% from outside of Florida. The patient origin for Mayo-Jacksonville is even more geographically dispersed than that of St. Luke's, with 22% of from outside of Florida. By comparison, nearly 99% of Methodist's patients come from North Florida. St. Luke's patient origin data indicates the reasonableness of its expectation that 15% of kidney transplant patients will come from outside Florida. St. Luke's, therefore, meets the criterion for substantial service to non-residents. Subsection 408.035(1)(l) - impact on costs, effects of competition on improvements or innovations in financing and delivering services with quality assurance and cost-effectiveness St. Luke's expects expanded transplant services to reduce its overall fixed cost per transplant. The introduction of a Mayo-affiliated medical program is reasonably expected to introduce beneficial competition to the market which currently has no competition. The fact that competition will come from a nationally-known, very successful program is expected to have a positive impact on existing programs. Subsection 408.035(1)(m) - costs and methods of construction Methodist contends that St. Luke's omission of architectural drawings or floor plans in the CON makes it impossible to consider the statutory criteria related to construction. While St. Luke's failed to include any architectural drawings, it did include descriptions of the existing spaces and in-house services which will support the program. Schedule 1 and 9 of the application show that no costs are associated with construction, expansion, remodeling or demolition. Architectural drawings were not submitted and not required by AHCA for CONs filed by the Cleveland Clinic (kidney transplant), Tampa General (lung transplant), and University Medical Center (heart transplant). In each instance, the facility proposed using existing spaces for the new programs. Based on AHCA's past practices in comparable circumstances, St. Luke's application is not flawed due to the absence of architectural plans. Subsection 408.035(1)(n) - history of and proposed services to Medicaid and medically indigent patients St. Luke's has historically provided limited Medicaid and charity care. See Findings of Fact 39 and 40. St. Luke's proposal to perform 3% Medicaid and 3% charity kidney transplants in the second year of operation is the equivalent of one Medicaid and one charity case. That commitment, however, exceeds the Florida average and the commitment AHCA required of Bert Fish program. The commitment made by St. Luke's is adequate for kidney transplant services. Subsection 408.035(1)(o) - past and proposed continuum of care in multi-level system St. Luke's affiliation with Mayo physicians' practices and the Mayo-Jacksonville clinic allow it to incorporate kidney transplant services into a multi-level system which includes home health and outpatient care. Subsection 408.035(2)(a) - capital expenditures proposals (a) less costly alternatives; (b) utilization of similar services; (c) alternatives to new construction; and (d) serious access problems Subsection 408.032(2), Florida Statutes, defines capital expenditures as follows: "Capital expenditure" means an expenditure including an expenditure for a construction project undertaken by a health care facility as its own contractor, which, under generally accepted accounting principles, is not properly chargeable as an expense of operation and maintenance, which is made to change the bed capacity of the facility, or substantially change the services or service area of the health care facility, health service provider, or hospice, and which includes the cost of the studies, surveys, designs, plans, working drawings, specifications, initial financing costs, and other activities essential to acquisition, improvement, expansion, or replacement of the plant and equipment. In this project, St. Luke's proposes to incur the cost for kidney transplant equipment to establish the new service. The least costly alternative is enhanced Mayo participation in the program at Methodist. Methodist is, however, sufficiently utilized, well in excess of the rule minimum. No new construction is required at St. Luke's to implement the kidney transplant service. Patients will not, however, experience serious problems with access to kidney transplant services if St. Luke's is not approved. There are no physical constraints on the expansion of services at Shands or Methodist. In the absence of physical constraints at existing providers, but in consideration of their volumes which are well in excess of that required, the introduction of competition of the Mayo quality at such low cost is, on balance, desirable for the health care system.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That a final order be entered issuing CON 9078 to establish a new adult kidney transplant program at St. Luke's Hospital in Jacksonville. DONE AND ENTERED this 17th day of February, 2000, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER 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 17th day of February, 2000. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Richard A. Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 F. Philip Blank, Esquire R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Michael J. Cherniga, Esquire Seann M. Frazier, Esquire Greenberg Traurig, P.A. Post Office Drawer 1838 Tallahassee, Florida 32302
Conclusions Sovereign immunity extends to “corporations primarily acting as instrumentalities . . . of the state, county, or municipalities.” See § 68.28(2), F.S.; Pagan v. Sarasota County Public Hospital Board, 884 So.2d 257 (Fla. 2d DCA 2004). MRHS was deemed to be an instrumentality of the hospital district by the Attorney General in an opinion dated December 8, 2006 and the circuit court in Marion County has reached the same conclusion in several cases. As a result, MRHS is entitled to sovereign immunity under § 768.28, F.S. The public policy basis for extending sovereign immunity to private entities such as MRHS has recently been questioned by two appellate courts. See University of Florida Board of Trustees v. Morris, 32 Fla. L. Weekly D1803 (Fla 2d DCA July 27, 2007) (Altenbernd, J., concurring), rev. denied, 2008 Fla LEXIS (Fla. Jan. 7, 2008); Andrews v. Shands at Lakeshore, Inc., 33 Fla. L. Weekly D30 (Fla 1st DCA Dec. 20, 2007). The nurses are employees of MRHS and they were acting within the scope of their employment when providing services to Tyler. As a result, the nurses’ negligence is attributable to MRHS. The nurses had a duty to provide competent medical care to Tyler. They breached this duty and violated the standards of care for nursing personnel by failing to report the cyanotic episodes to Dr. Pierre and by failing to properly perform the four-extremity blood pressure test. The nurses’ actions and inactions contributed to the delayed diagnosis of Tyler’s heart condition. However, Dr. Pierre’s failure to order an immediate cardiology consultation when she detected a heart murmur shortly after Tyler’s birth also contributed to the delayed diagnosis of Tyler’s heart condition. The delayed diagnosis of Tyler’s heart condition led to his “crash” on December 16 because it is more likely than not that Tyler would have been transferred to Shands or another tertiary facility had his condition been diagnosed sooner. Tyler was not a candidate for the second and third stages of the Norwood procedure because of the damage caused by the “crash,” and he also suffered brain damage during the “crash” that caused his developmental delay. The amount of damages agreed to by MRHS is reasonable, even though Dr. Pierre likely shares some of the responsibility for Tyler’s condition. Indeed, the life care plan prepared for Tyler reflects that the cost of a transplant is between $650,000 and $700,000 and Tyler is expected to require multiple transplants over the course of his life. Moreover, the non-economic damages (e.g., pain and suffering) of Tyler and his parents could very well have exceeded the settlement amount had the case gone to jury trial. LEGISLATIVE HISTORY: This is the first year that this claim has been presented to the Legislature. ATTORNEYS’ FEES AND LOBBYIST’S FEES: The claimants’ attorney provided an affidavit stating that that attorney’s fees will be capped at 25 percent of the amount awarded by the claim bill in accordance with §768.28(8), F.S. Lobbyist’s fees are not included in the 25 percent attorney’s fees. Lobbyist’s fees will be an additional 4 percent of the amount awarded by the claim bill, which would be $28,000 based upon the $700,000 claim. The Legislature is free to limit the fees and costs paid in connection with a claim bill as it sees fit. See Gamble v. Wells, 450 So. 2d 850 (Fla. 1984). The bill does so by stating that “[t]he total amount paid for attorney’s fees, lobbying fees, costs and other similar expenses relating to this claim may not exceed 25 percent of the amount awarded [by the bill].” If this language remains in the bill (and the bill is amended as recommended below to reflect the allocation approved by the circuit court), the claimants will receive a total of $525,000, with $393,750 going into Tyler’s special needs trust and $131,250 going to his parents. The remaining $175,000 will go to attorney’s fees, costs, and lobbyist’s fees. If this language was not in the bill (and the bill is amended as recommended below to reflect the allocation approved by the circuit court), the claimants would receive approximately $362,000, with approximately $271,500 going into Tyler’s special needs trust and approximately $90,500 going to his parents. The claimants’ attorney would receive a total of approximately $310,000 ($175,000 for attorney’s fees and approximately $135,000 for costs), and the lobbyist would receive $28,000. OTHER ISSUES: The bill identifies the Marion County Hospital District as the entity responsible for payment of the claim. The parties agree, and I recommend that the bill be amended to reflect MRHS as the entity responsible for payment because it is responsible for operating the hospital pursuant to a lease from the hospital district. The bill requires the entire claim to be paid into Tyler’s special needs trust. The parties agree, and I recommend that the bill be amended to require payment of the claim in accordance with the allocation approved by the circuit court, i.e., 75 percent into Tyler’s special needs trust and 25 percent to his parents. The bill requires any funds remaining in Tyler’s special needs trust upon his death to revert to the General Revenue Fund. The parties agree, and I recommend that the bill be amended to remove this language because the bill is being paid from the hospital’s funds, not State funds. The bill should be also amended to include the standard language requiring payment of Medicaid liens prior to disbursing any funds to the claimants. See § 409.910, F.S. RECOMMENDATIONS: For the reasons set forth above, I recommend that Senate Bill 68 (2008) be reported FAVORABLY, as amended. Respectfully submitted, cc: Senator Charlie Dean Representative Marcelo Llorente Faye Blanton, Secretary of the Senate T. Kent Wetherell Senate Special Master House Committee on Constitution and Civil Law Tony DePalma, House Special Master Counsel of Record
