The Issue Whether Petitioner should be granted CON No. 6606 to convert 10 medical/surgical beds to 10 neonatal intensive care beds to create a Level II neonatal intensive care unit (NICU).
Findings Of Fact UCH is a licensed acute care hospital with 404 authorized beds. A number of these beds were transferred to the Women's Center, which was exempted from CON review by DHRS. (Exhibit 8) The Women's Center involved the expenditure by UCH of some $11,000,000 to construct and equip a separate building adjacent to the existing hospital. The Women's Center was completed and became operational in September 1991. Accordingly, at the time the Application for NICU beds was submitted through the processing of the Application by DHRS, no births were experienced at this facility. For the first two months the Women's Center was operational, the Women's Center experienced 107 births of which 1 required transfer to a hospital providing Level II neonatal intensive care services. At the time the batching cycle for the September 27, 1990 deadline and January 1993 planning horizon was published (Exhibit 18), the NICU inventory was in litigation, and DHRS did not publish a fixed bed need pool for that batching cycle. Instead, in Florida Administrative Weekly, Vol. 16, No. 34, dated August 24, 1990 (Exhibit 18), an estimated inventory of existing beds was used in the bed need formula calculation. This showed for District VI zero need for additional NICU Level II beds. Subsequent to the issuance of the State Agency Action Report (SAAR), in this case litigation was complete, and DHRS entered a Final Order on September 15, 1991 establishing the bed inventory for neonatal intensive care beds Level II and Level III in District 6. That Order increased the NICU Level II bed inventory by 15 beds by adding four beds to Lakeland Regional Medical Center (LMRC) NICU and 11 beds to Winter Haven's NICU. These additions increased the NICU Level II inventory in District VI from the 61 shown on Exhibit 18 to 76. The SAAR (Exhibit 6) used an inventory of 77 Level II NICU beds in District VI to determine no need after application of the bed need formula showed a need for 70 Level II NICU beds in District VI. Changing the inventory from 77 to 76 NICU beds does not affect this conclusion. Occupancy rates used in the bed need calculation were taken from the reports hospitals are required to submit to local health councils. In some instances in the batching cycle here involved, the hospitals had failed to report to the local health councils their occupancy rate for the period required by the bed need formula, and DHRS contacted these hospitals in District VI for the data needed. Petitioner contends that the occupancy rate data relied upon by DHRS in calculating the need for NICU beds for the 1993 planning horizon is inaccurate and that more reliable data is obtained from using different reports that the hospitals are required to submit to the Hospital Cost Containment Board (HCCB). Petitioner's expert witness opined that the information hospitals are required to submit to the HCCB provides a more accurate method of determining the occupancy rate of the Level II NICU beds at each hospital. Petitioner also contends that at the time the Level II occupancy rates were provided to DHRS there was no finite definition, by rule, of the differences between Levels I, II and III NICUs, and the hospitals did not submit accurate data. However, credible evidence was presented that a proposed definition of Levels I, II and III NICUs had been promulgated to all of the hospitals and, when enacted as a rule, this proposed definition was adopted verbatim or nearly so. Intervenors' witnesses pointed out that the hospital reports to HCCB are based on DRG's (diagnostic related groups), and the same DRG is frequently used on a Level I, II or III NICU admission. Accordingly, from those reports to the HCCB an accurate determination of the Level II occupancy rate cannot be made. Furthermore, the patient, during the hospital stay, is frequently moved from Level III to Level II to Level I care, and this data cannot be obtained from the reports submitted to the HCCB. Accordingly, it is found that the reports submitted by hospitals to the local health councils provide more accurate occupancy rates than can be gleaned from the reports submitted to the HCCB, and the occupancy rate utilized by DHRS to calculate NICU bed need is correct. The average occupancy rate for District VI hospitals providing NICU Level II beds was approximately 70 percent during the most recent 12 months prescribed for this batching cycle. Although discrepancies were noted in the patient days at Humana and Tampa General during this period, when these discrepancies were corrected, the district occupancy rate remained in the vicinity of 70 percent. Rule 10-5.042(3)(d), Florida Administrative Code, provides that regardless of bed need shown (by using the bed need formula) the establishment of new Level II NICU beds within a district shall not normally be approved, unless the average occupancy rate for Level II beds in the district equals or exceeds 80 percent for the most recent 12 month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed bed need pool. Petitioner submitted no evidence to demonstrate a not normal situation existed to waive the 80 percent average District VI occupancy rate required before additional Level II NICU beds will be approved. Petitioner principally relied upon the admissions in Hillsborough County to demonstrate an 80 percent occupancy rate. However, the rule specifically refers to a district rate rather than to a subdistrict or one-county rate. In several areas, Petitioner's estimates used to determine the anticipated number of patients to be served in the proposed NICU are not realistic. To determine the ratio of Level II patients to the number of births, Petitioner relied on data from Lakeland Regional Medical Center (LMRC) as a comparable hospital. However, LMRC is not comparable to UCH in patient payor mix. In excess of 40 percent of LMRC obstetrical cases are Medicaid patients, while UCH projects only 6 percent Medicaid births. A lower income payor such as Medicaid patients have a much higher ratio of ill babies at birth than do more affluent mothers who generally receive better prenatal care. Consequently, the percentage of births needing Level II care in the payor mix expected at UCH is more comparable to the percentage experienced by Humana Women's Hospital, an Intervenor herein. At Humana the percentage of births requiring Level II care is on the order of 6 percent as compared to 15.6 percent at LMRC. This lower ratio is more consistent with UCH experience in its first two months of operations where out of 107 births only 1 required transfer to a Level II NICU. Some question was raised regarding the accuracy of Petitioner's estimate of 1500-1700 births during the first full year of operation. While it would be expected that admissions to a new facility would be lower the start-up year than in subsequent years, hard evidence to support the proposed number of births or a lessor number was not presented. In either case, Petitioner has failed to meet the birth requirement of a minimum of 1000 live births for the most recent 12 month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed need pool needed to qualify for this CON. Petitioner presented no evidence to support the not normal conditions that would provide an exemption to this requirement in Rule 10-5.042(6), Florida Administrative Code, other than the fact that it is patently obvious that a hospital that commenced operations 6 months after submitting its CON application could not demonstrate 1000 live births in the 12 months preceding its application. The protesting providers of Level II neonatal care are both located within one hour driving time of the site of UCH as is All Children's Hospital in St. Petersburg. The other hospitals in District VI providing Level II neonatal care, to wit Manatee Memorial Hospital, Winter Haven Hospital and LMRC, are also within two hours driving time of UCH which is the geographical access guideline established by rules for NICUs. Although UCH contends that its application meets all eight preference items prescribed by the state health plan, the evidence presented established its application conclusively meets only one of these preferences, number 6. Absent a showing of need for the proposed facility as found in finding 6 above, granting this CON will increase the excess NICU beds in District VI and adversely impact existing providers. This includes Tampa General which is a disproportionate share provider (of Medicaid and indigent care). It appears from the evidence presented, that in constructing the Women's Hospital, space for an NICU was provided in the plans and, while awaiting a CON to provide a 10 bed Level II ICU, the space is used for storage. No structural changes will be required to operate a NICU at this location, and costs are related primarily to the equipment that will be needed. Whether the installation of a NICU in this space will improve the physical plant of the Women's Center depends on from which advantage point one looks. From Petitioner's point of view, the NICU would improve the physical plant and comply with Preference 3 of the state health plan. Based upon the premise that the proposed NICU beds will be used at an occupancy rate of 70 percent or greater, the conversion of 10 acute care beds currently operating at less than 50 percent occupancy to NICU beds, the overall occupancy rate will increase and Preference 4 would be met. However, no credible evidence was presented that the proposed 10 bed Level II NICU will operate at 70 percent capacity. If initial utilization of Level II care continues and less than 1 percent of UCH live births require Level II care, this Preference will not be met. Although Petitioner did not address Preference 5 in its application, the SAAR notes that HCB reports show of the three hospitals with a grouping of "05" UCH has lower gross revenues per adjusted admission. Petitioner meets Preference 6. Preference 7 of the State Health Plan pertains to applicants who propose to provide neonatal intensive care services to Children's Medical Services (CMS) and non-CMS patients who are defined as charity care patients. Although UCH proposes to provide 6 percent Medicaid and 5 percent indigent care, past history does not support this level of indigence or low pay care. Under Preference 8 of the State Health Plan, preference is given to applicants who propose to serve substance abuse, pregnant and postpartum women, and coordinate their services with other appropriate social agencies. Although UCH stated in its application that it has developed a referral relationship with the Teen Mom's Program, it did not specifically address coordination of its services with substance abuse, pregnant and postpartum women. The local health plan for District VI provides preference shall be given to an applicant who provides the department with documentation that they provide, or propose to provide, a disproportionate share of Medicaid and charity care patient days in relation to other hospitals in the subdistrict. UCH is not a disproportionate share provider and does not propose to become one. Accordingly, it does not comply with this preference item in the district health plan.
Recommendation It is, therefore, recommended that a Final Order be entered denying the application of University Community Hospital for Certificate of Need No. 6606 to establish and operate a 10 bed Level II neonatal intensive care unit. RECOMMENDED this 16th day of January, 1992, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5720 Proposed findings submitted by Petitioner are accepted, except as noted below. Those not noted below and not contained in Hearing Officer findings were deemed not necessary to the conclusions reached. 22. Accepted as the testimony of Hopes, but not as a fact. Accepted only insofar as not in conflict with HO #5. Rejected. 32. Rejected. 34-35. Accepted insofar as not inconsistent with HO #7. 36. Same as 34. Accepted as testimony of witnesses. However, ultimate finding in HO #7 is that when these numbers were corrected, no change in bed need resulted. Rejected. 42. Rejected that Hopes utilization statistic more accurately reflects true utilization of NICU beds. 53-55. Rejected. 56. Rejected as outside the time period here involved. 58-59. Rejected. 62. Rejected insofar as inconsistent with HO #10. Rejected. Second sentence rejected as in conflict with HO #9. 75. Ultimate sentence rejected. 85. Rejected. 92. Accepted, except for the connotation that these patients have geographical access problems to existing facilities. 95. Accepted merely as the testimony of this witness who is currently an employee of UCH. 97-118. Although these preference items were discussed in HO findings #12-19, absent a comparative review these preferences were not considered in determining that a need for 10 more Level II NICU beds did not exist in District VI. Proposed findings submitted by Respondent and the Intervenors are accepted. Those not included in HO findings were deemed unnecessary to the conclusions reached. COPIES FURNISHED: Cynthia S. Tunnicliff, Esquire W. Douglas Hall, Esquire Post Office Drawer 190 Tallahassee, FL 32302 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, FL 32308 James C. Hauser, Esquire Post Office Box 508 Tallahassee, FL 32302 John Radey, Esquire Post Office Drawer 11307 Tallahassee, FL 32302 Sam Power Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Slye General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue The issue in this cause is whether University Community Hospital's Certificate of Need Application to establish a new, 5-bed Level III neonatal intensive care unit in District 6 should be approved or whether St. Joseph's Hospital's Certificate of Need Application for the addition of 5 Level III beds to its existing Level III neonatal intensive care program in District 6 should be approved.
Findings Of Fact THE PARTIES Agency for Health Care Administration (AHCA) AHCA is the single state agency responsible for the administration of the CON program in Florida, pursuant to Section 408.034(1), Florida Statutes. AHCA preliminarily approved the UCH CON application to establish a new 5-bed Level III NICU and denied the application of SJH. University Community Hospital UCH is a 431-bed acute care, non-profit hospital located in northern Tampa, Florida. The hospital is licensed to operate 374 acute care beds, 10 Level II NICU beds, 20 comprehensive rehabilitation beds, and 27 skilled nursing beds. It is the third largest hospital in the Hillsborough County region and is a major tertiary institution in West- Central Florida. UCH operates six recognized "Centers of Excellence" including: The Women's Center, The Pepin Heart & Vascular Institute, The Pediatric Care Center, The Diabetes Treatment Center, The Center for Cancer Care, and The Orthopedic Center. UCH provides significant acute care services including cardiology, orthopedics, general surgery, ICU, CCU, obstetrics (OB), gynecology (GYN), emergency room, and others. In addition, UCH provides certain "tertiary" services including Level II NICU services, adult open heart surgery, angioplasty, and comprehensive rehabilitation services. UCH operates The Women's Center which was established in 1991 to address the special needs of women and respond to the growing patient demand from North Tampa and South Pasco. The Women's Center is a freestanding facility connected to the main hospital which provides a full range of OB, GYN, and newborn services. It houses delivery rooms, surgery rooms, mother/baby beds, GYN beds, an ante-partum unit for high-risk OB patients, 10 Level II NICU beds, a well-born nursery, prenatal and postnatal educational programs, and diagnostic equipment. The Women's Center operates the Advanced Reproductive Technology (ART) program which addresses infertility problems using state-of-the-art reproductive technologies. The UCH ART program is the largest of its kind in the Tampa Bay area, and draws many patients throughout West-Central Florida. In fact, the number of participating women has doubled in the last two years. Babies conceived from this program often require NICU services due to the age of participating women, increased pre- term delivery, high-risk medical conditions, and the frequency of multiple births. The facility also operates a special "high-risk" OB program designed to care for women with special prenatal needs. These women often require prior hospitalization, bed rest, extensive nursing attention, or medications, and frequently request to receive these services at UCH. As with the ART program, there is an increased chance for these high- risk mothers to give birth to babies needing NICU care. Since 1991, UCH has operated a 10-bed Level II NICU located in the Women's Center. While it was designed and equipped according to Level III NICU standards and possesses the highest quality of medical equipment available, the unit is not authorized to provide Level III NICU services. Approximately 1000 physicians hold hospital privileges at UCH. They include Board-certified physicians covering 35 medical specialties. The Women's Center employs three medical directors. Its medical staff includes 83 physicians who are specialists in OB, GYN, and/or pediatrics and six additional physicians who are specialists in maternal and fetal medicine. It provides a full range of pediatric services in its dedicated Pediatric Care Center and has physicians who are Board- certified in all pediatric specialty areas, including pediatric surgery. In addition to its extensive staff of doctors, the Women's Center also maintains a quality group of nurses in its Level II NICU, most of which are specially certified in neonatology and have significant experience in Level III units. The Women's Center was originally built to handle 2,000 - 2,200 births annually. However, due to factors including its location, population growth, and performance, the facility exceeded that capacity. In late 1999, UCH began construction of a $10 Million expansion, which was recently completed. Today, the facility has the capacity to handle 3,000 - 3,500 births annually. UCH is located in the North Tampa corridor which is experiencing a population growth. It is the northernmost hospital in Hillsborough County, and the closest tertiary hospital to Pasco County. UCH's primary service area for OB and Level II NICU patients is North Hillsborough and South Pasco. Approximately 20% of its OB and Level II NICU patient volume are residents of Pasco County. In 2000, UCH delivered 2,168 babies. The following year, in 2001, it increased to 2,269 births and the hospital reasonably projects its volume to reach 2,500 annual births in the near future. UCH's Level II NICU unit has been well- utilized over the past several years and has experienced a 16% volume increase per year since 1999. It has the highest growth rate of all Level II providers in District 6. UCH has twice previously applied for a 5-bed Level III NICU and was denied each time. The Agency's CON director stated that UCH was denied because: (a) at the time, there was no numeric need to support their proposal, (b) Tampa General had not previously supported their proposal, and (c) UCH had not previously provided written quality assurances to the Agency. St. Joseph's Hospital (SJH) SJH is a large, acute care, not-for-profit hospital, founded in central Tampa in 1934. It is licensed to operate 883 beds, including 15 Level II and 27 Level III NICU beds. SJH is fully accredited by the Joint Commission on Healthcare Organizations, and is a state-designated Level II Trauma Center. It is one of 15 hospitals nationwide designated to participate in National Cancer Research Institute clinical research protocols and provides adult open heart surgery services, and operates several major clinical institutes, including the Heart Institute, Cancer Institute, and Neuroscience Institute. SJH's licensed hospital beds are distributed among three hospital facilities located on one campus and include: St. Joseph's Women's Hospital, a 193-bed facility; St. Joseph's Hospital, a 550-bed facility; and Tampa Children's Hospital at St. Joseph's with 153 beds. Tampa Children's Hospital operates a specialty six- bed pediatric cardiac ICU, and a 16-bed pediatric ICU, and is one of the few providers in Florida offering pediatric cardiovascular surgery. In fact, it performs approximately 400 cardiac surgeries annually, with a majority performed on neonates. Twenty-seven of the 30 designated pediatric sub- specialties are represented on the hospital's active medical staff which is comprised of 200 physicians including 120 pediatric sub-specialists. In addition to its comprehensive pediatric and neonatal surgery programs, Tampa Children's Hospital participates in a fetal surgery program with St. Joseph's Women's Hospital, which involves close clinical cooperation between perinatologists specializing in high-risk obstetrics, and pediatric medical and surgical sub-specialists. Overview of CON Statutory and Regulatory Framework Sections 408.031-408.045, Florida Statutes, outline the establishment and expansion of certain tertiary health care services in the State of Florida and is known as the Health Facility and Services Development Act. Under the CON statutory framework, health care providers seeking to establish or expand certain health care services in the State of Florida must obtain CON approval prior to implementation of their proposal. Pursuant to Section 408.035, Florida Statutes, AHCA is required to review all applications in context with statutory and rule criteria and is the single state agency authorized to issue, revoke, or deny CON licensure. Overview of Level III Neonatal Intensive Care as a Tertiary Health Service Pursuant to Section 408.032(17), Florida Statutes, Level III neonatal intensive care is considered a "tertiary health service" which is defined as: 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. Because of the tertiary nature of Level III NICU services, most hospitals in Florida do not offer Level III neonatal intensive care. Overview of Level II and Level III NICU Services Rule 59C-1.042, Florida Administrative Code, provides the specific requirements for Level II and Level III NICU programs. Pursuant to Section 59C-1.042(2)(g), Florida Administrative Code, Level II neonatal intensive care is restricted to neonates who weigh 1000 grams or more at birth and require at least 6 hours of nursing care per day. Ventilator services may be provided in certain circumstances. Level III care includes the treatment of neonates who weigh less than 1000 grams at birth and require at least 12 hours of nursing care per day. Level III neonates often have complex major congenital anomalies and require continuous cardiopulmonary support. Level II NICU providers are prohibited from providing Level III NICU services and are required to transfer all neonates of 1,000 grams or less to a Level III provider. Level III NICUs that do not provide treatment of complex major congenital anomalies are required to enter into a written agreement with another Level III provider for those services and transfer the neonate patient, if necessary. Although all Level II and Level III NICUs treat severely ill babies, Level III care involves heightened complexity and intensity due to the volatility of the Level III neonates. Their vital signs and medical status are subject to more rapid fluctuation and they usually require longer periods of respiratory support and mechanical ventilation which can result in the scarring, leakage, rupture or deterioration of the lungs. Existing Level III NICU Providers in District 6 Currently, there are three Level III NICU programs in District 6 including SJH which operates 27 beds, Tampa General which operates 21 beds and Brandon Regional Medical Center which operates an 8-bed Level III unit. Pre Hearing Stipulation Agreement Prior to hearing, the parties stipulated that certain provisions of the 12 CON statutory review criteria found in Section 408.035, Florida Statutes, were not in dispute while others remained in dispute. Specifically, the parties agreed to the following: The need for the health care facilities and health services being proposed in relation to the applicable district health plan is IN DISPUTE; The availability, quality of care, accessibility, and extent of utilization of existing health care services in the service district of the applicant is IN DISPUTE; The ability of the applicant to provide quality of care and the applicant's record of providing quality of care is IN DISPUTE. (However, both applicants' record of providing quality of care was stipulated as not in dispute); The need in the service district of the applicant for special health care services that are not reasonable and economically accessible in adjoining areas is IN DISPUTE; The needs of research and educational facilities, including, but not limited to, facilities with institutional training programs and community training programs for health care practitioners and for doctors of osteopathic medicine and medicine at the student, internship, and residency training levels is NOT IN DISPUTE; The availability of resources, including health personnel, management personnel, and funds for capital and operation expenditures, for project accomplishment and operation is NOT IN DISPUTE; The extent to which the proposed services will enhance access to health care for residents of the service district is IN DISPUTE; The immediate and long-term financial feasibility of the proposal is IN DISPUTE. (However, only as to whether the applicants could achieve their respective projections of utilization). The extent to which the proposal will foster competition that promotes quality and cost effectiveness is IN DISPUTE. 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 is NOT IN DISPUTE. The applicant's past and proposed service to Medicaid patients and the medically indigent is IN DISPUTE. The applicant's designation as a Gold Seal program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility is not applicable and NOT IN DISPUTE. As to AHCA Rule 59C-1.042, Florida Administrative Code, the parties agreed that only the following criteria remain in dispute: (3)(h) Whether the proposal is consistent with the applicable district health plan as required in Section 408.035(1), Florida Statutes; (3)(k) The extent to which the applicant intends to serve the Medicaid and indigent population as found in Section 408.035(11), Florida Statutes; and (5) Whether the applicant has met the Minimum Unit Size requirement set out in Rule 59c-1.042(5), F.A.C., which states that an applicant "shall propose a Level III NICU of at-least 15 beds and should have 15 or more Level II NICU beds.." The NICU Proposals UCH Proposal UCH proposes to convert 5 of its acute care beds to 5 Level III NICU beds. The 5 Level III beds will be integrated into its 10-bed Level II NICU thereby creating a 15-bed combined NICU. UCH, in its proposal, agrees to provide the full range of Level III NICU services with the exception of pediatric cardiac catheterization and pediatric open heart surgery which require separate licensure. UCH intends to provide 24-hour, 7 days/week physician coverage of its Level III NICU. In certain circumstances, the hospital proposes to follow the practice followed at All Children's Hospital, Brandon Hospital, and Mease Hospital in Dunedin and have neonatologists "on call" and not physically present at UCH. AHCA supports their plan. As a condition for AHCA's approval, UCH agrees to commit at least 29.09% of its total Level III NICU patient days to Medicaid babies and at least 1% to indigent babies. In addition, UCH agrees to follow specific procedures to ensure high quality and consents to routine inspections by the Agency. There is significant medical/professional support for UCH's proposal. Several OB physicians in the Tampa area provided testimony favoring the proposal. They indicate that the UCH plan will improve the District's quality of health care and benefit mothers, babies, and families. Moreover, Tampa General Hospital, a local competitor, supports the project. In fact, Dr. Robert Nelson, the medical director of Tampa General, testified that despite the fact that most UCH newborns requiring Level III NICU care are transferred to his hospital, those babies would be better served by UCH. In addition, East Pasco Medical Center (EPMC), a large provider of extensive OB services within District 6 located directly to the geographic north of UCH, favors the plan. Given the fact that there is no Level III NICU provider in Pasco county, UCH is the closest major hospital to EPMC and would provide tremendous benefit to Pasco county's rapidly- growing patient population. Dr. Jeffery Angel, who serves as the medical director for perinatology at SJH, Brandon Hospital, and UCH, and heads the major perinatology group in Hillsborough County also supports the UCH proposal. He provided expert testimony and opined that Level III NICU services at UCH would greatly benefit neonate patients due to the obvious risks associated with their transport. Through implementation of its proposal, UCH purports to improve and promote continuity of care, patient and physician choice, patient access, quality of care, patient satisfaction, and competition. SJH NICU Proposal SJH also proposes to add 5 Level III NICU beds by converting 5 acute care beds. SJH, however, currently operates 27 of the 53 Level III NICU beds within District 6. While its existing Level III NICU unit provides excellent care, it has historically experienced peaks and valleys in utilization over the course of days or weeks within any given month, and it's occupancy rate has consistently been under 80%. Section 408.035(1), Florida Statutes, and Rule 59C- 1.042(3)(h), Florida Administrative Code. There is a need for the Level III health care facility and health service being proposed in relation to the District 6 Local Health Plan. Pursuant to Section 408.035(1), Florida Statutes, AHCA performed a bed need methodology for Level III NICU services and, notwithstanding SJH's occupancy rate, determined that District 6 required 5 additional Level III NICU beds in the January 2004 planning horizon. AHCA's projection of fixed need creates a rebuttable presumption of need that no party challenged. There is insufficient evidence to modify the fixed need determination. The evidence did, however, demonstrate that AHCA, using the Rule formula, rarely computes a numeric need for additional Level III NICU beds, and when need is determined, 1-3 beds are usually required. In fact, in District 6, the Agency has calculated a numeric need on one occasion in the past 12 years when it determined that 1 additional bed was necessary. Interestingly however, Rule 59C-1.042(5), Florida Administrative Code, states that hospital applicants "shall propose a Level III NICU of at-least 15 beds," which under the existing need formula, is mathematically impossible to generate within District 6 today or in the foreseeable future. As a result, under a strict and dispositive interpretation of that rule, all new applicants would automatically be locked out of the Level III NICU market. Recognizing that new Level III NICU programs could rarely, if ever, be established in Florida under that strict interpretation, AHCA has long interpreted the minimum size rule to be only one of the many review criteria which are weighed in evaluating the overall merits of a NICU proposal. Section 408.035(1), Florida Statutes, and Subparagraph 59C-1.042(3)(h), Florida Administrative Code, further require the Agency to consider the applicant's CON proposal for Level III NICU beds in relation to the applicable district health plan. The District 6 Local Health Plan includes two "preferences" for evaluating proposals for Level III. The first factor gives preference to Applicants who commit to provide the most Level III care to Medicaid and indigent patients. While Tampa General is the largest provider, UCH, in its proposal, agreed to commit 29.09% of the total Level III days to Medicaid patients and 1% to the indigent. SJH agreed to commit 25% of its aggregate patient days to Medicaid and/or indigent care. The second preference requires Applicants to analyze the need for more Level III beds and address the impact on existing providers. UCH comprehensively assessed both need and adverse impact, and demonstrated that its approval would not adversely affect the existing providers. Given the unchallenged published need and the District 6 Health Plan, and considering UCH's experience operating a quality, expanding OB program with an existing Level II unit in an overall growing OB market, the new bed need presents a unique and timely opportunity for UCH to enter the Level III NICU market. The UCH proposal will satisfy the Level III bed need in a manner that is consistent with the District Health Plan. Section 408.035(2), Florida Statutes. A UCH Level III unit will improve the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in District 6. Pursuant to Section 408.035(2), Florida Statutes, the Agency properly considered the availability, quality, accessibility, and extent of utilization of Level III NICU providers in District 6. The evidence demonstrates that the UCH plan increases availability, ensures quality and continuity of care, promotes access, provides patient and physician choice, supports competition, and provides a better distribution of Level III services in District 6. The SJH plan, given the facility's existing number of Level III NICU beds and occupancy rate, would not improve availability, quality, access, or utilization, and would stifle competition. Availability and Accessibility of Quality Care AHCA is responsible for ensuring that each district maintains sufficient providers of quality care. While the parties agree that UCH provides excellent care to its Level II patients, SJH argues that there are sufficient providers of quality Level III care within District 6. Given the variables of the district, it is questionable whether SJH, Tampa General and Brandon Hospital provide quality care that is sufficiently accessible to all residents of the district. The experts agree that the field of OB medicine is largely unpredictable. As Dr. Angel explained, most high-risk and/or pre-term deliveries cannot be predicted; therefore, it is extremely difficult to determine, prior to birth, whether a baby will require NICU services. In fact, Dr. Dillon suggested that OB doctors correctly identify less than half of the women who will develop pre-term labor, pre-term delivery, or obstetric complications. And Dr. Greenberg admitted that only 15% of pre-term deliveries are accurately predicted. Complicating matters at certain hospitals, including UCH, some women fail to receive prenatal care, and simply appear for delivery. These high-risk, "walk-ins" are often drug-users and prostitutes that present significant risks of complications and problems to their babies. Frequently, they deliver pre-term infants who need the services of a NICU. The experts agree that it is generally preferable for high-risk mothers to give birth at a hospital with a Level III NICU. Given the indigent and Medicaid patient load as well as the increasing deliveries and significant Level II NICU utilization at UCH, it is determined that UCH presents a need for Level III beds in District 6. While transporting fragile neonates remains an option, there are many problems associated with newborn and maternal transports to other facilities. Some women are too medically unstable to be transported. Dr. Angel explained that although some transfers are reasonably safe, complications arise in neonatal and maternal transport and removing the risk improves the Level III care. SJH admits that separating mothers from their babies who are commonly suffering from a broad array of concurrent medical problems is not preferred. The ability to treat all medical issues in one setting by a coordinated network of medical professionals provides sick babies with an enhanced probability of survival and development. It allows a qualified hospital to successfully treat many babies which otherwise would be required to be removed from their mothers and transferred to another facility or another city. Under the UCH plan, the facility will be capable of treating all critically ill newborns. Doctors who serve at UCH will be able to maintain the continuity of care to the mother and newborn which is important in hospitals with large OB volume and an established Level II unit. In addition, patients in north Hillsborough and south Pasco counties will have access to a closer provider without the fear of transfer, separation anxiety or unnecessary risk. As previously indicated, UCH is a major provider of OB services in the northern section of Hillsborough county where the population is rapidly growing. And although UCH is less than a 2 hour drive from all other Level III providers in District 6, the closest Level III provider north of UCH is located in Gainesville. Given the county's expanding population base in the north and the level of traffic in the downtown Tampa area, the UCH proposal improves and promotes availability, accessibility and quality of care. Utilization The issue of utilization provides additional support for UCH to add Level III services. The NICU Rule calls for a facility to have at least 1500 annual births prior to developing a Level III unit and UCH delivers over 2,200 babies each year. In fact UCH currently has a higher birth volume than many Florida hospitals with Level III units. The Level III NICU utilization rate at SJH does not warrant 5 additional beds. Since 1998, SJH has operated below 80% occupancy for each year except 2000. In 2001, according to its internal data, SJH recorded 7,698 Level III patient days which equates to 78% occupancy with approximately 6 unused Level III beds per day. In the first quarter of 2002, SJH's occupancy rate fell to 76.5%. In addition, the birth volume at SJH appears to be decreasing. For example, its birth volume in the first quarter of 2002 was 4% less than its birth volume in the first quarter of 2001. If, in the future, SJH's birth volume rises and it increases its Level III occupancy to 90%, pursuant to 59C-1.042(3)(g), Florida Administrative Code, SJH can automatically demonstrate a need for additional Level III beds without showing any numeric need in District 6. Section 408.035(3), Florida Statutes. UCH can provide high quality care. While SJH argues that UCH lacks the depth of medical experience and resources necessary to operate a Level III NICU program, the evidence suggests otherwise. It is generally agreed that the components of high quality Level III care are quality physicians, quality nurses, and quality unit design and equipment. UCH possesses these components. UCH is a relatively new facility that utilizes the most recent medical equipment available. The hospital maintains a cadre of highly-trained, Board-certified doctors and nurses with extensive experience in Level III units. It currently provides quality care to its OB and Level II NICU patients and as Drs. Kanarek, Sosa, Angel, Hyatt, and Greenberg agreed, it is certainly capable of providing high quality Level III care. In addition, UCH has a proven track record of developing new services and expanding existing services in a high quality manner and possesses an experienced management team. Moreover, Dr. Kanerek, a Board-certified neonatologist who initiated Tampa General's Level III unit and managed it for several years, will continue to serve as the UCH NICU director. SJH further argues that UCH is less capable of providing quality care since mortality rates are better in high volume Level III facilities. The evidence suggests otherwise. Dr. Shiono, an expert in biostatistics and epidemiology testified there is no statistical correlation between NICU volume and patient outcome. In fact, she recently published a professional article entitled "Hospital and Patient Characteristics Associated with Variation in 28- day Mortality Rates for Low Birth Weight Infants," after comparing mortality rates of low birth weight infants with hospital characteristics. Her study concluded that there is no relationship between a hospital's volume of Level III babies and their mortality rates. The evidence in this case suggests the same. SJH has no better mortality rate for its Level III babies than the three 5-bed Level III units in Florida. In fact, between July 1997 and June 2001, their average mortality rates were as follows: St. Joseph's - 9.4%; West Boca Medical Center - 7.7%; Mease Hospital Dunedin - 3.0%; and North Shore Medical Center - 9.8%. Section 408.035(4), Florida Statutes. There is a need for special health care services in District 6 that are not reasonably and economically accessible in adjoining areas. The Agency is required to evaluate the need for Level III services in District 6 that are not reasonably accessible in adjoining areas. Undoubtedly, the UCH proposal will promote needed and improved accessibility to Level III NICU services for the residents of Pasco County. As discussed earlier, Pasco County is experiencing growth in population and there is no Level II or Level III NICU provider. UCH currently provides significant OB and Level II NICU care to the residents of Pasco since it is the closest major hospital to residents of East Pasco County. East Pasco Medical Center strongly supports the UCH proposal and Pasco patients will benefit from the plan. Section 408.035(5), Florida Statutes. The parties stipulated that the need for research and educational facilities is not at issue in this matter. Section 408.035(6), Florida Statutes. The parties stipulated that the availability of resources, including health personnel, management personnel and funds for capital and operating expenditures is not at issue in this matter. Section 408.035(7), Florida Statutes. The extent to which the proposed services will enhance access to health care for residents of District 6 has been discussed above. Section 408.035(8), Florida Statutes. The immediate and long-term financial feasibility of the UCH proposal is sound. While the parties agree that the immediate financial feasibility of the proposals is not in dispute, each party challenges the long-term feasibility and utilization projections of the other. As previously discussed, SJH has experienced consistent unused capacity. Smaller Level III providers, however, appear to maintain occupancy rates at 90% or greater. Over the past 5 years, Level III units with fewer than 15 beds have averaged 94.54% occupancy while larger units report 81.24%. In 2001, smaller units averaged 98.18%, while larger units averaged 81.97%. In District 6, between 1996-2000, Brandon Hospital, a 5-bed Level III provider, reported that its occupancy exceeded 94% each year and led the district average of all Level III providers. The long-term feasibility of the UCH proposal is sound. For further discussion, please see the discussion above regarding the issue of utilization. Section 408.035(9), Florida Statutes. The UCH proposal will enhance, foster and increase Level III NICU competition and improve quality and cost-effectiveness. SJH is the dominant Level III provider in District It currently operates 27 of the 53 Level III NICU beds in the district, however as previously described, SJH has plenty of unused Level III bed capacity. Its existing 27 beds can accommodate substantially more patient days than are currently being used. Adding 5 Level III beds to an already under- utilized provider will stifle competition. Moreover, the SJH proposal calls for higher Level III charges than UCH. In 2004, SJH proposes an average gross charge per patient day of $2,994, while UCH suggests $2,493. SJH's projected reimbursement rates from insurance and managed-care companies is higher as well. While the Medicaid program pays hospitals a flat fee for Level III care per day, regardless of gross charges, insurance and managed care companies negotiate reimbursement rates. In 2004, UCH proposes to be paid an average of $1,513 per day from insured patients while SJH proposes $2,898 per day. UCH proposes an average of $1,277 per day from managed care patients while SJH proposes $1,421 per day. In addition to its proposed net charges, SJH proposes a questionable increase in net revenues per day. In 2001, SJH received an average of $917 per day. In 2004 however, SJH proposes to increase its collection to $1,137/day, or 7.4 % per year. Since Medicaid reimbursement increases approximately 2%-3% per year, SJH must significantly increase its reimbursement from insurance and managed care companies to achieve their proposed net revenues. The evidence demonstrates that the SJH proposal does not promote competition or cost-effectiveness. Their proposed increases suggest that SJH operates as the dominant Level III provider in a non-competitive environment and may, unilaterally, be able to control pricing. The UCH plan, on the other hand, creates an environment and potential for price competition. Section 408.035(10), Florida Statutes. The costs and methods of the proposed construction are not at issue in this matter. Section 408.035(11), Florida Statutes. Both UCH and SJH have a long history of providing health care services to Medicaid and indigent patients and propose to continue their commitment. SJH and UCH treat all patients regardless of ability to pay, including OB patients and newborns. As a CON condition, UCH commits to provide a minimum of 29.09% of total Level III days to Medicaid patients and at-least 1% to indigents. SJH currently commits 25% of its Level III NICU volume to Medicaid and indigent patients combined and agrees to continue. Section 408.035(12), Florida Statutes. The applicants' designation as a Gold Seal program nursing facility pursuant to Section 400.235, is not at issue in this matter.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: UCH CON Application No. 9492 is recommended for approval, and SJH's CON Application No. 9493 is recommended for denial. DONE AND ENTERED this 14th day of January, 2003, in Tallahassee, Leon County, Florida. ___________________________________ WILLIAM R. PFEIFFER 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 January, 2003. COPIES FURNISHED: James C. Hauser, Esquire Metz, Hauser & Husband, P.A. Post Office Box 10909 Tallahassee, Florida 32302-2902 Michael P. Sasso, Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Suite 310-G St. Petersburg, Florida 33701 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP 118 North Gadsden Street The Perkins House, Suite 200 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3116 Tallahassee, Florida 32308
The Issue The issues involved in this case, as stipulated to by the parties, are as follows: Issues Remaining to Be Litigated Again, because of their inability to separate the purely factual issues from those which also involve legal determinations, the parties have combined below all issues which remain to be litigated. 1A. Was it proper for DHRS to compute the formula for need contained in FACs 10- 5.11(25)(a)1-3 on a subdistrict basis? 1B. Even if the answer is "yes", did DHRS properly use the result of such a computation as a reason for denying Charter- Ocala's application in this case? 2A. Was it proper for DHRS to take into account both existing and approved beds in computing the occupancy standard formula contained in FACs 10-5.11(25)(d) 5? 2B. Even if the answer is "yes," did DHRS properly use the results of such a computation as a reason for denying Charter- Ocala's application in this case? Does the level of Charter-Ocala's indigent care commitment cause its application not to fully meet the requirement in subsection 8 of Fla. Stat. s 381.494(6)(c) that the proposed services "be accessible to all residents of the service district"? Is the proposed project financially feasible in the long term? Will the proposed project result in an increase in health care costs? In light of all factors, should Charter-Ocala's application be granted?
Findings Of Fact GENERAL Procedural. On or about October 15, 1985, the Petitioner filed an application for a certificate of need with the Respondent. On or about December 26, 1985, the Petitioner filed amendments to its application. On or about February 27, 1986, the Respondent issued a State Agency Action Report proposing to deny the Petitioner's application. On March 27, 1986, the Petitioner filed a Petition for Formal Administrative Hearing with the Respondent. The Petition was forwarded to the Division of Administrative Hearings and was assigned case number 86-1466. On November 12, 1986, the parties filed a Prehearing Stipulation in which they agreed to certain facts and conclusions of law. The facts agreed upon by the parties are hereby adopted as findings of fact. The Parties. The Petitioner is a free-standing 68-bed short-term psychiatric and substance abuse specialty hospital located in Ocala, Florida. The 68 beds consist of 48 short-term psychiatric beds and 20 substance abuse beds. The Petitioner began operating on October 17, 1985. The Respondent is the agency responsible for determining whether the Petitioner's proposal should be approved. The Petitioner's Proposal. In its application, the Petitioner has proposed an expansion of its existing 48 short-term psychiatric beds by 24 beds. The Petitioner proposed that the 24 additional beds consist of 10 beds in a geriatric psychiatric unit and 14 beds in an adult psychiatric unit. The total proposed cost of the additional beds was $1,491,850.00. The Petitioner amended the total proposed cost to $1,213,880.00 on December 26, 1985. At the final hearing, the Petitioner represented that it will operate an adult eating disorder program in the new 14-bed psychiatric unit. NEED FOR ADDITIONAL SHORT-TERM PSYCHIATRIC BEDS. A. General. The Petitioner's existing facility for which additional beds are sought is located in Ocala, Marion County, Florida. Marion County is located in the Respondent's planning district 3. District 3 consists of Alachua, Bradford, Citrus, Columbia, Dixie, Gilchrist, Hamilton, Hernando, Lafayette, Lake, Levy, Marion, Putnam, Sumter, Suwannee and Union Counties. The existing providers of short-term psychiatric services in district 3 in addition to the Petitioner consist of Alachua General Hospital, Shands Teaching Hospital, Lake City Medical Center, Munroe Regional Medical Center and Lake Sumter County Mental Health Clinic. The District III Health Plan divides the district into 2 subdistricts: southern and northern. The southern subdistrict includes Citrus, Hernando, Lake, Marion and Sumter Counties. The northern subdistrict consists of Alachua, Bradford, Columbia, Dixie, Gilchrist, Hamilton, Lafayette, Levy, Putnam, Suwannee and Union Counties. Marion County is located in the northern portion of the southern subdistrict. Ocala, which is located in the northern portion of Marion County is approximately 20 miles from the border of the subdistricts. B. Rule 10- 5.011(1)(o), Florida Administrative Code. The projected population of district 3 in 1990 is 972,450. Based upon the projected population of district 3 in 1990, there is a gross need for 340 short-term psychiatric beds for district 3 in the relevant planning horizon year 1990. There are 316 licensed and approved short-term psychiatric beds for district 3. There is a net need for 24 short-term psychiatric beds for district 3 in 1990. Of the 316 licensed and approved short-term psychiatric beds located or to be located in district 3, 149 are located in hospitals holding a general license and 167 are located in specialty hospitals. Multiplying the projected 1990 district 3 population by a ratio of .15 beds per 1,000 population indicates a gross need for 146 short-term psychiatric beds in hospitals holding a general license. There will be a net surplus of three beds located in hospitals holding a general license in 1990 (146 beds needed less 149 licensed and approved beds). Multiplying the projected 1990 district 3 population by a ratio of .20 beds per 1,000 population indicates a gross need for 194 short-term psychiatric beds which may be located in specialty hospitals. There will be a net need of 27 beds which may be located in specialty hospitals (194 beds needed less 167 licensed and approved beds). The approval of the Petitioner's proposal will not create an imbalance between specialty beds and general beds in district 3 for 1990. There is sufficient need for additional beds in district 3 for approval of the Petitioner's proposal. Occupancy. Objective 1.2 of the State Health Plan provides: dditional short-term inpatient hospital psychiatric beds should not normally be approved unless the average annual occupancy rate for all existing and approved adult short-term inpatient psychiatric beds in the service district is at least 75 percent ... [Emphasis added]. The occupancy rates in 1985 for the existing short-term psychiatric beds in district 3 were as follows: Facility Beds Occupancy Alachua General Hospital 30 77.5 percent Shands Teaching Hospital 42 77.8 percent Lake City Medical Center 9 69.2 percent Munroe Regional Medical Center 18 56.4 percent Lake/Sumter County Mental Health 18 88.0 percent. The average occupancy rate for the existing facilities listed in finding of fact 27 is 75.5 percent. There are 151 short-term psychiatric beds approved for district 3 which are not yet operational. The occupancy rate of the existing and approved beds of district 3 is less than 75 percent. The approved beds should be assumed to have a 0 percent occupancy since they are not in use. Planning Guideline 2 of the District III Health Plan provides: Additional inpatient psychiatric services should not be developed until existing or approved services reach the occupancy standards Specified in the State Inpatient Psychiatric ... Rule. The occupancy standard Specified in the State Inpatient Psychiatric Rule is 75 percent. It is reasonable to expect that approved beds will affect existing occupancy rates when the beds become operational. Consumer demand for short-term psychiatric beds cannot expand indefinitely to meet supply. Since 48 percent of the licensed and approved beds for district 3 are approved beds, it does not make sense to ignore approved beds. Applying the occupancy standard on a subdistrict basis, licensed beds in the southern subdistrict had an average occupancy rate of 72.2 percent for 1985 (excluding the Petitioner's existing beds). If the 51 approved beds at Community Care of Citrus, 35 approved beds in Hernando County and the 15 approved beds at Lake/Sumter Mental Health are taken into account, the occupancy rate is Substantially lower. The Petitioner's proposal does not meet the occupancy standards of the state health plan or the district health plan (on a district or subdistrict basis). Subdistrict Allocation of Bed Need. Planning Guideline 4 of the District III Health Plan provides: Needed inpatient psychiatric ... beds will be allocated within the District based on the proportion of need generated in each planning area using the State methodology. The northern and southern subdistricts are the appropriate planning areas under the district health plan. The projected population for the southern subdistrict for 1990 is 549,536. Applying the state methodology to the southern subdistrict, there will be a gross need for 192 short-term psychiatric beds in 1990. Subtracting the 84 licensed and 101 approved beds yields a net need for 7 short-term psychiatric beds for the southern subdistrict for 1990. Of the 192 gross beds needed for the southern subdistrict in 1990, 82 should be located in hospitals holding a general license and 110 may be located in specialty hospitals. There are 66 licensed and 101 approved beds located or to be located in specialty hospitals in the southern subdistrict. Therefore, under the district health plan, there will be a surplus of 57 short-term psychiatric beds located in specialty hospitals in the southern subdistrict in 1990. All existing and approved short-term psychiatric specialty hospitals for district 3 are or will be located in the southern subdistrict; there are no specialty hospitals located or approved for the northern subdistrict. The Petitioner is the closest specialty hospital to the northern district. There is insufficient need for the Petitioner's proposal in the southern subdistrict of district 3 under the district health plan. Until December, 1985, or early 1986, the Respondent's policy and practice was to apply the need formula of Rule 10-5.11(25)(d), Florida Administrative Code, on a district-wide basis, not on a subdistrict basis. In approximately December, 1985, or early 1986, the Respondent implemented a new policy of reviewing the need for proposed short-term psychiatric services on a subdistrict basis in the applicable district health plan recognized subdistricts. This new policy was based upon a new interpretation of existing statutes and rules. Specifically, the Respondent relied upon Rule 10-5.011(1), Florida Administrative Code, and Section 381.494(6)(c)1, Florida Statutes, which direct an evaluation of the relationship between proposed services and the applicable district health plan in reviewing certificate of need applications. The evidence failed to prove: (a,) when the policy was formulated; (b) who was responsible for the formulation and implementation of the policy; and (c) whether any sort of investigation, study or analysis was performed or relied upon in connection with the policy. The effect of this policy can be outcome-determinative in that it can cause an application for a certificate of need to be denied. Prior to the adoption of the policy, the Respondent Promulgated Rule 10-17, Florida Administrative Code, which Provided for sudistricting of district This rule was repealed. Geographic Access. A small portion of the population of district 3 is within a maximum travel time of 45 minutes from the Petitioner's facility. Only 36 percent of the district 3 population is within 45 minutes driving time from the Petitioner's facility. The Petitioner's facility is located near the center of district 3. Approximately 60 percent of the population of district 3 is located within 60 minutes travel time from Ocala. There are excellent transportation routes from parts of the northern subdistrict to Ocala, including Interstate Highway 75 and U.S Highways 27, 301 and 441. Approximately 73 percent of the Petitioner's Patients during its first year of operation came from the southern subdistrict. Of those Patients, approximately 58 percent were from Marion County and 15 percent were from other southern subdistrict counties, including 10.5 percent from Citrus County and none from Hernando County. Approximately 15 percent of the Petitioner's patients during its first year of operation came from the northern subdistrict: 8 percent from Alachua County, 1.7 percent from Putnam, 1.2 percent from Bradford, .2 percent from Union, Suwannee and Gilchrist, .7 percent from Columbia and none from Hamilton, Lafayette, and Dixie. Approximately 12 percent of the Petitioner's patients during its first year of operation came from outside of district 3. Other Factors Approximately 16 percent to 17 percent of Marion County's population was 65 years of age or older in 1980. By 1990, the 65 and older population is projected to increase to approximately 22 percent. Approximately 28 percent of the population of the southern subdistrict is projected to be 65 or older in 1990. Top of the World, a retirement community, is being developed 10 to 15 miles from the Petitioner's present location. There is a large population of females aged 18 to 30 attending the University of Florida. The University is located in Gainesville which is within a 40 to 50 minute drive time from the Petitioner's present location. There are over 83,000 females aged 15-44 residing in Alachua and Marion Counties. Young adult females have the highest incidence of eating disorders such as bulimia and anorexia. From a clinical and programmatic perspective, to provide optimal therapy for geriatric and eating disorder patients: (1) the patients should be separated from the general psychiatric population; (2) the staff should be specially trained to deal with the unique problems posed by the two types of patients; and (3) the program and physical surroundings should be specially designed to accommodate the needs of the patients and to facilitate the rendition of services to patients. The Petitioner represented in its application that the Petitioner has a 16-bed geriatric program. Munroe Regional and Marion-Citrus Mental Health Center and Lake/Sumter Mental Health Supported the Petitioner's original application for its present facility based in part on the Petitioner's representation that 16 beds would be designated as geriatric beds. A facility for Citrus County with 51 beds has been approved which will have a gerontology program. In Hernando County 35 beds have been approved which includes a gerontology program. Seven letters of Support were submitted with the Petitioner's application. Only one of those letters mentions geriatric beds. No mention of an alleged need to provide an eating disorder program was mentioned by the Petitioner in its application. Eating disorder patients are treated at Shands in Gainesville, Alachua County, Florida. There are no existing or approved Specialized geriatric or eating disorder programs in district 3. The Petitioner Should be able to recruit physicians and other medical professionals to staff its proposed programs. ECONOMIC ACCESS. The Petitioner's admissions criteria include the ability to pay. The Petitioner has projected that 1.5 percent of patient revenues from the operation of the 24 additional beds will be attributable to indigent care. This amount is low. Applicants generally propose 3 to 7 percent indigent care. Generally, Short-term psychiatric Services are accessible to all residents of district 3. The evidence failed to prove, however, that short-term psychiatric Services in specialty hospitals are readily accessible to indigent residents. Munroe Regional Medical Center and Lake/Sumter County Mental Health provide psychiatric services to indigents. Lake/Sumter was recently granted a certificate of need authorizing it to move to Leesburg and to expand its hospital to include 33 short-term psychiatric beds which will be devoted almost exclusively to the treatment of indigents. These facilities are not specialty hospitals, however. The Petitioner's projected care of indigents does not include free evaluations and assessments provided at the Petitioner's counseling centers. In light of the fact that the Petitioner takes into account the ability to pay, however, this service will not significantly increase the care provided to indigent patients or accessibility of services to indigents. During the Petitioner's first year of operation it provided indigent care of approximately 4 percent of total revenues. It is therefore likely that the Petitioner will exceed its projected 1.5 percent indigent care. The Petitioner did not prove how much of an increase can be expected, however. The Petitioner has a corporate policy never to deny admission to a patient in need of emergency treatment because of inability to pay. The Petitioner's proposal will not significantly enhance services available to indigents. FINANCIAL FEASIBILITY AND IMPACT ON COSTS. 8O. If the Petitioner's proposal is considered based upon the need for additional beds in the district, it will be financially feasible. Its projected patient day projections are reasonable based upon district-wide need. If need is determined only on a district-wide basis, the opening of approved beds will not negatively affect the Petitioner's referral patterns or patient base. If need is determined only on a district-wide basis, the cost of psychiatric services in district 3 will not be negatively impacted by the Petitioner's proposal. If need is determined on a subdistrict basis, the Petitioner's proposal will not be financially feasible. There is insufficient need in the southern subdistrict for the Petitioner to achieve its patient day projections on a subdistrict basis. Planning Guideline 6 of the District III Health Plan provides: Providers proposing to expand or establish new psychiatric facilities should document that these services will not duplicate or negatively affect existing programs in the region. In light of the existence of an excess of 57 short-term psychiatric beds for the southern subdistrict based upon a subdistrict allocation of bed need, the Petitioner's proposed new beds will duplicate beds in existence or approved beds. If need is determined on a subdistrict basis, the cost of psychiatric services in the southern subdistrict will be negatively impacted.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner's application for the addition of 24 short- term psychiatric beds be approved. DONE and ORDERED this 13th day of March, 1987, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1987. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Paragraph numbers in the Recommended Order are referred to as "RO ". Petitioner's Proposed Findings of Fact: Proposed Finding RO Number of Acceptance or of Fact Number Reason for Rejection 1 RO 7, 9-10 and 12. 2 RO 13-14. 3 RO 13 and 16. 4 RO 17. 5 RO 51. 6 RO 54 and 61. 7 RO 54. 8-10 Irrelevant. 11 RO 58-59. 12 RO 59. 13 The first sentence is accepted in RO 60. The second sentence is irrelevant. 14 RO 61-63. 15 Irrelevant. 16 RO 20 and 22. 17 RO 43. 18 RO 19. 19 RO 19-21. 20 RO 23. 21 RO 24. 22 RO 28. The last sentence is irrelevant. 23 RO 1, 9-10 and 12. 24 Irrelevant. It has been stipulated that the quality of care criterion has been met. 25 RO 64. 26 RO 71. The first sentence is accepted in RO 70. The second sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. 29-30 Irrelevant. 31 RO 55-56. 32 RO 74. RO 75. The last sentence is not supported by the weight of the evidence. RO 73 and 76. The Petitioner did not commit to provide 1.5 percent of total revenues it committed to provide 1.5 percent of revenues from the 24 beds. The last sentence is irrelevant. 35 RO 77. 36 RO 78. 37 Not supported by the weight of the evidence. 38-39 and 41 If need is determined on a district- wide basis these proposed findings of fact are true. If, however, need is determined on a subdistrict basis these proposed findings of fact are not supported by the weight of the evidence. See RO 80 and 83. 40 Irrelevant. 42-44 Cumulative. See RO 80 and 83. 45 and 46 Not supported by the weight of the evidence. 47-48 Irrelevant. If need is determined on a district-wide basis these proposed findings of fact are true. If, however, need is determined on a subdistrict basis these proposed findings of fact are not supported by the weight of the evidence. See RO 82 and 85. Irrelevant. The first sentence is statement of the law. The last sentence is irrelevant. This is a de novo proceeding. How the Respondent reached its initial decision is irrelevant. The rest of the proposed finding of fact is accepted in RO 50. Statement of law. 52 RO 45. 53 RO 46. 54 RO 47. 55 Irrelevant. 56 RO 48. 57 RO 49. Irrelevant. Conclusion of law. Irrelevant. 61-62 Prehearing Stipulation. Irrelevant. The parties have stipulated that the portion of the rule mentioned in the first sentence is met. The proposed finding of fact is also a discussion of law. It is therefore rejected. 65-67 Consideration of the state health plan is statutorily required. The Respondent does not apply the occupancy standard of the state health plan as a matter of policy, therefore. These proposed findings of fact are therefore irrelevant to the extent that they apply to the determination concerning the state health plan. To the extent that they pertain to the occupancy standard of the district health plan, they are hereby adopted. Conclusion of law. Irrelevant. The first sentence is irrelevant. The second sentence is contained in the Prehearing Stipulation as a stipulated fact. 71 RO 30. 72 Irrelevant and conclusion of law. 73-82 Irrelevant. Respondent's Proposed Findings of Fact 1 RO 1, 3-4, 9 and 11 2 RO 7 and 13. 3 RO 19. 4-6 Prehearing Stipulation. 7 8 and 9 RO 26. RO 27-28. The last sentence is 10 contrary to the facts stipulated to by the parties. The parties have stipulated that existing beds meet the occupancy standard. This proposed finding of fact is therefore unnecessary. RO 29. 11 RO 30 and 32-33. 12 RO 31. 13 RO 16 and 36. 14 RO 34. 15 RO 37-41. There are 84 licensed beds not 81. 16-17 Irrelevant. 18 RO 55-56. The evidence established that "at least" 73 percent of the Petitioner's patients originate from the southern subdistrict not that more than 73 percent. 19 RO 43. 20 Hereby accepted. 21 RO 51. RO 10 and 64. The first sentence is accepted in RO 65. The rest of the proposed finding of fact is uncorroborated hearsay. 24 RO 67. RO 12 and 68. Irrelevant or based upon uncorroborated hearsay. Not a finding of fact. Not supported by the weight of the evidence. 29 RO 84-85. 30 Statement of law. 31 RO 72-73. 32 RO 85. 33 RO 83. COPIES FURNISHED: Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sandra Stockwell, Esquire Culpepper, Pelham, Turner & Mannheimer 300 East Park Avenue Post Office Drawer 11300 Tallahassee, Florida 32302-3300 J. Kevin Buster, Esquire Ross O. Silverman, Esquire King & Spalding 2500 Trust Company Tower Atlanta, Georgia 30303
Findings Of Fact On November 17, 1987, Petitioner was awarded CON 3746 to construct a 60-bed addition to its existing facility, Suwannee Health Care Center, in Live Oak, Florida. On July 14, 1988, Petitioner filed the application in the instant case. Petitioner proposes to transfer the 60 beds authorized by CON 3746 to Florida Land Trust Number Seven (the Land Trust). The Land Trust is the owner of a 60-bed nursing home in Live Oak, Florida, called Surrey Place Nursing Center of Live Oak (Surrey Place). Surrey Place is operated by Health Care Associates (HCA), which is owned by the beneficiaries of the Land Trust. The construction of Surrey Place was authorized by CON 3395 and Surrey Place opened in January, 1988. The application for CON 3395 was filed on July 16, 1984. Petitioner's proposal is for the 60 beds to be constructed as a 60-bed addition to Surrey Place. By letter dated August 11, 1988, HRS returned the application for expedited review of the transfer to Petitioner. The letter states that the proposal by Petitioner "is not merely a transfer of a CON, but rather an addition of beds to an existing facility which would change the scope and operation of the existing nursing home. Therefore, the addition of beds requires a full batched review." Petitioner's Exhibit 3. HRS did not review the application on its merits prior to issuing the August 11, 1988 letter. Suwannee Health Care Center and Surrey Place are both located in the same planning subdistrict and are located within one-half mile of each other. Transfer It is HRS's policy that a "transfer" occurs only when a new owner agrees to take over a project and implement it exactly as originally approved. Also, it is HRS's policy that the transferee should be the applicant for a transfer. In the past, however, HRS has accepted for review and approved transfers where the application was filed by the transferrer. Also, HRS in the past has approved transfers which involved more than just a mere change of ownership. These transfers resulted in the combination of the beds approved by the CON to be transferred with the beds approved by other CONs with the end result being the construction of a larger nursing home facility than was contemplated under either CON. Combination During the 1988 Session of the Florida Legislature, Health Quest Corporation (Health Quest) advocated to the Legislature that certain legislation amending Chapter 381, Florida Statutes, be enacted. Health Quest drafted the proposed legislation and lobbied for its enactment. Health Quest wanted the amendment because it had a CON for a 180-bed nursing home to be built in Sarasota County which it wanted to divide into a 120-bed freestanding facility and a 60-bed addition to an existing facility in Sarasota County. During the 1988 Legislative Session, HRS and Health Quest entered into an Agreement. The entire Agreement provides that: AGREEMENT This Agreement is made between Health Quest Corporation ("Health Quest") and the Department of Health and Rehabilitative Services ("HRS") this 31st day of May, 1988. RECITALS Health Quest holds CON No. 3278 ("the CON") authorizing a 180-bed nursing home in Sarasota County. Health Quest operates a 53-bed nursing home ("the Facility") adjacent to the Lake Pointe Woods retirement complex in Sarasota. On September 29, 1987, Health Quest filed with HRS an application seeking expedited review for its proposal to divide the CON into a 60-bed component and a 120-bed component. As set forth in the application, the 60-bed component is for an addition to the Facility and the 120-bed component is for a freestanding facility. Since on or before September 4, 1987, it has been the Department's position that such division or consolidation could be accomplished only through batched comparative review. Currently pending before the Division of Administrative Hearings ("DOAH") is a Section 120.57(1) petition filed by Health Quest contesting the refusal of HRS to review Health Quest's September 29, 1987 application as a project subject to expedited review. The Florida Legislature is considering the enactment of the Affordable Health Care Assurance Act of 1988 ("the Act"). The Act would amend Section 381.706(2), Florida Statutes, to add subsections (j) and (k), providing for expedited review of applications to divide a single approved facility or to consolidate two or more approved certificates of need into a single facility. The Act would also add Section 381.705(3) to limit the criteria for review of certain applications filed under Section 381.706(2)(j) or 381.706(2)(k) and would add Section 381.710(2)(d) providing for extension of the validity period of CONs for which applications under Section 381.706(2)(j) or 381.706(2)(k) are filed. Contingent upon passage of the Act, HRS and Health Quest wish to settle the DOAH proceeding and other litigation involving the September 29, 1987 application to divide CON 3278. TERMS HRS acknowledges that an applicant would be entitled, under the Act, to expedited review of applications not only to divide or consolidate CONs but to do both at the same time, e.g., divide 60 beds from CON 3278 and consolidate these beds into the existing beds at the Facility now operated by Health Quest. At such time as the Act becomes law and Health Quest files an application substantially similar to its September 29, 1987 application, HRS agrees that the validity period of CON 3278 shall, due to litigation involving the division and consolidation of CON 3278 commenced on February 17, 1988, be extended 168 days to January 17, 1989. This Agreement does not constitute a waiver on the part of Health Quest of any right to additional extension of the validity period after August 2, 1988 if the Department fails to approve the application on or before said date. Upon approval of the application, Health Quest shall dismiss the DOAH proceeding and the District Court of Appeals proceeding involving the division of CON 3278. The Agreement was signed by J. Robert Griffin, M.A., J.D., HRS's Deputy Assistant Secretary for Regulation and Health Facilities, and Charles M. Loeser, Health Quest's Vice President and General Counsel. The amendments referred to in the Agreement were enacted by the Legislature and are now codified in Sections 381.706(2)(j) and (k), 381.705(3) and 381.710(2)(d), Florida Statutes (1988 Supp.). On July 1, 1988, Health Quest submitted to HRS a second application for expedited review of its proposal to divide 60 beds from a 180-bed CON and add the 60 beds to an existing 53-bed facility which it owned. HRS reviewed the application using the review criteria set forth in Section 381.705(3), Florida Statutes (1988 Supp.), approved it, and issued CON 5655 on August 5, 1988. Notwithstanding the passage of the 1988 Amendments, the Agreement, and the issuance of CON 5655, HRS's interpretation of Section 381.706, Florida Statutes (1988 Supp.), is that the addition of beds to an existing facility requires full comparative batched review and, therefore, cannot be approved by expedited review. HRS interprets the provisions of Section 381.706(2)(j) as requiring that at least two CONs be in existence at the time of the proposed combination. In HRS's view two CONs can only exist if the two facilities approved by the CONs have not been built, since it is HRS's policy that a CON ceases to exist when a license is issued for the facility to begin operation. Review Criteria The proposed addition of 60 beds to Surrey Place is financially feasible. The Land Trust and its principals have the financial resources to complete the project and are capable of developing and managing the project. The Land Trust and its principals have previous experience successfully operating nursing homes in Florida and have a history of providing quality care. Surrey Place was built with the expectation that it would eventually consist of 120 beds. Except for the addition of the 60 beds, the scope and operation of Surrey Place will not change.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a Final Order approving Petitioner's application. DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Leon County, Florida. JOSE DIEZ-ARGUELLES 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 14th day of March, 1989. APPENDIX Rulings on Petitioner's Proposed Findings of Fact 1.-10. Accepted. Some of these proposed findings of fact are subordinate to facts found. 11. Irrelevant. 12.-27. Accepted. Some of the proposed findings of fact are subordinate to facts found. 28.-30. Accepted, except to the extent they imply that the approval was for the addition of beds to an existing facility. 31-34. Rejected as irrelevant; what final action HRS would have taken is unknown. Irrelevant. True but irrelevant; HRS is free to change its policy if it can explicate it at hearing. 37.-39. Accepted. 40.-42. Accepted, except last sentence of 42 which is rejected. The Careage transfer was for an addition of beds to a facility not yet built. 43.-47. Rejected as irrelevant. 48-54. Accepted. 55.-59. Accepted. 60.-61. Accepted, but the policy manual describes HRS's past unwritten policy. 62. Rejected as argument. Rulings on HRS'S Proposed Findings of Fact Accepted. Accepted, but subordinate to facts found. Accepted. However, there is sufficient evidence to conclude that the Land Trust through its trustee and beneficiaries will be able to fund the project. Accepted. 5.-6. Accepted that this is HRS's policy and interpretation of the statutes. However, see Conclusions of Law. Accepted. Accepted that this is HRS's basis for its interpretation. However, in this case, the competitive environment is not changed. Rejected. The Department was directed to issue the CON because there was need in the area and not because of the uniqueness of the facility. First sentence accepted to the extent that Petitioner did not specifically mention Section 351.706 in its application. However, by the time of hearing the applicability of the statute was not in question and an issue in the case was whether the proposal met the language of the statute. Rest of paragraph accepted as HRS's policy. 11.-14. Accepted as HRS's policy. True, but irrelevant. Rejected as argument. Irrelevant, since no final action on the merits was taken. Accepted that this is HRS's policy, but see Conclusions of Law. Accepted that this is HRS's current policy. However, HRS has in the recent past accepted and approved transfer applications filed by the transferee. First two sentences accepted. Last sentence rejected; HRS knew enough to enter into the agreement and failed to present any evidence that what it knew then somehow changed. Accepted. Rejected as irrelevant and argument. Rejected as argument. COPIES FURNISHED: Boone, Boone, Klingbeil and Boone, P.A. Stephen K. Boone, Esquire 1001 Avenida del Circle Venice, Florida 34284 Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact The Application West Florida Regional Medical Center is a 400-bed acute care hospital in Pensacola, Escambia County, Florida. The hospital is located in a subdistrict which has the greatest population aged 65 and over who are living in poverty. That group constitutes the population qualified for Medicare. Some 17 percent of Escambia County's population falls into the medicare category. Prior to October, 1987, HRS had determined that there was a fixed pool need in the Escambia County area for 120 nursing home or extended care beds. Several hospitals in the Escambia County area applied for the 120 nursing home beds. Those beds were granted to Advocare (60 beds) and Baptist Manor (60 beds). The award of the 120 beds to Baptist Manor and Advocare is not being challenged in this action. West Florida, likewise, filed an application for an award of nursing home beds in the same batch as Advocare and Baptist Manor. However, Petitioner's application sought to convert 8 acute care beds to nursing home or extended care beds. West Florida's claim to these beds was not based on the 120 bed need established under the fixed need pool formula. West Florida's application was based on the unavailability of appropriately designated bed space for patients who no longer required acute care, but who continued to require a high skill level of care and/or medicare patients. The whole purpose behind West Florida's CON application stems from the fact that the federal Medicare system will not reimburse a hospital beyond the amount established for acute care needs as long as that bed space is designated as acute care. However, if the patient no longer requires acute care the patient may be re-designated to a skilled care category which includes nursing home or extended care beds. If the patient is appropriately reclassified to a skilled care category, the hospital can receive additional reimbursement from Medicare above its acute care reimbursement as long as a designated ECF bed is available for the patient. Designation or re-designation of beds in a facility requires a Certificate of Need. Petitioner's application for the 8 beds was denied. When the application at issue in this proceeding was filed Petitioner's 13-bed ECF unit had been approved but not yet opened. At the time the State Agency Action Report was written, the unit had just opened. Therefore, historical data on the 13 bed unit was not available at the time the application was filed. Reasons given for denying West Florida's application was that there was low occupancy at Baptist Hospital's ECF unit, that Sacred Heart Hospital had 10 approved ECF beds and that there was no historical utilization of West Florida 13 beds. At the hearing the HRS witness, Elizabeth Dudek stated that it was assumed that Baptist Hospital and Sacred Heart Hospital beds were available for West Florida patients. In 1985 West Florida applied for a CON to establish a 21-bed ECF unit. HRS granted West Florida 13 of those 21 beds. The 8 beds being sought by West Florida in CON 5319 are the remaining beds which were not granted to West Florida in its 1985 CON application. In order to support its 1985 CON application the hospital conducted a survey of its patient records to determine an estimate of the number of patients and patient days which were non acute but still occupied acute care beds. The hospital utilized its regularly kept records of Medicare patients whose length of stay or charges exceeded the Medicare averages by at least two standard deviations for reimbursement and records of Medicare patients whose charges exceed Medicare reimbursement by at least $5,000. These excess days or charges are known as cost outliers and, if the charge exceeds the Medicare reimbursement by $5000 or more, the excess charge is additionally known as a contractual adjustment. The survey conducted by the hospital consisted of the above records for the calendar year 1986. The hospital assumed that if the charges or length of stay for patients were excessive, then there was a probability that the patient was difficult to place. The above inference is reasonable since, under the Medicare system, a hospital's records are regularly reviewed by the Professional Review Organization to determine if appropriate care is rendered. If a patient does not meet criteria for acute care, but remains in the hospital, the hospital is required to document efforts to place the patient in a nursing home. Sanctions are imposed if a hospital misuses resources by keeping patients who did not need acute care in acute care bed spaces even if the amount of reimbursement is not at issue. The hospital, therefore goes to extraordinary lengths to place patients in nursing home facilities outside the hospital. Additionally, the inference is reasonable since the review of hospital records did not capture all non-acute patient days. Only Medicare records were used. Medicare only constitutes about half of all of West Florida's admissions. Therefore, it is likely that the number of excess patient days or charges was underestimated in 1986 for the 1985 CON application. The review of the hospital's records was completed in March, 1987, and showed that 485 patients experienced an average of 10.8 excess non-acute days at the hospital for a total of 5,259 patient days. The hospital was not receiving reimbursement from Medicare for those excess days. West Florida maintained that the above numbers demonstrated a "not normal need" for 21 additional ECF beds at West Florida. However as indicated earlier, HRS agreed to certify only 13 of those beds. The 13 beds were certified in 1987. The 13-bed unit opened in February, 1988. Since West Florida had planned for 21 beds, all renovations necessary to obtain the 8-bed certification were accomplished when the 13- bed unit was certified in 1987. Therefore, no capital expenditures will be required for the additional 8 beds under review here. The space and beds are already available. The same study was submitted with the application for the additional eight beds at issue in these proceedings. In the present application it was assumed that the average length of stay in the extended care unit would be 14 days. However, since the 13 bed unit opened, the average length of stay experienced by the 13-bed unit has been approximately 15 days and corroborates the data found in the earlier records survey. Such corroboration would indicate that the study's data and assumptions are still valid in reference to the problem placements. However, the 15- day figure reflects only those patients who were appropriately placed in West Florida's ECF unit. The 15-day figure does not shed any light on those patients who have not been appropriately placed and remain in acute care beds. That light comes from two additional factors: The problems West Florida experiences in placing sub-acute, high skill, medicare patients; and the fact that West Florida continues to have a waiting list for its 13 bed unit. Problem Placements Problem placements particularly occur with Medicare patients who require a high skill level of care but who no longer require an acute level of care. The problem is created by the fact that Medicare does not reimburse medical facilities based on the costs of a particular patients level of care. Generally, the higher the level of care a patient requires the more costs a facility will incur on behalf of that patient. The higher costs in and of themselves limit some facilities in the services that facility can or is willing to offer from a profitability standpoint. Medicare exacerbates the problem since its reimbursement does not cover the cost of care. The profitability of a facility is even more affected by the number of high skill Medicare patients resident at the facility. Therefore, availability of particular services at a facility and patient mix of Medicare to other private payors becomes important considerations on whether other facilities will accept West Florida' s patients. As indicated earlier, the hospital goes to extraordinary lengths to place non- acute patients in area nursing homes, including providing nurses and covering costs at area nursing homes. Discharge planning is thorough at West Florida and begins when the patient is admitted. Only area nursing homes are used as referrals. West Florida's has attempted to place patients at Bluff's and Bay Breeze nursing homes operated by Advocare. Patients have regularly been refused admission to those facilities due to acuity level or patient mix. West Florida also has attempted to place patients at Baptist Manor and Baptist Specialty Care operated by Baptist Hospital. Patients have also been refused admission to those facilities due to acuity level and patient mix. 16 The beds originally rented to Sacred Heart Hospital have been relinquished by that hospital and apparently will not come on line. Moreover the evidence showed that these screening practices would continue into the future in regard to the 120 beds granted to Advocare and Baptist Manor. The president of Advocare testified that his new facility would accept some acute patients. However, his policies on screening would not change. Moreover, Advocare's CON proposes an 85 percent medicaid level which will not allow for reimbursement of much skilled care. The staffing ratio and charges proposed by Advocare are not at levels at which more severe sub-acute care can be provided. Baptist Manor likewise screens for acuity and does not provide treatment for extensive decubitus ulcers, or new tracheostomies, or IV feeding or therapy seven days a week. Its policies would not change with the possible exception of ventilated patients, but then, only if additional funding can be obtained. There is no requirement imposed by HRS that these applicants accept the sub-acute-patients which West Florida is unable to place. These efforts have continued subsequent to the 13-bed unit's opening. However, the evidence showed that certain types of patients could not be placed in area nursing homes. The difficulty was with those who need central lines (subclavian) for hyperalimentation; whirlpool therapy such as a Hubbard tank; physical therapy dither twice a day or seven days a week; respiratory or ventilator care; frequent suctioning for a recent tracheostomy; skeletal traction; or a Clinitron bed, either due to severe dicubiti or a recent skin graft. The 13-bed unit was used only when a patient could not be placed outside the hospital. The skill or care level in the unit at West Florida is considerably higher than that found at a nursing home. This is reflected in the staffing level and cost of operating the unit. Finally, both Advocare and Baptist Manor involve new construction and will take approximately two years to open. West Florida's special need is current and will carry into the future. The Waiting List Because of such placement problems, West Florida currently has a waiting list of approximately five patients, who are no longer acute care but who cannot be placed in a community nursing home. The 13-bed unit has operated at full occupancy for the last several months and is the placement of last resort. The evidence showed that the patients on the waiting list are actually subacute patients awaiting an ECF bed. The historical screening for acuity and patient mix along with the waiting list demonstrates that currently at least five patients currently have needs which are unmet by other facilities even though those facilities may have empty beds. West Florida has therefore demonstrated a special unmet need for five ECF beds. Moreover, the appropriate designation and placement of patients as to care level is considered by HRS to be a desirable goal when considering CON applications because the level of care provided in an ECF unit is less intense than the level of care required in an acute care unit. Thus, theoretically, better skill level placement results in more efficient bed use which results in greater cost savings to the hospital. In this case, Petitioner offers a multi-disciplinary approach to care in its ECF unit. The approach concentrates on rehabilitation and independence which is more appropriate for patients at a sub-acute level of care. For the patients on the awaiting proper placement on the waiting list quality of care would be improved by the expansion of the ECF unit by five beds. Finally, there are no capital costs associated with the conversion of these five beds and no increase in licensed bed capacity. There are approximately five patients on any given day who could be better served in an ECF unit, but who are forced to remain in an acute care unit because no space is available for them. This misallocation of resources will cost nothing to correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a CON to Petitioner for five ECF beds. DONE and ORDERED this 30th day of March, 1989, in Tallahassee, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1989. APPENDIX The facts contained in paragraph 1-29 of Petitioner's proposed Findings of Fact are adopted in substance, insofar as material. The facts contained in paragraph 1, 2, 3, 4, 5, 6, 8, 12, 15, 16, 20, 27, 28, 29, 31 and 33 of Respondent's Proposed Findings of Fact are subordinate. The first sentence of paragraph 7 of Respondent's Proposed Findings of Fact was not shown to be the evidence. Strict compliance with the local health plan was not shown to be an absolute requirement for CON certification. The remainder of paragraph 7 is subordinate. The facts contained in paragraph 9, 10, 11 and 30 of Respondent's Proposed Findings of Fact were not shown by the evidence. The first part of the first sentence of paragraph 13 of Respondent's Proposed Findings of Fact before the semicolon is adopted. The remainder of the sentence and paragraph is rejected. The first sentence of paragraph 14 of Respondent's Proposed Findings of Fact was not shown by the evidence. The remainder of the paragraph is subordinate. The facts contained in paragraph 17, 26 and 32 of Respondent's Proposed Findings of Fact are adopted in substance, insofar as material. The acts contained in paragraph 18 are rejected as supportive of the conclusion contained therein. The first (4) sentences of paragraph 19 are subordinate. The remainder of the paragraph was not shown by the evidence. The first (2) sentences of paragraph 21 are adopted. The remainder of the paragraph is rejected. The facts contained in paragraph 22 of Respondent's Proposed Findings of Fact are irrelevant. The first sentence of paragraph 23 is adopted. The remainder of paragraph 23 is subordinate. The first sentence of paragraph 24 is rejected. The second, third, and fourth sentences are subordinate. The remainder of the paragraph is rejected. The first sentence of paragraph 25 is subordinate. The remainder of the paragraph is rejected. COPIES FURNISHED: Lesley Mendelson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Donna H. Stinson, Esquire MOYLE, FLANIGAN, KATZ, FITZGERALD & SHEEHAN, P.A. The Perkins House - Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
The Issue At issue in this proceeding is whether Memorial West should be issued CON 7249 to establish a 10-bed Level II NICU program at its facility in southwest Broward County based on "not normal circumstances." Also at issue is whether the Intervenor, Plantation General Hospital, L.P., has sufficiently demonstrated standing, based on whether its existing NICU service will be substantially adversely affected if Memorial West's proposed project is approved.
Findings Of Fact The agency hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except where inconsistent with the rulings on the exceptions.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Plantation General Hospital, L.P. be dismissed as a party to these proceedings based upon its failure to demonstrate standing, and That Certificate of Need No. 7249 be granted to South Broward Hospital District, d/b/a Memorial Hospital West to establish a 10-bed Level II Neonatal Intensive Care Unit at its Pembroke Pines facility. DONE and ORDERED this 20th day of January, 1995, in Tallahassee, Florida. JAMES W. YORK 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 20th day of January, 1995.
The Issue Whether Certificate of Need Application Number 9099, filed by Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center, to convert 20 skilled nursing beds to 20 acute care beds, meets the criteria for approval.
Findings Of Fact Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center (JFK) is the applicant for Certificate of Need (CON) Number 9099 to convert a 20-bed hospital-based skilled nursing unit (SNU) to 20 general acute care or medical/surgical beds. The construction cost is approximately $117,000, of the total project cost of $151,668. JFK is an affiliate of Columbia Hospital System (Columbia), the largest for-profit hospital chain in the United States. The Agency for Health Care Administration (AHCA) is the state agency which administers the CON program for health care services and facilities in Florida. JFK is a 343-bed hospital located in Atlantis, Florida, in Palm Beach County, AHCA District 9, Subdistrict 5. Pursuant to a previously approved CON, an additional 24 acute care beds are under construction at JFK, along with 12 CON-exempt observation beds, at a cost of approximately $4 million. In August 1998, JFK was allowed to convert 10 substance abuse beds to 10 acute care beds. Other acute care hospitals in District 9 include the Petitioners: St. Mary's Hospital, Inc. (St. Mary's), and Good Samaritan Hospital, Inc. (Good Samaritan), which are located in northern Palm Beach County, AHCA District 9, Subdistrict 4, approximately 11 and 9 miles, respectively, from JFK. The remaining hospitals in District 9, Subdistrict 5, in southern Palm Beach County, and their approximate distances from JFK are as follows: Wellington (8 miles), Bethesda (7 miles), West Boca (18 miles), Delray (12 miles), and Boca Raton Community (17 miles). JFK and Delray are both "cardiac" hospitals offering open heart surgery services, with active emergency rooms, and more elderly patients in their respective service areas. The parties stipulated to the following facts: JFK's CON application was submitted in the Agency for Health Care Administration ("AHCA") second hospital batching cycle in 1998, and was the only acute care bed application submitted from acute care bed District 9, Subdistrict 5. AHCA noticed its decision to approve JFK's CON 9099 by publication in Volume 25, Number 1, Florida Administrative Weekly, dated January 8, 1999. Good Samaritan and St. Mary's each timely filed a Petition for Formal Administrative Proceeding challenging approval of JFK's CON application. By Order dated March 17, 1999, the cases arising from those petitions were consolidated for the purposes of all future proceedings. JFK has the ability to provide quality care and has a record of providing quality of care. §408.035(1)((c), Fla. Stat. JFK's CON application, at Schedule 6 and otherwise, projects all necessary staff positions and adequate numbers of staff, and projects sufficient salary and related compensation. See, §408.035(1)(h). JFK has available the resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. See, §408.035(1)(h), Fla. Stat. JFK's CON application proposal is financially feasible in the immediate term. §408.035(1)(i), Fla. Stat. JFK's CON application proposal is financially feasible in the long term, except, Good Samaritan and St. Mary's contend as it relates to projected utilization. §408.035(1)(i), Fla. Stat. Schedules 9 and 10 and the architectural schematics in JFK's application are complete and satisfy all applicable CON application requirements. Schedule 1 in the application is complete, reasonable, and not at issue. JFK's proposed construction/renovation design, costs, and methods of construction/renovation are reasonable and satisfy all applicable requirements. See, §408.035(1)(m), Fla. Stat. JFK's CON application satisfies all minimum application content requirements in Section 408.037(1), Florida Statutes; except that Good Samaritan and St. Mary's contend that subsection (1)(a), is not satisfied. JFK certified that it will license and operate the facility if its CON proposal is approved. See, §408.037(2), Fla. Stat. JFK's Letter of Intent was timely filed and legally sufficient. See, §408.039(2)(a) and (c), Fla. Stat. Good Samaritan does not provide cardiac catheterization services, angioplasty, or open heart surgery. St. Mary's does not provide elective angioplasty or open heart surgery services. JFK is one of the hospitals to which Good Samaritan and St. Mary's transfer patients in need of inpatient cardiac catheterization services, angioplasty, and open heart surgery. Neither Good Samaritan nor St. Mary's have any present plans to apply for CON approval to add skilled nursing beds or acute care beds. The parties also stipulated that Subsections 408.035(1)(e), (f), (g), (h) - as related to training health professionals, (j), (k), and (2), Florida Statutes, are not at issue or not applicable to this proposal. For the batching cycle in which JFK applied for CON Number 9099, AHCA published a fixed need of zero for District 9, acute care subdistrict 5. In the absence of a numeric need for additional acute care beds in the subdistrict, JFK relied on not normal circumstances to support the need for its proposal, including the following: delays in admitting patients arriving through the emergency room to inpatient beds, delays in moving patients from surgery to recovery to acute care beds, and seasonal variations in occupancy exceeding optimal levels and, at times, exceeding 100%. Good Samaritan and St. Mary's oppose JFK's CON application. In general, these Petitioners claimed that other problems cause overcrowding in the emergency room at JFK, that the type of beds proposed will not be appropriate for the needs of most patients, that "seasonality" is not unique to or as extreme at JFK, and that a hospital-specific occupancy level below that set by rule cannot constitute a special or not normal circumstance. If JFK achieves the projected utilization, experts for Good Samaritan and St. Mary's also projected adverse financial consequences for those hospitals. Rule 59C-1.038(5) - special circumstances During the hearing, the parties stipulated that the numeric need for new acute care beds in the subdistrict is zero. The rule for determining numeric need also includes the following provision: (5) Approval Under Special Circumstances. Regardless of the subdistrict's average annual occupancy rate, need for additional acute care beds at an existing hospital is demonstrated if the hospital's average occupancy rate based on inpatient utilization of all licensed acute care beds is at or exceeds 80 percent. The determination of the average occupancy rate shall be made based on the average 12 months occupancy rate for the reporting period specified in section (4). Proposals for additional beds submitted by facilities qualifying under this subsection shall be reviewed in context with the applicable review criteria in section 408.035, F.S. The applicable time period for the special circumstances provision is calendar year 1997. JFK's reported acute care occupancy was 76.29% in 1997, and 79.7% in 1998, not 80%, as required by the rule. JFK and AHCA take the position that other special circumstances may, nevertheless, be and have been the basis for the approval of additional acute care beds. JFK also maintained that the reported average occupancy levels understated the demand for and actual use of its inpatient beds. Due to seasonal fluctuations caused by the influx of winter residents, JFK reached or exceeded 100% occupancy on 5 or 6 days, exceeded 80% occupancy on 20 days, and averaged 90.9% occupancy, in January 1999. In February 1999, the average was 96.5%, but was over 100% on 8 days, and over 90% on 25 days. In March 1999, the average occupancy was 90.1%, but exceeded 100% on one day, and 90% on 17 days. In recent years, the "season" also has extended into more months, from approximately Thanksgiving to Easter or Passover. It also includes flu season which disproportionately affects the health of the elderly. JFK also demonstrated that occupancy varies based on the day of the week, generally highest on Mondays, Tuesdays, and Wednesdays and lowest on weekends. JFK's acute care beds were also occupied by patients who were not classified as 24-hour medical/surgical inpatients. Others included observation and 23-hour patients, covered by Medicare or health maintenance organizations (HMOs). Some of those patients were classified initially as outpatients to lower reimbursement rates, but routinely subsequently reclassified and admitted as inpatients. In fact, during the applicable time period for determining occupancy, Medicare allowed patients to be classified as outpatients for up to 72-hour hospital stays. Subsequently, Medicare reduced the allowable hospital stay to 48 hours for all "outpatients," according to AHCA's expert witness. When not classified as inpatients, patients are not counted in average occupancy rates which are based solely on the admitted inpatient census, counted each midnight. For example, in February 1999, the average daily census for 23-hour patients was 10.8 patients, which, when combined with 24-hour patients, results in an average occupancy of 99.7% for the month. Due to the Medicare classification system, some but not all of the so- called 23-hour patients affect the accuracy of the inpatient utilization data. According to AHCA's expert witness, however, numeric need cannot be determined because of JFK's failure to quantify the number of Medicare patients who actually affected the acute care bed utilization. The 23-hour or observation patients may use, but do not require CON-approved and licensed acute care beds. Instead, those patients may be held in either non-CON, non-licensed "observation" beds or in licensed acute care beds. As AHCA determined, to the extent that 23-hour patients in reality stayed longer, and adversely affected JFK's ability to accommodate acute care patients, their presence can be considered to determine if special circumstances exist. Combining 24-hour and 23-hour patients, JFK experienced an occupancy rate of 80% in 1996, and 85.7% in 1997. While some of the 23-hour patients were, in fact, outpatients who should not be considered and others stayed from 24 hours up to 3 days and should be considered, JFK's proportion of Medicare services is important to determining whether special circumstances based on acute care utilization exist. With 74% of all JFK patients in the Medicare category, but without having exact numbers, it is more reasonable than not to conclude that the occupancy level is between the range of 76.29% for acute care only and 85.7% for acute care and 23-hour patients. A reasonable inference is that JFK achieved at least 80% occupancy of patients who were in reality inpatients in its acute care beds in 1997. The expert health planner for the Petitioners conceded that bed availability declines, capacity is a constraint, and high occupancy becomes a barrier to service at some level between 80 and 83% occupancy. In a prior CON filed on behalf of Good Samaritan for a 4-bed addition to an 11-bed neonatal intensive care unit (NICU), the same expert asserted that 76% occupancy was a reasonable utilization standard. That occupancy level was based on the desire to maintain 95% bed availability. An exact comparison of the occupancy levels in this and the NICU case, however, is impossible due to the small size of the NICU unit and the fact that the applicant met the occupancy level in that rule for special circumstances. The statistical data on the number patients actually using acute care beds at JFK in excess of 24-hours despite their classification, supports its claim of overcrowding. Emergency Room Conditions JFK described overcrowding in its emergency department as another special circumstance creating a need for additional acute care beds. The emergency room at JFK has 37 bays each with a bed and another 15 to 17 spaces used for stretchers. Eighteen parking spaces are reserved for ambulances in front of the emergency department. It is not uncommon for a patient to wait in the JFK emergency room up to 24 hours after being admitted to the hospital, before being moved to an acute care bed. In February 1999, after having converted 10 substance abuse beds to acute care beds in October 1998, JFK still provided 234 patient days of acute care in the emergency department. The waiting time for patients to receive a bed after being admitted through the emergency department ranged from 10 hours to 5 days in the winter, and from an average of 6 hours up to 24 hours in the summer. While JFK claims that the quality of care is not adversely affected, it does note that patient privacy and comfort are compromised due to the noise, lights, activity, and lack of space for visitors in the emergency room. JFK's patients tend to be older and sicker than the average. As a result, more patients arriving at its emergency room are admitted to the hospital. In the winter of 1998, JFK was holding up to 35 acute care inpatients at a time in the emergency room. Nationally, from 15% to 20% of emergency room patients are admitted to hospitals. By contrast, almost twice that number, or one-third of JFK's emergency room patients become admitted inpatients. Emergency room admissions are also a substantial number of total admissions at JFK. In calendar year 1998, slightly more than 65% of all inpatient admissions to JFK arrived through the emergency room, most by ambulance. Ambulance arrivals at any particular hospital are often dictated by the patient's condition, with unstable patients directed to the nearest hospital. Once patients are stabilized in the emergency room at JFK, those requiring obstetric, pediatric, or psychiatric admissions are transferred from JFK which does not provide those inpatient services. Emergency room patients in need of acute care services provided at JFK, like the neonates at issue in the prior Good Samaritan application, are unlikely candidates for transfer The emergency room at JFK receives up to 50,000 patient visits a year, up from approximately 32,000 annual visits five years ago. JFK operates one of the largest and busiest emergency departments in Palm Beach County. Due to overcrowding in the emergency department at Delray Hospital, in southern Palm Beach County, patients have been diverted to other facilities, including JFK. In terms of square footage, JFK's emergency room does not meet the standards to accommodate the 52 to 54 bays and stretchers and related activities. JFK lacks adequate space for support services which should also be available in the emergency department. The Petitioners asserted that enlarging the emergency room will alleviate its problems. JFK demonstrated, however, that regardless of the physical size of the emergency room, optimal patient care requires more capacity to transfer patients faster to acute care beds outside the emergency department. Conditions in Other Departments Of 343 operational beds at JFK at the time of the final hearing, 290 were monitored or telemetry acute care beds, 30 were critical care beds, and 23 were non-monitored, non-critical care beds. Most of the monitored beds are in rooms equipped with antennae to transmit data from electrodes and monitors when attached to patients. When monitoring is not necessary, the same beds are used by regular acute care patients. The large number of monitored beds located throughout the hospital in various units reflects JFK's largely elderly population and specialization in cardiology. In 1998, 820 inpatient cardiac catheterizations (caths) were performed at JFK. Petitioners Good Samaritan and St. Mary's transferred 90 and 28 of those cath patients, respectively to JFK. In the first five months of 1999, 449 caths were performed, including procedures on 35 patients transferred from Good Samaritan and 16 from St. Mary's. Cath lab patients are held in the lab longer after their procedures when beds are not available in cardiac or the post- anesthesia care units. The Petitioners suggested that cath lab patients could be placed in a 12-bed holding area added to the lab in July 1999; however, that space was expected to be filled by patients being prepared for caths. Open heart surgery is available in Palm Beach County at three hospitals, Delray, JFK and Palm Beach Gardens. Patients admitted to JFK for other primary diagnoses often require cardiac monitoring even though they are not in a cardiac unit. The additional 24 beds which were under construction at the time of the final hearing will also be monitored beds. The 20 beds at issue in this proceeding will not be monitored. The Petitioners questioned whether non-monitored beds will alleviate overcrowding at JFK where so many patients require monitoring. JFK physicians in various specialties testified concerning conditions in other areas of the hospital. A nephrologist, who consults primarily in intensive care units, described the backlog and delay in moving patients from intensive care into acute care beds. A cardiologist noted that patients are taking telemetry beds they do not need because there is no other place to put them. A general and vascular surgeon described the overcrowding as a problem with the ability to move patients from more to less intensive care when appropriate. Elective surgeries have been delayed to be sure that patients will have beds following surgery. The evidence presented by JFK supports the conclusion that the additional acute care beds will assist in alleviating overcrowding in other hospital units, including backlogs in the existing monitored beds. JFK has established as factual bases for special circumstances that its high occupancy exceeds the optimal much of the year, aggravated by seasonal fluctuations; that it has relatively large emergency room admissions over which it has no control; and that its intensive care and monitored beds are not available when needed. Number of Beds Needed With the conversion, in 1998, of 10 substance abuse beds to acute care beds and the 1999 construction of 24 of 40 additional beds requested by JFK, the number of licensed and approved beds at JFK increased to 367. In addition, with CON- exemption, JFK has added observation beds. As a result of AHCA's partial approval of the previous JFK request for new construction and due to unfavorable changes in Medicare reimbursement policies for hospital-based SNUs, JFK now seeks this 20-bed conversion. JFK ceased operating the SNU in October 1998, after Medicare reimbursement changed to a system based on resource utilization groups (RUGs). JFK was unable to operate the SNU without financial losses, that is, unable to cover its patient care costs under the RUGs system. The proposal to convert the beds back to acute care, as they were previously licensed will allow JFK to reconnect existing oxygen lines in the walls and to use the beds for acute care patients. Although Good Samaritan and St. Mary's suggested that JFK can profitably operate a SNU, there was no evidence presented other than its previous occupancy levels which were very high, and the fact that Columbia is not closing all of its SNUs. The Petitioners also question JFK's ability to use its SNU beds for acute care and/or observation patients. AHCA, however, took the position that acute care licensure is required for beds in which acute care patients are routinely treated. Otherwise, the agency would not have accurate data on utilization, bed inventory, and the projected need. In order to demonstrate the number of beds needed, JFK's expert used historical increases in admissions. Some admissions data was skewed because the parent corporation, Columbia, closed Palm Beach Regional in 1996, and consolidated its activities at JFK. Excluding from consideration the increase of 3,707 admissions from 1995 to 1996, JFK's expert considered approximately 800 as reasonable to assume as an average annual increase. That represents roughly the mid-point between the 1996 to 1997 increase of 605, and the 1997 to 1998 increase of 1,076 admissions. A projected increase of 800 admissions for an average 5-day length of stay would result in an increase of 4,000 patient days a year which, at 80% occupancy, justifies an increase of 14 beds a year. Considering the closing of Palm Beach Regional, the number of beds in the subdistrict will have been reduced by 170. At the hearing, JFK's expert also relied on 3.3% annual patient day increase to project the number of beds needed, having experienced an increase of 5.8% from 1997 to 1998. Using this methodology, JFK projected a need for 20 additional acute care beds by 2002, and over 40 more by 2004. That methodology assumed patient growth in the excess of population growth and, necessarily, an increase in market share. JFK's market share increased in its primary service area from approximately 19% in 1993 to 27% in 1997. But the market share also slightly declined from 1997 to 1998. AHCA's methodology for determining the number of beds needed was based on the entire population of Palm Beach County, not just the more elderly southern area. It also assumed that JFK's market share would remain constant. Using this more conservative approach than JFK, AHCA projected a need for 383 acute care beds, or 16 beds added to the current total of 367 licensed and approved beds, at an optimal 75% occupancy by the year 2004. AHCA relied on a projection of 104,959 total patient days in 2004. Using the same methodology, JFK's expert determined that total projected patient days for 1998 would have been 94,225, but the actual total was 98,126 patient days. AHCA's methodology underestimates the number of beds needed, but does confirm that more than 16 additional beds will be needed by 2004. AHCA's reliance on 75% as an optimal future occupancy level as compared to the hospital-specific historical level of 80% was criticized, as was the use of the year 2004 as a planning horizon. The rule requires 80% occupancy for a prior reporting period and does not establish any planning horizon. Good Samaritan and St. Mary's used 80% occupancy in their analysis of bed need. At 80% occupancy, Petitioners projected an average daily census of 265 patients in 331 beds in 2001, or 268 patients in 334 beds in 2002, and 270 patients in 358 beds in 2003, as compared to 367 existing and approved beds. The Petitioners' projection is an underestimate of bed-need based on the actual average daily census of 269 patients in 1998. The Petitioners' methodology erroneously projects a need for fewer licensed beds than JFK has currently, despite the special circumstances evincing overcrowding. At 80% occupancy, based on the special circumstances rule, a hospital exceeds the optimal level and needs more beds. But, according to the Petitioners, 80% is a future occupancy target for the appropriate planning horizon of 2002. As AHCA's expert noted, it is illogical to use 80% as both optimal and as an indication of the need for additional beds. Similarly, it is not reasonable to use a planning horizon which coincides with the time when more beds will be needed. Therefore, the use of 75% for the five-year planning horizon of 2004 is a reasonable optimal target, as contrasted to the need for additional beds when 80% occupancy is reached at some future time beyond the planning horizon. AHCA's underestimate of need at 16 more beds by 2004, and JFK's overestimate of need at 40 more beds by 2004, support the conclusion that the requested addition of 20 beds in this application is in a reasonably conservative range. Rule 59C-1.038(6)(a) and Subsection 408.035(l)(n) - service and commitment to medically indigent; and Rule 59C-1.038(6)(b) - conversion of beds Rule 59C-1.038(6), Florida Administrative Code, also includes the following criteria: Priority consideration for initiation of new acute care services of capital expenditures shall be given to applicants with documented history of providing services to medically indigent patients or a commitment to do so. When there are competing applications within a subdistrict, priority consideration shall be given to the applications which meet the need for additional acute care beds in a particular service through the conversion of existing underutilized beds. Subsection (a) of the Rule, overlaps with District 9 health plan allocation factor one, which must be considered pursuant to Subsection 408.035(1)(a), and with the explicit criterion of Subsection 408.035(1)(n), Florida Statutes. All three require a commitment to and record of service to Medicaid, indigent and/or handicapped patients. JFK agreed to have its CON conditioned on 5% of the care given in the 20 new beds to Medicaid and charity patients. The commitment for the 24 beds under construction is 3% for Medicaid and charity patients. If charity patients are defined as those with family incomes equal to or below 150% of federal poverty guidelines, JFK provided $2.9 million in charity care in calendar year 1998, and $720,000 as of April for 1999. JFK provided an additional 3% to 5% in Medicaid care. The Medicaid total includes Palm Beach County Health Care District patients, who are also called welfare patients. The charity care provided by JFK is equivalent to approximately 1% of its gross revenue. JFK explained its relatively low Medicaid care as a function of its relatively limited services for people covered by Medicaid, particularly, the young who utilize obstetrics and pediatrics. JFK pointed to the differing demographics in Palm Beach County with more elderly, who have Medicare coverage, located in its primary service area. Excluding pediatric and obstetric care, Medicaid covered 6.7% of patients in southern Palm Beach County as compared to 16.3% in northern Palm Beach County. Of the Medicaid patients, 2.9% in the southern area as compared to 6% in the northern area are adults. On this basis, JFK established the adequacy of its historical Medicaid and indigent care, and of its proposed commitment. Subsection (6)(b) of Rule 59C-1.038 is inapplicable when, as in this case, there are not competing applications to compare. Subsection 408.035(1)(a) - other local health plan factors and Subsection 408.035(1)(o) - continuum of care District 9 allocation factor 2, favoring cost containment practices, is enhanced by the proposed conversion rather than the new construction of beds. Within the Columbia group of hospitals, there is an effort to avoid unnecessary duplications of services. JFK caters to an elderly population and to providing cardiology, neurology, and oncology services. Columbia's Palms West provides pediatric and obstetric care. Another Columbia facility in Palm Beach County, Columbia Hospital, specializes in inpatient psychiatric services. The elimination of the hospital-based SNU at JFK does eliminate one level of care in the system, contrary to the criteria. District 9 health plan allocation factor 3 requires favorable consideration of plans, like JFK's, to convert unused or underutilized beds. In this case, the JFK SNU was highly utilized but unprofitable. There is no evidence that alternative placements in free-standing nursing homes are inappropriate or unavailable. Minor inefficiencies result from the time lag for transfers during which skilled nursing patients remain in acute care beds. To some extent, the inefficiencies were already occurring while JFK operated the SNU due to its high average census of 18 or 19 patients in a total of 20 SNU beds. Those inefficiencies are outweighed by the low cost conversion of 20 beds for $117,000, particularly as compared to its prior 24-bed construction for $4 million. In general, the applicable local health plan allocation factors support the approval of the JFK application. Rule 59C-1.030 - needs access for low income, minorities, handicapped, elderly, Medicaid, Medicare, indigent or other medically underserved In general, the proposal is intended to increase access to JFK's services by decreasing waiting times for admissions. The services are used by a large number of elderly patients, who are primarily covered by Medicare. JFK demonstrated that the population in its service area also tends to be wealthier than the population in northern Palm Beach County. Medicaid and indigent access to care at JFK is consistent and reasonable given the demographic data presented. Access for elderly Medicare patients will be enhanced by the proposal. Subsection 408.035(1)(b) - accessibility, availability, appropriateness, and adequacy of like and existing services Good Samaritan and St. Mary's argue that hospitals below 75% occupancy are available alternatives to JFK's patients. Yet, those facilities are not viable alternatives for unstable patients admitted through the emergency room. Neither is it appropriate to transfer patients who need services provided at JFK. JFK does not allege that any problems exist at other facilities, but only that it is affected by special circumstances. From January to June 1998, the closest hospitals to JFK experienced wide-ranging occupancy levels from 92% at Delray, the hospital with services most comparable to those at JFK, to 57% at Bethesda, and 47% at Wellington. The wide range in occupancy rate is further indication of uniqueness of the need for patients to access services available only at Delray and JFK. Subsection 408.035(1)(d) - outpatient care or other alternatives Admitted inpatients have no alternatives to their need for acute care beds. Subsection 408.035(1)(h) - alternative use of resources and accessibility for residents The continued use of the 20 beds as a SNU was suggested as an alternative. As noted, however, that proved to be financially unprofitable at JFK, in comparison to the low cost conversion to acute care beds. AHCA reasonably rejected the idea that of the beds being designated "observation" beds when used for acute care patients. In addition, in 1996, JFK estimated the cost of moving patients from bed to bed in the hospital due to the shortage of appropriate beds, when needed, at up to $1 million. This project is intended to meet a facility-specific need based on the demand for services at JFK from patients who cannot reasonably initially be sent or subsequently transferred to other hospitals. As such, JFK's additional beds do not meet the criterion for accessibility for all residents of the district. Subsection 408.035(1)(i) - utilization and long-term financial feasibility Good Samaritan and St. Mary's contend that JFK's proposal includes unrealistically high utilization projections for the additional 20 beds. Using 98,000 patient days in 1998, which excludes any days attributable to skilled nursing beds, total utilization projected in the second year is 78.4%. For the additional 20 beds, projected utilization is 77.4%. The expert for Good Samaritan and St. Mary's disagreed with the allocation of patient days between the existing and additional beds. If 80% utilization is assigned to existing 367 beds, as he suggested, then the average annual occupancy of the 20 new beds would be only 50%. The financial break-even point for the project, however, is 50 to 75 patient days, or 10 to 15 patients with average lengths of stay of 5 days. Therefore, even with the lower projected occupancy of 50%, or an average of 10 beds at any time, the project is financially feasible in the long-term. In reality, a separate allocation of patient days to the 20 new beds is somewhat arbitrary. It is also less important than total projected utilization, since the 20 beds do not represent a separate unit in which specialized services will be provided. The additional beds will become a part of the total medical/surgical inventory. By demonstrating that there will be sufficient total occupancy to exceed the financial break-even point in the newly converted beds regardless of the allocation of patient days to any particular bed, JFK demonstrated the long- term financial feasibility of the proposal for CON 9099. Subsection 408.035(1)(l) - impact on costs; effects of competition If the JFK proposal is approved, Good Samaritan anticipates a loss of 255 patients, or 1,392 patient days, which is equivalent to a financial loss of over $1.5 million. St. Mary's anticipates losses of 158 patients or 973 patient days, and in excess of $1 million. Both hospitals were experiencing overall operating losses in 1999. But, the estimates of financial losses for both hospitals did not take into consideration all of the expense reductions associated with serving fewer patients. Excluding pediatrics and obstetrics, which are not available at JFK, JFK's overlapping service areas with Good Samaritan and St. Mary's are minimal. Good Samaritan's market share in JFK's primary service area is 4.8%, and St. Mary's is 9.3%. Pediatrics and obstetrics contribute 30.7% of total patients at Good Samaritan, and 49.5% at St. Mary's. Physician overlap among the hospitals is also limited. Although 357 doctors admitted patients to JFK and 464 to St. Mary's in the first two quarters of 1998, the number of overlapping doctors was 28. With a total of 379 admitting doctors at Good Samaritan for the same period of time, only 21 were included in JFK's 357 admitting physicians. In general, doctors in the northern Palm Beach County acute care subdistrict seldom admit patients to hospitals in the southern subdistrict, and vice versa. The absence of overlapping medical staff also reflected the differences in the services. Most of the top twenty doctors who admitted patients to Good Samaritan and St. Mary's were obstetricians and pediatricians. When obstetricians and pediatricians are excluded, the number of overlapping doctors for JFK and Good Samaritan is reduced to 15, and for JFK and St. Mary's to 22. In addition to providing different services, to different areas of the County, doctors who practice primarily in one or the other subdistrict served patients in different payor classification mixes. In 1997, JFK's patients were 74% Medicare, consistent with the fact that a larger percentage of elderly patients live in JFK's service area. By contrast, Medicare patients were approximately 48% of the total at Good Samaritan, and 32% of the total at St. Mary's. Historically, the addition of acute care beds at JFK has not affected other hospitals in the district or even the same acute care subdistrict. After the conversion of 10 substance abuse beds in the fall of 1998, the acute care patient days at every hospital in the same subdistrict increased in early 1999 over comparable periods of time in 1998. The assumption that additional beds at JFK will take patients from other hospitals includes the assumption that JFK will draw a larger share of an incremental increase of patients. The assumption is, in other words, that all patients will be new to JFK. The expert health planner for Good Samaritan and St. Mary's conceded that facility-specific overcrowding can justify projections that the additional beds will accommodate the existing census plus growth attributable to increasing population, and will not generate new patients. The expert assumed, nevertheless that from 1478 to 1486 new patients (depending on whether the length of stay is rounded off) would be associated with JFK's project. From that total, the proportional losses allocated were 255 patients from Good Samaritan and 158 patients from St. Mary's. Another underlying assumption increase is that all of the new patients would go to other hospitals if JFK does not add 20 acute care beds. That assumption suggests that all of the patients could receive the services they need at the other facilities, which is not supported by the facts or current utilization data. More likely, with the addition of beds due to overcrowding, some patients will come from the existing hospital census at JFK. It is not reasonable to assume that JFK will have all new patients, nor that all patients could be treated at other hospitals in the absence of JFK's expansion. The proportion of emergency room admissions at JFK is reasonably expected to continue. Patients who arrive at JFK requiring open heart surgery, angioplasties or invasive cardiac caths are reasonably expected to continue to receive those services at JFK, including patients who are transferred to JFK from Good Samaritan and St. Mary's. Based on the failure to support the assumptions, and the differences in service areas, medical staff, specialties, and patient demographics, Good Samaritan and St. Mary's have not shown any adverse impact from the JFK proposal. On balance, considering the statutory and rule criteria for reviewing CON applications, JFK established, as a matter of fact, that it meets the special circumstance criteria related to emergency room admissions, pre- and post-surgical and intensive care backlogs, and average annual occupancy projections in excess of optimal levels.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That a final order be entered issuing CON 9099 to convert 20 skilled nursing beds to 20 acute care beds at Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center, on condition that a minimum of 5% of new acute care patient days will be provided to Medicaid and charity patients. The file of the Division of Administrative Hearings, DOAH Case No. 99-0714 is hereby closed. DONE AND ENTERED this 7th day of April, 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 7th day of April, 2000. COPIES FURNISHED: 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 Richard A. Patterson, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Thomas A. Sheehan, III, Esquire Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, P.A. Post Office Box 3888 West Palm Beach, Florida 33402 Stephen A. Ecenia, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Robert D. Newell, Jr., Esquire Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313
