The Issue The issue in this case is whether Venice Hospital, Inc., (Venice) meets the statutory and rule criteria for a Certificate of Need (CON) to operate an open heart surgery program, and therefore, whether the Department of Health and Rehabilitative Services (Department) should approve its CON Application Number 5715.
Findings Of Fact The Parties 1. Venice is a 342 bed general hospital located in Venice, Florida, which is in south Sarasota County and is a part of the Department's Service District There are no subdistricts in District 8 for open heart surgery. The majority of patients served by Venice are from 50-55 years of age or older, and 22%-25% of patients admitted to Venice have a primary diagnosis of heart disease. If patients with heart disease as a secondary diagnosis are considered along with those who have this as their primary diagnosis, the total represents over 40% of all patients admitted at Venice. Of the cardiac catheterization patients treated at Venice in 1988, 78% were Medicare patients. Venice is a Medicaid provider, projecting 1.6% of its total revenue from Medicaid. It has a critical care center with 32 beds capable of invasive monitoring, multi-infusion of medications, pacemakers, Swans Ganz catheters, and care of post- catheterization patients. A separate 8-bed unit has been designated for use by open heart patients, with the same monitoring capability as the remainder of the unit. Memorial is an acute care hospital located in Sarasota, Florida, and is governed by the Sarasota County Public Hospital Board, which is elected to provide health care services to all residents of Sarasota County. It provides a full range of services, including an open heart surgery program, and is the largest provider of services to medically indigent and Medicaid patients in Sarasota County. Medical Center is a 208 bed not-for-profit hospital located in Punta Gorda, Florida, which has provided cardiac catheterization since 1985, and has been approved to initiate an open heart surgery program which is scheduled to open in late 1989. It has a 5% Medicaid payor mix. The primary service area for Medical Center is Charlotte County. Its secondary service area includes south Sarasota County. Both Memorial and Medical Center are also located in District 8, with Venice located between these facilities. Venice is approximately 35 miles to the north of Medical Center, and about 25 miles to the south of Memorial. There are two existing open heart programs in District 8, one at Memorial and the other at Southwest Regional Medical Center in Ft. Myers. In addition, there are two approved, but not yet operational, open heart programs, one at Medical Center and the other at Lee Memorial in Ft. Myers. The Department is the state agency which is responsible for administering Sections 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for Certificates of Need (CON) are filed, reviewed, and either granted or denied by the Department. The Application On or about September 27, 1988, Venice filed an application with the Department for a CON to implement an open heart surgery program at its hospital in Venice, Florida, with a capital expenditure of $665,500. This application was designated as CON Application Number 5715. The Department reviewed this application, and in October, 1988, forwarded an omissions letter to Venice. Venice responded to the omissions letter, and addressed not only the items noted by the Department in its omissions letter, but also provided additional materials, information, and corrections not requested in the omissions letter. Effective on November 14, 1988, the Department deemed Venice's application complete. A public hearing was held on this application at the request of Memorial on November 18, 1988. Thereafter, the Department reviewed and considered all material received from the applicant, as well as the information received at the public hearing, and prepared its State Agency Action Report (SAAR) noticing its intent to grant CON 5715. Memorial and Medical Center timely filed petitions to challenge the Department's notice of intent to issue this CON. Venice is relying upon its application which was deemed complete and reviewed by the Department in its SAAR, and not upon its original application that was filed prior to the omissions letter. Additionally, the applicant is not relying upon a "not normal circumstance" justification for its application, but rather urges that it meets the statutory and rule criteria for the issuance of this CON. The Department's CON Manual HRSM 235-1, dated October 1, 1988, is irrelevant to this proceeding since it has not been adopted by, or incorporated in, a rule, and was not applied in the batching cycle in which Venice's application was filed, or in the subsequent batch. It has not yet been applied to any hospital CON application. Therefore, the matters contained within this Manual concerning what is a permissible response to an omissions letter have not been considered. As part of its originally filed application, Venice included a document prepared by Ernst & Whinney entitled, "Audited Financial Statements and Other Financial Information, Venice Hospital, Inc., June 30, 1987." Through a clerical error in the copying process, page one of this twenty-four page document was omitted. At the time it filed its omissions response, Venice included this missing first page which is signed on behalf of Ernst & Whinney, and which states that the examinations contained therein were made in accordance with generally accepted auditing standards. It expresses the opinion that these financial statements present fairly the financial position of the applicant. An auditor's opinion letter is an essential part of the audited financial statement which must be included with the CON application. However, Venice provided this inadvertently missing page prior to its application being deemed complete. Thus, it was available to, and was reviewed by, the Department in the preparation of the SAAR on this application. Venice's application did raise concerns which it was seeking to address concerning availability and accessibility by addressing the current practice of transferring patients requiring open heart surgery to other facilities. Patient costs for such transport, as well as patient risk, inconvenience and comfort for the patient and family members, were all referenced in the application. Additionally, testimony at the public hearing held on November 18, 1988, which the Department considered in the preparation of its SAAR, dealt with concerns and problems arising from patient transport, including delay, risks to the patient from ambulance or helicopter transfers, and adverse effects which may occur on quality of care through this practice which is inconsistent with the concept of a continuum of care. The SAAR specifically notes that Venice contends its proposal will improve geographic access in its immediate service area, and that from July, 1987 through June, 1988, it transferred 144 of its cardiac patients from its facility for open heart surgery and an additional 125 were transferred for angioplasty procedures. The application did not specifically address or identify any adverse impact which its approval would have on existing providers. However, evidence on this issue is admissible at hearing since it is relevant to the issue of the standing of Memorial and Medical Center, and also because it is relevant to establish whether approval of this application would be consistent with statutory and rule review criteria, and provisions of the Local Health Plan that require assessment of any such impact. The SAAR notes that Venice did contend that approval of this CON will not affect the economy or quality of existing services in the District. Stipulations The parties stipulated that: The project is financially feasible in the short term; Venice has a record of providing quality care and this record is not an issue in this case; Other than for open heart services, other facilities are adequate and available to act as alternatives; The size and cost of construction for Venice's proposal are appropriate; Open heart surgery programs currently exist within a two hour drive time under average driving conditions for at least 90% of the District's population; The type and cost of equipment in the application are reasonable; If approved, Venice will provide the services required by Rule 10- 5.011(1)(f)3a and 3b, Florida Administrative Code, and does provide the services shown at paragraph 3c of said Rule. State Health Plan Objective 4.2 of the State Health Plan applicable to this application is to "maintain an average of 350 open heart surgery procedures per program in each district through 1990." (Emphasis Supplied.) The goal set forth in the State Plan relative to open heart surgery programs is to ensure the appropriate availability of such services at reasonable costs. Venice's application is not consistent with Objective 4.2. If Venice's application were to be approved, there would be five programs in the District. The number of procedures projected for 1990 is 1683, and if 1683 is divided by 5 programs, the result is an average of only 337 procedures per program. The two existing providers in District 8 are currently performing over 1600 procedures annually, and as is discussed below, it does not appear that Venice itself will be able to achieve an acceptable level of service at any time established by the record in this case. Approval of this application will also significantly and adversely impact the ability of the two approved programs to achieve an acceptable level of service. In the State Health Plan narrative, it is recognized that "quality of patient care is a primary concern in open heart surgery programs due to the potential consequences to the patient of poorly trained and/or skilled staff.11 In order to ensure quality, and in recognition of the relationship between the volume of open heart surgery procedures and quality, the State Plan references the Department's requirement, set forth by Rule, that a minimum of 200 adult procedures be performed within 3 years of initiation of an open heart program. The narrative also notes that a broad range of services must be provided to fulfill the requirements of an open heart surgery program. Venice's application is partially consistent with these narrative statements in the State Health Plan since the parties have stipulated that it has a record of providing quality care, and it offers a complete range of services with departments within the hospital where a broad range of diagnostic techniques and expertise are available. However, it was not established that a minimum of 200 adult open heart surgical procedures will be performed at Venice within three years of initiation of this program. Local Health Plan Even though an applicant does not include within its application every element in a Local Health Plan which is relevant to its application, the Department itself will look at the applicable Local Plan to determine if an application is consistent therewith. The applicable District 8 Health Plan recommends that "existing facilities should be afforded the opportunity for expansion before developing a new cardiac surgical center." However, if a numeric need for an additional program is shown, and if existing facilities do not seek to expand their existing programs to meet such need, an application for a new program would not be inconsistent with this portion of the Local Health Plan. Under the facts of this case where there are no competing applications from hospitals with existing open heart surgery programs, and where a numeric need for one additional program in District 8 is projected by the Department's need methodology, Venice's application is consistent with this recommendation. The Local Plan also recommends that preference be given to applications for new or expanded programs which clearly document the impact of the proposed new service on existing providers in the District and adjacent Districts. As found above, Venice did not specifically address any adverse impact its proposal would have on existing providers, and therefore, its application is not consistent with this recommendation. The Department's Need Methodology and the "35O Rule" Rule 10-5.011(1)(f)8, Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for additional open heart surgery programs It provides a formula by which the number of open heart procedures for the horizon year, in this case 1990, are to be estimated. Pursuant to the formula, there are projected to be 1683 open heart surgery procedures performed in 1990 in District 8. This number of projected procedures is then divided by 350 procedures in order to determine the number of programs which will be needed. See Rule l0-5.011(1)(f)11b. Using this methodology, the Department has identified the need for 4.8, rounded to 5, programs in the District in the horizon year. Since there are currently 2 existing and 2 approved programs in District 8, the Department and Venice have concluded that there is a projected numeric need for Venice's additional program in 1990. There is a direct relationship between the volume of open heart surgery procedures performed at a facility and the quality of care provided at such facility, with lower mortality rates generally at hospitals with higher volumes than those with low volumes. Therefore, in addition to its numeric need calculation, the Department has also developed a "350 standard" to address patient safety and quality of care concerns by ensuring that each existing and approved open heart surgery program achieves a volume sufficient to assure quality and efficiency prior to approval of a new program. Rule 10- 5.011(1)(f)11aI, Florida Administrative Code, prohibits the establishment of new open heart surgery programs unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart cases per year. Memorial and Medical Center urge an interpretation and application of the 350 standard in a manner which would require each existing and approved program to actually operate at the level of 350 cases per year. Since approved programs are not yet operational, and therefore cannot operate at the 350 level, they argue that the intent of this standard, as set forth in the above-cited Rule, is to preclude the approval of any additional programs while there are approved programs, or existing programs which are not meeting the 350 standard. To the contrary, the Department and Venice urge that the 350 standard be applied by averaging the actual number of cases at existing programs, and the number of cases which are reasonably projected to be performed at approved programs. Under this interpretation, as long as the average between cases which are performed at existing, and which are reasonably projected to be performed at approved programs exceeds 350, then the further approval of an additional program is not prohibited. Having considered the testimony and evidence presented by the parties, and in particular the testimony of Eugene Nelson and Elizabeth Dudek, which is found to be more credible, consistent, and reasonable than the testimony of Michael Carroll and Harold Luft, it is found that the Department's interpretation and application of the 350 standard is reasonable and consistent with the terms of Rule 10- 5.011(1)(f)11aI. It is also noted that if the interpretation urged by Memorial and Medical Center were to be followed, it is inexplicable how there could presently be two approved, but not operational, open heart programs in District 8. The Department has consistently applied this 350 standard since its adoption in 1983 by averaging caseloads at existing programs and reasonably projected caseloads for approved programs. To interpret this standard as urged by Memorial and Medical Center would impose a moratorium on new open heart surgery programs while there is an already approved, but not operational, program in a District, or while a newly operational program has not yet attained the 350 standard. There is no basis for this prohibitory interpretation which would not only reduce competition, but would also be inconsistent with sound health planning and the State Health Plan Objective 4.2, as discussed above. Quality of Care Venice is accredited by the Joint Commission on Accreditation of Health Care Facilities for special care units, and it has been stipulated that it has a record of providing quality care in its existing programs and departments. On average, hospitals performing greater than 200 open heart procedures per year have superior surgical outcomes than hospitals doing less than 200 procedures. Mortality rates are significantly lower at hospitals performing more than 200 procedures annually than at those performing less. It was established that there is a direct relationship between volume of open heart surgical procedures and quality of care at facilities with open heart surgery programs. Therefore, the existence of more open heart programs than are truly needed in an area may result in some existing programs not achieving sufficient volume to assure patient safety and quality of care. Certainly, not every hospital should have an open heart program, but as long as there is sufficient volume to assure quality, the competition among programs will encourage quality care, and result in an overall increase in the quality of care provided at all departments in a hospital with an open heart program. Rule 10-5.011(1)(f)5d, Florida Administrative Code, was adopted by the Department in order to set forth the minimum volume deemed necessary to assure quality of care, and provides, in part: There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. Although Venice urges that it will be able to meet this threshold level within three years, it failed to establish by competent substantial evidence that it would actually attract the patients necessary to perform either the number of open heart procedures projected in its application, or this minimum number of 200 procedures required by the Department to assure quality of care in its third year of operation, given the current pattern of physician referrals in the area, its market share in relation to those of Memorial and Medical Center, and actual utilization levels for the existing District 8 programs at Memorial and Southwest Regional Medical Center, as is more fully discussed below. Without the assurance of sufficient volume to meet the 200 procedure threshold established by the Department by Rule, the validity of which is not at issue in this case, Venice has failed to show that it will be able to achieve and maintain a patient volume in its proposed program which will assure quality of care in its proposed open heart surgery program. Availability and Access While the addition of the Venice program would obviously increase the availability of services in the District, open heart surgery services are already reasonably available in District 8, especially in view of there being two approved programs which will become operational before 1990, the horizon year in this case, in addition to the two existing programs. The two hour travel time standard is already being met in District 8, as stipulated to by the parties. Geographic accessibility will not be appreciably or significantly increased by this proposal since Venice's facility lies approximately midway between Memorial and Medical, which are sixty miles apart. There is significant excess capacity in existing and approved open heart surgery programs in District 8 during most of the year, especially at Memorial. Therefore, there is ready access to, and availability of open heart surgery services to patients in the District. Venice did not establish that approval of its application would enhance access to open heart surgery services for the medically indigent. Despite its assertion in its application that its program would be available to the underserved, there is no definite commitment to serve charity care patients as a percentage of total patient days or of total revenue. Venice has proposed to serve Medicaid patients at the level of 1.5% of total patient days, but Medicaid patients are currently receiving services through existing programs at substantially higher levels of commitment. The applicant has reserved the right to refuse non-emergency care to indigents. While it was established that unstable patients who have to be transferred from one hospital to another face increased risks, and that members of the medical staff at Venice feel that there are unacceptable delays in transferring patients who need open heart surgery from Venice to other facilities due to an asserted lack of available beds, it was not shown that such delays have actually jeopardized the safety of patients or resulted in a reduction in the quality of care received by patients to an unacceptable level. A delay in transferring a patient from one facility to another of from 6 to 8 hours is reasonable, and in line with experience nationally. The anecdotal evidence presented by Venice on this point was not competent and substantial, and in fact shows that the number of delays exceeding 8 hours has increased only slightly from 1986 to 1988, a condition that may be addressed in any event when the two approved programs become operational. Additionally, the applicant never formally shared any concerns about transfer delays with existing facilities in an effort to reduce such delays or to document extreme cases of delay. Transfer delays are exacerbated by seasonal increases in population in District 8, but there continues to be a reasonable likelihood that patient transfers can be accommodated, even during seasonal population increases, without adverse impacts to patient care. However, a large majority of open heart surgery cases are non- emergency that can be scheduled for surgery within 6 to 48 hours after diagnosis without any compromise in patient care. Emergency patients are given priority, and there are sufficient available beds to accommodate emergency patients, regardless of seasonal delays. Recent studies have shown that even emergency patients benefit from a delay of up to 24 hours in order to stabilize their condition rather than rushing them to surgery. In any event, such seasonal delays do not establish that there is a lack of available beds in District 8 which would require the approval of this application, especially with two approved programs already in the District which will become operational by 1990. Alternatives Considered Venice did not fully explore alternatives, including less costly alternatives, to a new program at its facility, such as a joint or shared program with an existing provider. In fact, a consultant retained by Venice recommended on September 8, 1988, that Venice pursue a joint program with Memorial, but Venice never approached Memorial to ascertain if its administrators or medical staff would be interested in such a joint effort, even though these two hospitals have previously cooperated in providing joint services in obstetrics, shared nursing services, and jointly provided emergency services to the Town of North Port. Memorial previously loaned Venice 24 nursing full time equivalent positions (FTE) to fully staff a 35 bed unit at Venice during a critical nursing shortage. There are existing or approved open heart surgery programs at Tampa General Hospital, Manatee Memorial Hospital in Bradenton, Memorial, Medical Center, and Southwest Regional Medical Center in Ft. Myers. In addition, there are additional approved programs at HCA Blake Memorial Hospital in Bradenton and at Lee Memorial in Ft. Myers. Venice did not consider these existing and approved programs as alternatives to its proposed new program. It was not established that Venice has attempted, or proposed to establish a joint open heart surgery program with any of these facilities, or to secure staff privileges for its cardiologists at Memorial, or any of these other hospitals. Regionalization of health care services for open heart surgery patients is being encouraged and reviewed by the Medicare program. Under this concept, primary care hospitals would treat common diagnoses and offer common treatments, while regional referral hospitals would provide specialized care and offer more complex services referred to as tertiary level services. Open heart surgery is a specialized, tertiary care service. Venice did not consider regionalization or establish why it would not be appropriate in District 8. Personnel Availability and Costs There has been a long-term shortage of nurses, particularly in intensive care and open heart surgery, which even Venice's expert in nursing administration recognized and acknowledged. This shortage is present in Sarasota County not merely for nursing staff, but also for technical support staff, and is particularly acute in operating room and critical care personnel. While Venice does have nursing staff with open heart surgery experience, it would have to recruit additional nurses to fully staff this new program. It is not always possible to fill open heart surgery or critical care nursing positions with trained personnel. Memorial presently has 32 registered nursing vacancies, including 5 open heart surgery and 3 open heart critical care RN positions, despite a full-time nurse recruiter and an aggressive recruiting program. Because of this critical shortage, Memorial has been forced to use "traveler" or temporary nurses in its open heart surgery unit. In contrast to Venice's lack of actual experience in attracting and training open heart surgery and critical care nurses, Memorial established that in Sarasota County, it takes 6 to 8 months and costs $15,000 to $16,000 to train open heart surgery nurses, and 6 to 8 weeks to- train open heart critical care nurses. Venice will compete with Memorial and Medical Center in attracting open heart surgery nursing and technical staff. There has been a recent instance of a nurse leaving Venice to join Memorial, being trained as an open heart surgery nurse at Memorial, and then leaving to return to Venice. With the limited pool of available, trained open heart surgery nurses, and in view of the two approved open heart surgery programs in District 8 which need to be staffed and become operational prior to 1990, the implementation of the Venice program will have an adverse impact on the ability of existing and approved programs to attract and maintain trained open heart surgery nursing and technical staff, and can reasonably be expected to increase personnel costs for these providers. Venice proposes to add two cardiovascular surgeons to its medical staff prior to opening its open heart surgery program, and to retain a consulting firm to assist in recruiting these physicians. However, the consulting firm contacted by Venice has not agreed to accept this recruiting assignment. Memorial has been trying to recruit an additional open heart surgeon for over a year, without success. Venice has been trying to recruit a neurosurgeon, neurologist or cardiologist for almost a year, without success. It is, therefore, reasonable to infer that Venice will have difficulty recruiting two cardiovascular surgeons in less that one year. The salaries and benefits in Venice's application are generally reasonable, including the proposed salary for a perfusionist, although it did slightly underproject open heart surgery nursing salaries. However, its estimate of the number of additional positions, or FTE, which would be required throughout the hospital to accommodate the workload resulting from an open heart surgery program is incomplete. For example, an additional 3.5 FTE that would be needed for the clinical lab and donor center is not reflected in the application, although the costs associated therewith are included. Venice does have a record of successfully staffing critical care services, such as its open heart catheterization and thoracic surgery programs, without attracting staff from other hospitals in the District. It does propose to have a training program for open heart surgery personnel, and has an affiliation with nurse training programs at four universities. Financial Feasibility In its application, Venice projects that it will perform 125 open heart surgery procedures in its first year of operation, 175 in its second year, and 211 in its third year of operation. However, it is specifically found that these projections are not reasonable, based upon the testimony and evidence received. The testimony and exhibits prepared by Mark Richardson and Michael Carroll, who were accepted as experts in health planning, as well as the testimony offered by Rick Knapp, an expert in health care finance, was more credible and persuasive than, and outweighs the testimony and exhibits prepared by Eugene Nelson, an expert in health care planning, Dr. Henry W. Zaretsky, an expert in health care economics and planning, and Michael Rolph, who was accepted as an expert in health care finance and accounting. Initially, Venice relies upon the Department's Rule for determining the numeric need for additional programs, discussed above, and divides the Department's number of projected procedures in District 8 (1683) by 350 to arrive at the need for an additional program in 1990 by rounding 4.8 up to 5. However, Venice has conducted no analysis of market share or physician referral patterns to test the reliability of this projected need. Thus, this projection of numeric need is made in a vacuum, without any reference to the actual number of procedures already being performed, or actual market shares and referral patterns which are critical to an understanding of patient and physician preferences which have existed, and are likely to continue to be experienced, in the future. Venice's administration and members of its medical staff consider Memorial's open heart surgery program to be excellent and convenient to Venice's patients. It is unlikely that all five of Venice's cardiologists will refer all of their open heart surgery patients to Venice, and in fact, a member of Venice's medical staff who supports this application testified that he would only refer about half of his patients to Venice. Since most open heart patients are referred, and since there is no apparent dissatisfaction with the quality of Memorial's program, existing market share and referral patterns would likely continue and should have been considered in any meaningful analysis presented by the applicant. For the July, 1990 horizon in District 8, the Department's numeric need methodology projects that there will be 1683 open heart surgery procedures. With referral patterns in place and two existing providers with operational and well regarded programs, it is unlikely that Venice will have an automatic, equal share of the District's pool of open heart patients, or even that it will perform the 125 procedures in its first year, and 175 procedures shown on its pro forma for the second year of operation. In fact, the two existing providers, Memorial and Southwest Regional Medical Center, already performed 1637 procedures in 1988, leaving fewer than 50 procedures projected through the Department's numeric need methodology for the two already approved programs and Venice, if it were to be approved. Memorial has been performing over 600 procedures per year from 1986 through 1988, and has the capacity to perform up to 1,000 procedures annually. Thus, the existing and approved programs have more than sufficient capacity to absorb growth in open heart surgery volumes which are being projected. A second method Venice uses to justify its projected number of open heart procedures is to quantify the population of Venice's service area, and then apply the Department's open heart surgery use rate to that population. This assumes that virtually all of Sarasota County's population growth will occur in the south county area, which is an inaccurate assumption, and also assumes that Venice will capture all of the open heart surgeries in its service area, which is unreasonable given existing market shares and referral patterns. Memorial presently has a 42% market share of District 8 open heart surgery patients. To perform 200 procedures in its third year of operation, Venice would have to capture an 83% market share, and there is no basis to find that it would be successful in attracting this unreasonably high market share in its primary service area. In fact, Venice projects that it will only achieve a 45% and 61% market share in the first and second year of operation, respectively. Applying these percentages, Venice will perform 99 procedures in its first year, not 125, and 140 in its second year, not 175. It must be noted that Venice's consultant, which had recommended that it explore a joint or shared program with Memorial, had projected market shares of only 29% in the first year, 35% in the second year, and 45% in year three. Using these figures, Venice would only perform 63 procedures in its first year of operation, 81 in the second year, and 102 in the third. Given this level of operation in its second year of operation (81 procedures), the Venice program would lose $334,000 in its second year, and therefore, not be financially feasible. The third method used by the applicant to support its projection of the number of procedures it will perform, which is the basis of its assertion of financial feasibility, is based upon its assessment of cardiac catheterization volumes and applies a conversion factor to determine the number of open heart surgery procedures that will result. This analysis again assumes that it would receive a 100% market share, and does not take into account referral patterns and satisfaction with existing programs. In addition, while the growth of Venice's cardiac cath volume has stabilized, and may even be decreasing, this analysis incorrectly uses a l5%-16% annual growth rate in cardiac caths through 1990, which is unrealistic and not supported by the record. Venice relies upon the expert testimony of Eugene Nelson to establish that the use rate for open heart surgery has been increasing since 1985, and will continue to increase. The use rate increased over 53% between 1985 and 1988, and Nelson projects a continued 15.3% annual increase in the use rate through 1991. Under his projections the use rate per 100,000 population will be 235.79 in 1990, and 257.97 in 1991. Nelson's projected continued annual increase in the use rate of over 15%, and the use rates he projects for 1990 and 1991, are unreasonable. He has ignored the fact that annual increases in the use rate have been steadily decreasing from 17.5% between 1985 and 1986, to 13% between 1987 and 1988, as testified to be all health planners, and as even he acknowledged. Applying this decrease in the annual use rate increase, it would be increasing only 9% in 1990, and this would result in a total of 2108 procedures that could be projected to be performed in 1990. With the two existing programs in District 8 already performing 1600 procedures, a figure that will reasonably grow by 1990, there will be less than 444 procedures for the two already approved programs and Venice, if it were to be approved. Given this fact, which is even acknowledged by Venice, it is unlikely that Venice will be able to reach its projected number of cases in its first two years of operation in order to achieve financial feasibility. As recognized by Harold Urschel, Jr., M.D., who was called by Venice as an expert in cardiovascular surgery and open heart surgery programs, for the next five years open heart surgery volumes nationally will be "stable", although they "probably" will go up some. Open heart use rates have plateaued on a national level, with an average national use rate of l80~per 100,000 population. This use rate compares favorably with the Department's current use rate of 183 for District 8, and further questions the reasonableness of Nelson's projected use rates of almost 236 and 258 in 1990 and 1991, respectively. These use rates have stabilized and shown a marked decrease in their rates of increase due to the development of acceptable alternatives to open heart surgery, and close review of the necessity of this treatment by third party payors. As testified to by Nelson, there is a danger that an excess of open heart surgery programs in an area will exacerbate an already stabilized or flattened use rate, and may cause it to decline. He cited both the Miami and Jacksonville areas as examples of Districts in which there appear to be an excess of programs, with a resulting decline in the District's use rate, and inability of a substantial number of programs to even achieve the requisite level of 200 procedures per year to maintain quality of care. When it comes to open heart surgery programs, more is not necessarily better and may actually result in less, according to Nelson. Even applying Nelson's inflated use rate of 236 per 100,000 population in 1990 to the Venice service area population, the applicant will not achieve its projected number of procedures when the market share of 29% in 1990 predicted by Venice's consultant is considered. Applying its consultant's projected market shares, Venice will realize only 81 procedures in the first year, 98 in year two, and 126 procedures in the third year. Since Venice's pro forma bases its assessment of financial feasibility upon its projections of 125 procedures in year one, and 175 in year two, and since the applicant has not established the reasonableness of these projections, the long- term financial feasibility of this project has not been shown. Further, Venice has also failed to establish that it can reasonably be expected to achieve the level of 200 procedures in its third year, and therefore, it has also failed to show that it can achieve that minimum level which the Department, by Rule, requires to ensure quality of care. In other respects, the assumptions used by Venice in its pro forma are reasonable, including its 2% inflation factor for income, bad debt, payor mix and utilization by class of pay, projected charges, expenses, and depreciation. Effect on Competition and Costs There will not be a significant difference between the charges proposed by Venice and the actual charges at Memorial. The applicant projects that 80% of its open heart surgery will be reimbursed through Medicare, which reimburses on a fixed fee basis to which hospital charges have no direct relevance. Therefore, there would be no appreciable impact on costs in the health care community if this application is approved. As previously discussed, there would be greater competition among existing and approved programs in District 8 for trained open heart surgery and critical care nurses, which are in short supply. While Venice has projected open heart surgery nurses' salaries at a somewhat unrealistically low level, it can reasonably be expected that greater competition for trained personnel who are in short supply will eventually result in higher salaries and health care costs. If this application is approved, the cost to transport patients who require open heart surgery from Venice to another facility would be eliminated. This would mean that patients could avoid a $235 to $250 ambulance charge for transfer to Memorial, a $450 charge for ambulance transport to Tampa General, or a $1,000 to $1,300 helicopter charge for transport to Tampa General Hospital. This savings is not significant when compared to total charges for open heart surgery procedures. Impact on Existing and Approved Programs As discussed above, approval of the Venice application will adversely affect the ability of existing providers to attract and retain trained open heart surgery and critical care RNs due to the already existing shortage of personnel to fill these positions, and the fact that two already approved programs will become operational prior to Venice's program, if it were to be approved. Although Memorial has the capacity to perform 1,000 open heart surgery procedures annually, Venice's expert, Eugene Nelson, projects that if the Venice program is approved, Memorial will experience only a 12% growth between 1988 to 1991, and will only perform 771 cases in 1991. Curiously, he then concludes that this represents no impact on Memorial. The proposed primary service area for the Venice program and Memorial's primary service area completely overlap, and they are, therefore, competing for the same open heart surgery patients. Venice has been referring 85%-87% of its patients who require open heart surgery to Memorial. If Venice had its own open heart surgery program, the need for transfer and referral would be obviated. In the second year of operation, Venice projects on its pro forma that it will perform 175 cases. Using its own projection of 85%, 149 to 150 of these cases would have been transferred to Memorial, but for the Venice program. If the more realistic number of 81 procedures in the second year of operation for the Venice program is used, 69 cases which would have otherwise been transferred to Memorial would stay at Venice. Rick Knapp, who was accepted as an expert in health care finance, provided a reasonable estimate of financial impact upon Memorial, given these projected losses in patient referrals. He concluded that Memorial would experience a net income reduction of approximately $1.4 million if Venice's projection of 175 cases in its second year is correct, and Memorial lost 149 to 150 referrals. Even Michael Rolph, who was called as an expert in health care finance by Venice, testified that Memorial would loose $2 million in net revenue if it lost 100 open heart surgery patients. If the more realistic figure of 81 cases in the second year were used, there would also be a net income loss for Memorial, but more importantly for purposes of this case, it was established through Knapp's testimony that Venice's program would lose $334,000, and not be financially feasible. It is, of course, recognized that Memorial would still experience a growth in its absolute number of open heart procedures due to population increases and increases in the use rate. However, any such increase in the absolute number of procedures performed at Memorial through growth does not obviate the fact that the total number of procedures it would have performed will be significantly reduced by the loss of referrals from Venice, if this application is approved. This is particularly noteworthy given its excess capacity. Memorial's most recent annual gross income was $160 million, with an operating margin (profit) of between $3.5 and $3.9 million. Therefore, losses which would result from the Venice program would not threaten the financial viability of Memorial, but would be significant in terms of its open heart surgery program. Jerry Sommerville, an expert in hospital finance, estimated that 9% of Medical Center's open heart surgery cases would come from the Venice area, which is included in Medical Center's secondary service area. If these cases are lost to Medical Center with the opening of the Venice program, Medical Center's projected 150 cases in 1990 would be reduced by 13.5, and in 1991 its projection of 200 cases would be reduced by 18. These reductions would result in a net revenue loss for Medical Center of $254,000 with a gross marginal loss of $62,800 in 1990, and a net revenue loss of $329,500 with a gross marginal loss of $95,200 in 1991. This represents a significant reduction in income for this open heart surgery program in its first years of operation. Medical Center's most recent annual profit margin was approximately $1 million.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order which: (l) Denies Memorial's Motion for Summary Adjudication; Dismisses Medical Center as a party due to a lack of standing; and Denies Venice's CON Application Number 5715. DONE AND ENTERED this 28th day of September, 1989 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1989. APPENDIX (DOAH CASE NOS. 89-1412 & 89-1413) Rulings on the Petitioners' Proposed Findings of Fact: Adopted in Finding 6. Adopted in Findings 6, 17. Adopted in Finding 6. Adopted in Finding 9. Adopted in Findings 6, 9. Rejected as a conclusion of law. 7-8. Adopted in Finding 1. Adopted and Rejected in part in Finding 12. Adopted in Finding 15; Rejected in Finding 16. Adopted in Finding 17. Rejected in Finding 41, as otherwise as irrelevant. Adopted and Rejected in part in Findings 41, 42. Rejected as irrelevant. 15-18. Adopted and Rejected in part in Finding 42. 19. Adopted in Finding 43. 20-21. Rejected in Finding 43. Adopted in Finding 38. Adopted and Rejected in Finding 53. Adopted and Rejected in Finding 57. Rejected in Finding 57. Rejected in Finding 55. Adopted and Rejected in Findings 55, 56. Adopted in Finding 57. Rejected in Finding 57. Adopted and Rejected in Finding 57. Rejected as irrelevant. Adopted in Findings 12, 20 and 39; Rejected in Findings 53, 55 and 56. Adopted in part in Finding 27, but otherwise Rejected as unnecessary. Rejected as irrelevant and unnecessary. Rejected in Finding 44. Adopted in Finding 44. Adopted in Finding 37; Rejected in Findings 38-47. Rejected in Finding 41. Rejected in Finding 25. Rejected as irrelevant and unnecessary. Rejected in Finding 26. Adopted in Finding 21. Adopted in Finding 43. Adopted in Finding 34, but otherwise rejected as unnecessary. Rejected in Finding 24. Adopted in Finding 6. Adopted in Finding 11. Adopted in Finding 35. Adopted and Rejected in part in Findings 34, 35. 50-54. Adopted in Finding 48. 55-61. Adopted in Finding 11. Adopted in Finding 1. Adopted in Finding 31. Adopted and Rejected in part in Finding 35. Adopted in Finding 36; Rejected in Finding 35 and otherwise as irrelevant and unnecessary. Adopted in Finding 36; Rejected in Finding 33. Adopted in Finding 35. Rejected as cumulative and unnecessary. Adopted in Finding 36. Adopted in Finding 31. Adopted in Finding 6. Rejected as unnecessary. 73-75. Rejected in Finding 27 and otherwise as irrelevant. Adopted in Finding 27. Adopted in Finding 22. Rejected in Finding 27 and otherwise as unnecessary. Adopted in Finding 51. 80-81. Rejected in Findings 28, 29. 82-85. Rejected in Finding 49 and otherwise as irrelevant. 86. Rejected as not based on competent substantial evidence. 87-94. Rejected in Finding 49 and otherwise as irrelevant. 95. Adopted in Finding 22. 96-97. Rejected as irrelevant and unnecessary, and simply a summation of and argument on the evidence. 98. Adopted in Finding 11; Rejected in Finding 24. Rulings on the Respondents' Proposed Findings of Fact: Adopted in Finding 1. Adopted in Finding 6. Adopted in Finding 2. Adopted in Finding 3. Adopted and Rejected in part in Finding 17. Adopted in Finding 17. 7-9. Adopted in Finding 18. 10. Adopted in Findings 18, 22. 11-12. Adopted in Finding 22. 13-14. Rejected in Finding 20. 15-17. Rejected as irrelevant and unnecessary. 18. Adopted in Finding 18. 19. Adopted in Finding 22; Rejected in Finding 20. 20. Adopted in Finding 30. 21. Adopted in part in Finding 13, but otherwise Rejected as irrelevant and unnecessary. 22-23. Adopted in Findings 15, 16. 24. Adopted in Findings 4, 25. 25. Adopted in Findings 25, 39. 26. Adopted in Finding 26. 27-34. Adopted in Finding 27. 35. Adopted in Findings 22, 23 and 24. 36. Adopted in Findings 28, 29. 37. Rejected as unnecessary. 38-43. Adopted in Findings 28, 29. 44. Adopted in Findings 31, 32. 45. Rejected as unnecessary. 46-49. Adopted in Finding 34. 50. Adopted in Finding 24. 51. Adopted in Findings 24, 37. 52-55. Adopted in Finding 38. 56. Adopted in Finding 39. 57-61. Adopted in Finding 40. 62-64. Adopted in Finding 41. 65-66. Adopted in Findings 42, 43. 67. Adopted in Finding 44. 68-69. Adopted in Finding 46. 70. Adopted in Finding 47. 71. Rejected in Finding 48. 72. Adopted in Finding 40. 73. Adopted in Finding 47. 74-75. Adopted in Finding 49. 76. Adopted in Findings 55, 57. 77. Adopted in Findings 50, 52. 78. Adopted in Findings 31, 50 and 52. 79-82. Adopted in Finding 32. 83. Adopted in Findings 33, 50 and 52. 84. Adopted in Finding 33. 85. Adopted in Finding 32. 86-87. Adopted in Findings 33, 50 and 52. 88. Adopted in Findings 28, 29. 89. Adopted in Findings 24 through 27. 90. Adopted in Finding 6. 91-92. Rejected in Finding 7. 93. Adopted and Rejected in Finding 8. 94. Rejected in Finding 14 and otherwise as unnecessary. 95. Adopted in Findings 15, 16. 96. Rejected in Findings 14, 15. 97-99. Adopted and Rejected in Findings 12, 13. 100. Rejected in Finding 9. 101. Adopted in Findings 6, 9. COPIES FURNISHED: Theodore C. Eastmoore, Esquire A. Lamar Matthews, Jr., Esquire P. O. Box 3258 Sarasota, FL 33577 Robert A. Weiss, Esquire The Perkins House 118 North Gadsden Street Tallahassee, FL 32301 Charles A. Stampelos, Esquire P. O. Box 2174 Tallahassee, FL 32316 Richard A. Patterson, Esquire Fort Knox Executive Center 2727 Mahan Drive Tallahassee, FL 32308 Kenneth F. Hoffman, Esquire P. O. Box 6507 Tallahassee, FL 32314 R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler, Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Whether certificate of need application number 7184 for the establishment of adult open heart surgery services at Baptist Hospital, Pensacola, Florida, filed in March 1993, meets statutory and rule criteria for approval.
Findings Of Fact On or about March 23, 1993, Baptist Hospital, Inc., ("Baptist"), Pensacola, Florida, filed a certificate of need ("CON") application to establish an adult open heart surgery program for a total project cost of $2.35 million. Baptist's application was subsequently numbered CON 7184, and was approved preliminarily by the Agency for Health Care Administration ("AHCA") on July 7, 1993. Conditions for the issuance of the CON were drafted by Elizabeth Dudek of AHCA. Violations of CON conditions may result in sanctions, including fines of up to $1,000 a day. The conditions, as drafted, are as follows: The provision of a minimum of 3 percent of total annual adult open heart surgeries to Medicaid patients. The provision of a minimum of 3 percent of total annual adult open heart surgeries to charity care patients. A fixed rate structure by DRG for open heart surgery discharge (DRGs 104-108) will be set at a level which is 85 percent of the average of the most recently available charges at Sacred Heart and West Florida Regional, inflated at 7.5 percent annually. Baptist shall ensure a minimum annual adult open heart surgery patient volume of 350 at each Sacred Heart and HCA West Florida. (This assurance shall not be achieved though the transfer of charity care patients). Baptist is a 546-bed hospital, with 388 medical/surgical beds, 62 acute care beds being used as skilled nursing beds, 76 psychiatric and 20 substance abuse beds. Baptist is a Medicaid disproportionate share provider and a designated Level II trauma center, located in Pensacola, Escambia County, in AHCA District I. District I includes Escambia, Santa Rosa, Okaloosa, and Walton Counties. Baptist's primary service area is Escambia and Santa Rosa Counties in Florida, and Baldwin and Escambia Counties in Alabama. Sacred Heart Hospital of Pensacola ("Sacred Heart") the oldest hospital in Pensacola, is licensed for 391 beds, including 42 Level II and III neonatal intensive care beds, and is a Level II trauma center. Sacred Heart has an approved CON to add 40 acute care beds for a women's and children's hospital. In late 1995, construction is expected to be completed. After the women's and children's hospital is finished, Sacred Heart will undertake the construction of 12 additional critical care beds which it projects will be operational in 1996. Sacred Heart is a Medicaid disproportionate share provider. Sacred Heart initiated an open heart surgery program in the early 1970's, and is located approximately 4 to 6 miles from Baptist. Escambia and Santa Rosa Counties are in Sacred Heart's primary service area. The secondary service area includes Okaloosa and Walton Counties, and sections of Alabama. Approximately 65 percent of the total open heart surgery patients in Escambia County, and 51 to 58 percent of the total from Santa Rosa County have open heart surgeries at Sacred Heart. West Florida Regional Medical Center ("West Florida") is a 547-bed existing provider of open heart surgery services, composed of 378 medical/surgical care, 21 skilled nursing, 89 psychiatric, and 58 comprehensive medical rehabilitative beds. West Florida is also a state Level II trauma center, in Pensacola. West Florida is approximately 7 to 9 miles from Sacred Heart, and approximately the same distance from Baptist. Open heart surgery services were initiated in 1975 at West Florida, which is the dominant provider to residents of Okaloosa and Walton Counties. West Florida Regional's service area includes all of District 1. Three open heart surgery programs exist in Mobile, Alabama, approximately one to one and a half hour drive from Pensacola, two more in Dothan, Alabama, and one in Panama City, in AHCA District 2. Over 90 percent of the population in District 1 is located within a two-hour average drive to an existing open heart surgery program. Numeric Need On February 5, 1993, AHCA published a fixed need pool of zero for additional adult open heart surgery programs in District I for the July 1995 planning horizon. Two subsequent publications of need for an additional open heart surgery program in the district have also resulted in zero numeric need. When zero numeric need is computed, using the formula in Rule 59C-1.033(7)(b), an applicant has to demonstrate not normal circumstances for the approval of the application. In addition, a new adult open heart surgery program will not normally be approved if the formula in subsection (c) of that rule yields a result less than 350, indicating that existing programs in the district will be reduced to volumes below 350 annual open heart surgery operations. The calculation to determine whether this condition applies was 346.67. A fixed need pool of zero was published and not challenged. Vol. 19, No. 5, Florida Administrative Weekly, February 5, 1993. Not Normal Circumstances for Need Baptist describes certain conditions as not normal circumstances for the approval of its open heart surgery program. The not normal circumstances described are (1) a lack of financial access for uninsured persons, (2) utilization and capacity problems at one of the two existing providers in the district, (3) the size of Baptist Hospital, and the size and complexity of its cardiology services, and the fixed price and minimum volume conditions proposed for the approval of the CON. Financial Access Baptist asserts that its program will serve uninsured patients, who are a financially underserved group in its service area. Baptist proposes in its pro forma to serve up to 15 uninsured open heart surgery patients in year one and up to 19 in year two. Assuming the percentage of uninsured persons in District 1 is comparable to that for the entire state and assuming the open heart surgery use rate for the uninsured would otherwise be the same, Baptist's expert claimed that 53 uninsured persons were denied open heart surgery services in District 1 in 1993. Baptist's opponents challenged the admissibility of evidence related to uninsured persons as an impermissible amendment not discussed in the application. Assuming arguendo, that the evidence is admissible, Baptist failed to document any unmet need for uninsured persons, which its proposal will alleviate. There was more credible evidence that uninsured persons have a lower use rate for reasons other than the absence of another program in the district, including age, lack of access to primary care physicians, lack of referrals to cardiovascular surgeons, and the failure to secure Medicaid coverage. No advantage is gained with referrals of patients to the same group of cardiologists and cardiovascular surgeons who currently serve both Sacred Heart and Baptist, in the absence of evidence that the doctors can and will accept more Medicaid and indigent patients. The use rate for Medicaid patients in District 1, adjusted for age, shows equal access to open heart surgery services, as compared to other payer groups. District 1 Demographics and Utilization AHCA District 1 includes Escambia, Santa Rosa, Okaloosa and Walton Counties. Approximately 250,000 people reside in Escambia County, with slightly over half of the district population located in the other three counties in the district. Escambia is the western-most county in the district and the state. From 1992 to 1997, adult population growth is projected to be lower in Escambia County (2.6 percent) than it is district-wide (6.5 percent) which, in turn, is lower than the statewide growth rates (9 percent). Open heart surgery services began in District 1 prior to 1988 at both Sacred Heart and West Florida. From 1988 to 1993, the volumes of procedures in District 1 and the state have been as follows: 1988 1989 1990 1991 1992 1993 District 1 805 803 733 901 1,006 848 Statewide 18,961 19,819 22,010 23,748 26,078 25,190 From July 1991 - June 1992, there were 498 and 493 open heart surgery procedures at Sacred Heart and West Florida Regional, respectively, for a total of 991 procedures in AHCA District I. At West Florida Regional, open heart surgeries declined from 533 in 1992 to 418 in 1993. Open heart surgery use rates in District 1 and statewide are declining or becoming comparatively more level. Most residents of the district receive open heart surgery services in the district, with fewer than 3 percent out-migration. Baptist's expert claimed that the 1993 decline was an anomaly rather than a trend, comparing District 1 to AHCA districts which experienced a 1993 decline, but are reporting larger volumes for the first quarter of 1994. The volumes were not annualized to take into account seasonal fluctuations. In fact, Baptist's cardiologists also noted the increase in alternative procedures such as angioplasty, electrophysiology, and drug therapies. In the first quarter of 1994, there were 250 open heart surgery procedures in the district, as compared to 265 in 1992, and 208 in 1993. Annualized for the entire year to adjust for seasonal variations, 980 open heart surgeries are expected in 1994. Expert projections of total open heart surgeries at District 1 facilities for 1995-1998 are in a range as follows: 1995 1996 1997 1998 880 - 1,051 894 - 1,069 908 - 1,085 921 - 1,100 Sacred Heart's occupancy for total acute care beds was 74.8 percent in 1991, 74.5 percent in 1992, and 74.4 percent in 1993. However, Sacred Heart's critical care unit ("CCU") is frequently at capacity during the peak season in the winter months. Delays of 1 to 3 days before patients are admitted for elective open heart surgery operations and elective angioplasties, are not uncommon. Elective procedures are those performed on patients who are stabilized with drug therapies pending the procedure. There is no evidence of delays in transfers for emergency angioplasties or emergency open heart surgeries, other than the time required to follow transfer protocols. Actual Sacred Heart CCU utilization was 83.4 percent in 1991, 84.4 percent in 1992, and 81.2 percent in 1993. Sacred Heart's expert in health planning, Mark Richardson's opinion that over 75 to 77 percent occupancy in a CCU means inadequate capacity to add a new open heart program, but not to serve an existing program is accepted. In addition, Sacred Heart plans to add 12 beds to the critical care unit in early 1996, and has improved case management procedures to alleviate capacity limits in the CCU, and scheduling heart surgeries. Two of the three cath labs at Sacred Heart are used for cardiac caths, electrophysiological studies and angioplasties. Sacred Heart has the capacity to perform 4,200 total cases a year. There are no problems associated with the capacity of the cardiac cath labs at Sacred Heart. The expert testimony is undisputed that West Florida Regional provides excellent quality of care, has excess cath lab, CCU and operating room capacity, and is in an excellent position to increase utilization without additional construction and with minimum additional staff. Cardiologists at Baptist resist transferring patients to West Florida, where they have not sought staff privileges. The statement in Baptists' CON application that the "closed medical staff arrangement at West Florida Regional limits referrals" from Baptist and Sacred Heart is not supported by the evidence. Staff privileges in various categories, including temporary privileges are available to physicians who apply. There was an inference that only doctors affiliated with the hospital's clinics gain privileges at West Florida. From September 1993 to April 1994, over one hundred doctors not affiliated with West Florida's Medical Clinic referred patients to the cath lab at West Florida. West Florida has the capacity to perform from 2500 to 3000 procedures in the two cardiac cath labs and one electrophsiology lab and from 800 to 1000 open heart surgery procedures in its 2 dedicated operating rooms. In 1993, there were 1453 cardiac cath, 387 angioplasties, and 418 open heart surgery procedures at West Florida Regional. A resident of the Baptist area and former patient, and a doctor with privileges at Baptist complained that the drive to West Florida takes up to 30 minutes. There is no credible claim of geographic access problems to West Florida, as defined by Rule 59C-1.033(4)(a), Florida Administrative Code, which provides that "[a]dult open heart surgery shall be available within a maximum automobile travel time of 2 hours under average conditions for at least 90 percent of the district's population." Medical risks of transfers do not outweigh the benefits of concentrated expertise in open heart surgery programs. That determination is one basis for AHCA's rule designating open heart surgery services as tertiary services. Cardiology Consultants is a group of cardiologists, cardiac surgeons, nurses and support staff which provides services to Baptist and Sacred Heart. The chairman of Cardiology Consultants does not travel to West Florida Regional because it is an inefficient use of his time. Because their patients would have to be transferred to cardiologists other than themselves or others in their group, the cardiologists are reluctant to make referrals from Baptist to West Florida Regional for open heart surgery. The cardiologists and one former patient who testified agreed that Sacred Heart's open heart surgery services provided excellent quality of care. By contrast, Baptist's expert, Dr. Luke, claimed that an analysis of severity adjusted mortality rates showed outcomes at Sacred Heart significantly below that statistically expected, and below that experienced at West Florida Regional. That testimony is not reliable due to his lack of an explanation of the methodology involved in the compilation of the report. The analysis was offered to demonstrate that Baptist could capture a larger market share than Sacred Heart. If Dr. Luke's assertions on quality of care are true, the conclusion would suggest that Baptist-based cardiologists refer patients almost exclusively to a lower quality facility to avoid referrals to cardiologists outside their group at West Florida. That conclusion is rejected based on the expert's admission of his lack of clinical expertise to render opinions on quality of care. One of the reasons advanced for the approval of the Baptist CON is that Baptist and Sacred Heart operate, in effect, a unified, high quality single cardiology program with a shared chief cardiologist, shared on-call cath lab staff, and virtually identical, overlapping medical staffs from the Cardiology Consultants group. Cardiology Consultants maintains offices at both Sacred Heart and Baptist. Because the group staffs both hospitals, Baptist argues that its cardiology program should be viewed in terms of serving a 1000 bed hospital, and the statutory criterion on joint or shared programs would apply. In fact, an agreement for a shared or joint CON application was rejected by Sacred Heart. Baptist, in this case, is seeking to establish a program which competes with that at Sacred Heart. Baptist's Size and Programs Baptist cited its size and the breadth of its existing cardiology services as a not normal basis for approval of its open heart surgery program. Baptist is one of only three hospitals in Florida exceeding 500 beds, performing over 1100 cardiac caths without open heart surgery backup. There are also 58 Florida hospitals with cardiac cath services without an open heart surgery program. The Baptist network in District 1 includes two other hospitals of 60 and 55 beds, and affiliations with four of the five hospitals located in Baldwin and Escambia Counties, Alabama. Baptist's actual medical/surgical bed size is 388, as compared to 391 operational and 40 more approved for a total of 431 at Sacred Heart, and 379 at West Florida Regional. All three of the Pensacola hospitals are described by AHCA's witnesses as "large." Since the late 1980's, Baptist has followed a long range plan to develop a first floor heart center. The most recent cath lab construction included shelled-in space to relocate the backup lab from the fourth floor to the first floor. The projected cost of moving the lab, as is, is $50,000 to $60,000. By comparison to the first floor lab, the fourth floor lab equipment is not state-of-the-art. Upgrading the fourth floor lab is expected to cost $400,000. Baptist has a large volume cardiology program, with a broad range of services, and claims to treat sicker cardiac patients. In fiscal year 1993, there were 1106 cardiac caths, 146 electrophysiology studies, 118 pacemaker implants, 69 coronary angioplasties, 20 vascular angioplasties, and 28 defibrillator implants. Baptist's claim that it provided services to more severe cardiac cases, based on a computer analysis of unknown variables with inadequately explained data input is not substantiated. If open heart surgery services are not approved at Baptist, the cardiology program will not be able to expand to include alternative less invasive techniques which require open heart surgery backup. Without open heart surgery, however, other cardiology services at Baptist have been able to develop and currently contribute approximately $12 million annually to net revenue, with a $6.4 million contribution margin. In the cardiac diagnostic categories, 80 percent of Baptist patients come from Escambia County with an additional 5 percent from Santa Rosa County. Baptist anticipates having the capacity in its two cardiac cath labs to handle the anticipated increase of 100 to 150 angioplasties, expected to result from the establishment of an open heart surgery program, in its two laboratories which are currently at 65 percent utilization. Utilization is approximately 80 percent in the first floor cath lab, which is used for almost all cardiac caths and angioplasties. The fourth floor cath lab is used exclusively for pacemaker implants and electrophysiology studies, not for cardiac caths or angioplasties. If approved, Baptist can meet the requirement of AHCA rules related to adequate staffing and the availability and quality of its service. Angioplasties were performed at Baptist, prior to the requirement for back-up open heart surgery services. However, an exception was given to Baptist in a letter from AHCA's predecessor agency in 1987. Baptist is allowed to have invasive cardiologists perform angioplasties in an emergency or if open heart surgery is not a viable option, as happens for some patients who have had prior open heart surgeries. Proposed CON Conditions As a condition for approval of this project, Baptist proposes to set charges, through September 1997, at the lesser of actual charges or 85 percent of the inflated average charges of the two existing providers, but not less than 50 percent of charges. Initially, Baptist proposed to adhere to the condition for the first three years, from July 1994 to September 1997. Having been delayed due to litigation, Baptist's expert financial witness testified that Baptist would adhere to the condition for three years after approval of the application. Baptist did not agree to adhere permanently to the fixed price structure, although no time limit is set in the AHCA draft of the proposed condition. AHCA did not consider the proposed condition a not normal circumstance in this or a prior Baptist application. District 1 already has the lowest average charges statewide for open heart surgery services. Statewide charges are 27 percent higher than the average for Pensacola and 42 percent higher than Sacred Heart's. There will not be an enhancement of financial access as a result of approval of the Baptist CON. In addition, relatively few patients would benefit from the proposed fixed charges. Medicare, Medicaid, and managed care contractual agreements will not be affected by the proposed fixed rate charge structure. Baptist also proposed to adhere to a CON condition to monitor and maintain annual minimum volumes of 350 open heart surgeries at Sacred Heart and West Florida. In its CON application, Baptist projects 85 to 100 of its projected 165 open heart surgeries in year one would otherwise have been performed at Sacred Heart. The loss of net income was projected at $1.37 million or 9.6 percent of total net income. Baptist projected 35 surgeries lost to West Florida Regional, and the financial loss of a half a million dollars, or 6 percent of net income. Baptist's expert, Dr. Luke, noted that at least 925 open heart procedures must be performed in 1997 to allow Sacred Heart and West Florida Regional to maintain the 350 minimum volume of procedures. If there are three open heart surgery providers in Escambia County in 1998, Dr. Luke conceded that one of those programs will not have a minimum volume of 350 open heart surgery procedures a year. Historically, the required volume of open heart surgeries was exceeded only in 1992, and the highest projected volume by Baptist's expert is 1,100 for 1998. See, Findings of Fact 12 and 14. Baptist's expert asserted that the surgeons volume is more directly related to quality than the hospital's volume, but the hospital volume requirement is specifically recognized as a factor in Rule 59C-1.033(7)(c). To the extent that open heart surgery volumes at an existing provider decline, it is unlikely that Baptist can control decisions which are made based on the convenience of cardiologists and cardiovascular surgeons, increasingly by health maintenance organizations and other insurers, and the preferences of patients or their families. While the proposed 350 minimum condition is intended to avoid adverse effects of the approval, there is no reason to create and then have to alleviate that potential problem absent a showing of need or not normal circumstances. The proposed condition is not, in and of itself, a not normal circumstance. Other Criteria Related To Need Local Health Plan The 1992 District 1 Allocation Factors Report is the applicable local health plan to the review of Baptist's CON application. However, the 1990 District 1 Allocation Factors were analyzed by Baptist, and therefore, the Baptist application addressed only those preferences common to the two plans. Preference one favors an applicant demonstrating cost efficiency, lower project costs, and the least increase in patient charges. Beyond the first three years of the program for very few patients, the fixed rate charge structure will not be effective in keeping patient costs lower. Therefore, Baptist does not meet the preference. The lowest cost expansion of open heart surgery services in the district is the use of the excess capacity at West Florida Regional, with capacity for 800 to 1000 open heart surgeries as compared to the highest district-wide projection of 1,100 open heart surgeries in 1998. See, Finding of Facts 14 and 16. The second preference for bed conversions to increase utilization is not applicable to the proposed project. Preference three favors converting existing capacity to expand services over new construction. Baptist proposed to dedicate 2 exising rooms for open heart surgery, and to renovate 9,660 square feet, including a 2-bed expansion of the existing 8-bed cardiac care unit (CCU), to relocate a 6-bed eye unit, to expand by 9-beds an existing 18-bed step-down unit, to establish of a 12-bed progressive care unit, and to relocate a cystoscopy room. Total project costs are projected to equal $2,350,000. The Baptist proposal for renovations is preferable to new construction, but cannot be favored due to the alternative of using exising capacity at West Florida Regional. Preference four for joint ventures or shared services that mutually increase efficiency as opposed to unilateral CON applications is not given to Baptist. Although the same group of cardiologists presently operates the cardiovascular surgeries as a unified program at both Baptist and Sacred Heart, this application is a unilateral application, not a joint program. It is a duplicative program. The fifth preference, for applicants proposing to serve patients regardless of ability to pay, favors the Baptist application. In response to the sixth preference, for applicants agreeing to provide the greatest percentage of Medicaid and indigent services, Baptist proposes 3.03 percent of cases to be Medicaid patients and 3.03 percent indigent patients for the first year of operation, and 2.44 percent Medicaid and 2.93 percent indigent for the second year, or up to 15 indigents in year one, and 19 in year two of initiating a open heart surgery program. In total operations at Baptist in 1991, Medicaid was approximately 20 percent and charity 3 percent. Sacred Heart which, like Baptist, is a disproportionate share provider, averaged approximately 23 percent Medicaid and 5 percent charity. West Florida provided approximately 4 percent Medicaid and 9 percent charity. Baptist is entitled to partial preference to the extent that its provision of Medicaid exceeds that of West Florida. Preference seven, for applicants demonstrating a history of serving the greatest percentage of indigent and Medicaid patients, is met by Baptist. Baptist is a disproportionate share provider of services to Medicaid and charity care. In 1991, Baptist also provided 7.3 percent charity and uncompensated care. The eighth preference, for expansion of existing facilities as opposed to the establishment and construction of a freestanding facility, is not applicable to this case. Preference nine for applications which increase a facility's weighted occupancy rate, preference ten for a facility with an actual occupancy rate equal to or above the weighted occupancy rate and preference eleven to avoid a decrease in a facility's weighted occupancy rate were not addressed by Baptist, having not been included in the earlier local plan. Preference twelve is given to CON applicants who describe the impact on patient case load and the estimated increase in subdistrict case load, but not to applicants who do not supply this information. Baptist met the preference by providing an analysis of the impact on patient case loads at Sacred Heart and West Florida Regional. Preference thirteen is given for CON applications that include a five year projected occupancy rate for the applicant facility that is equal to or greater than the rule standard rate for facilities, as specified in the state rule paragraph 59C-1.038(7)(e), currently 75 percent. Baptist did not provide five year projected occupancy rates. Preference fourteen, related to pediatric units, is not applicable to Baptist's proposal. Preference fifteen, related to eliminating ICU/CCU units of less than 10 beds, is not applicable to this project. Preference sixteen is met by Baptist's plans to establish periodic internal evaluations of staff and equipment performance. Baptist committed to meet preference seventeen by providing initial and ongoing training and educational programs for staff members treating or caring for open heart patients, including training staff at an existing high- volume hospital in Orlando. Preference eighteen is given for the creation and use of data collection systems to monitor and report patient volume, patient origin, charges, safety problems and complications. Baptist agrees to meet preference eighteen by collecting and reporting data for open heart surgery services, as it currently does for all other services. Preference nineteen for written referral agreements between facilities in District 1 is not met by Baptist. Preference twenty for a plan to record instances of service repetition due to poor results, data, or images, is met. An index of performance currently exists for cardiac cases at Baptist. The preference for applicants that demonstrate a history of or willingness to commit to provide health care services to AIDS patients, preference twenty-one, was not addressed by Baptist. Preference twenty-two, given to CON applicants that demonstrate they have provided the greatest percentage of the facility's available annual patient days to AIDS patients has not been addressed. On balance, Baptist failed to demonstrate compliance with the applicable local health plan, in part by failing to address some of the preferences. Baptist does meet preferences for serving patients regardless of their ability to pay, for its proposal to serve Medicaid and indigent patients, for having done so in the past, for quality assurance, data collection and training programs, and for including an impact analysis. State Health Plan The 1989 Florida State Health Plan provides six allocation preferences related to the review of CONs to establish open heart surgery programs. The first state plan preference favors applicants establishing new open heart surgery programs in larger counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. Although the population of Escambia County exceeds 250,000, the preference is not met because the percentage of the population age 65 or over is 12.24 percent, in contrast to the statewide average of 18.59 percent. State plan preference two, for new open heart surgery programs which will reach a volume of 350 adult procedures annually within three years of initiating the program, is not met. Baptist projects that it will perform 165 open heart surgery procedures in the first year of operation and 205 operations in its second year of operation. Baptist did not include a third year projection. With a CON condition that Sacred Heart and West Florida will retain a minimum of 350 procedures, Baptist's expert, Dr. Luke, conceded that Baptist cannot achieve the 350 volume by its third year of operation. State preference three, for improved geographic accessibility and reduced travel time for residents leaving the district for open heart surgeries is not met by the Baptist application. Out-migration from District 1 is extremely low, approximately 3 percent, and the geographic access standard is met. State plan preference four, for hospitals which meet Medicaid disproportionate share criteria, is met by Baptist. State preference five which, in general, favors larger more efficient facilities is met by Baptist. Baptist has 388 medical/surgical beds, with $12 million in net revenue annually from its cardiology program. A large hospital is described by AHCA witnesses as one exceeding 350 to 400 beds. State health plan preference six, for applicants with protocols for the use of alternative non-surgical therapeutic cardiac procedures, is met by Baptist. On balance, Baptist's CON application does not comply with the state health plan. Although it meets the preferences for treating patients regardless of ability to pay, for a disproportionate share provider, and for a large, efficient hospital, and for the types of services proposed, Baptist is not located in an area with demographic characteristics indicative of need, and does not have the ability to attract enough patients from that population to reach sufficient open heart surgery volumes to assure a quality program. AHCA Review of the Baptist CON Application Dr. James T. Howell, the AHCA Division Director for Health Policy and Cost Containment, made the decision to approve the Baptist open heart surgery CON, because of Baptist's substantial, active, sophisticated cardiology program, its status as a high disproportionate share provider, its size, and because the results of the numeric need calculation and the formula for determining the reduced volume at existing providers were close to that required by rule. See, Finding of Fact 7. In February, 1993, after the numeric need publication and prior to the filing of the application at issue in this case, Dr. Howell, Albert Granger, and Robert Sharpe of AHCA met with the Mayor of Pensacola who is also Senior Vice President of Baptist Health Care and President of Baptist Health Care Foundation, and Baptist's Vice President for Planning who expressed frustration over the denials of its prior open heart surgery CON applications. Baptist submitted CON applications for open heart surgery in 1987, 1989, 1991, 1992, and 1993. Among the issues of concern was the status of Sacred Heart and West Florida Regional as grandfathered providers resulting in their having "a permanent franchise." Baptist representatives expressed concern about their ability ever to secure an open heart surgery program under the current rules. After that meeting, the rule amendment process was initiated to allow consideration of data reported up to 3 months, rather than 6 months prior to the publication of the fixed need pool. At the time the Baptist application for CON 7184 was reviewed, the amendment had not been adopted. No other change in the open heart surgery rule has been made subsequent to the review of the prior Baptist CON application. When the Baptist application for CON 7184 was filed initially, Laura MacLafferty was assigned as AHCA's primary reviewer. The state agency action report ("SAAR") represents her factual analysis of the application, although she did not and, routinely, does not make recommendations to issue or deny CONs. Ms. MacLafferty and her supervisor, Alberta Granger, are not aware of any AHCA non-rule policy to determine if a calculation of minimum volume is "close" enough to the 350 standard of the rule, nor any agency guidelines to determine when a hospital is "large" or "operates a large cardiology program" which should include open heart surgery. Subsequent to reviewing the Baptist application, in December 1993, Ms. MacLafferty reviewed another open heart surgery application from District 1, filed on behalf of Fort Walton Beach Medical Center. In her review of both the Baptist and Fort Walton applications, Ms. MacLafferty found no documentation that patients in District 1 experienced problems with access to open heart surgery services. Ms. MacLafferty submitted the draft SAAR to a supervisor, Alberta Granger. The draft SAAR was retrieved from her desk, prior to Ms. Granger's reviewing it. It was removed by Elizabeth Dudek, who heads AHCA's CON and health care board sections. Ms. Granger did not review the SAAR, which was prepared by Ms. MacLafferty. The final draft was returned to Ms. Granger for her to sign on July 7, 1993. This was the only time since Ms. Granger became supervisor in the CON office, that she has not reviewed and discussed with Ms. Dudek SAARs prepared by her staff. Ms. Granger had been the primary reviewer of Baptist's 1989 CON application. Ms. Granger and her supervisor, Ms. Dudek, are aware that in this case and in one or more of its prior CON open heart surgery applications, Baptist argued that its size, scope of cardiology services, and proposed fixed rate structure were reasons to approve its proposal. Ms. Granger stated, and Ms. Dudek confirmed, that the usual procedure was not followed in the review of this and one other application in this batching cycle. In this batching cycle, Dr. Howell requested that Mr. Sharpe, head of AHCA's planning section, also review those two open heart surgery applications. Ms. Dudek recalls, that prior to 1987, there were two batches of approximately 12 total applications in which agency personnel other than the CON staff was involved in the review of CON applications. In making his decision on the Baptist application, Dr. Howell consulted Ms. Dudek and Mr. Sharpe. Ms. Dudek, who heads the CON and health care board section, was not initially in favor of the approval of the Baptist application. Mr. Sharpe, head of the planning section, prepared a 9 page analysis of the pros and cons of the Baptist proposal. The Sharpe analysis demonstrates that an increase of 9 additional open heart surgeries during the 12 month reporting period, and the use of the more current data under the pending rule revision would have resulted in the need for one additional open heart surgery program in District 1. The memorandum also demonstrated that a lower future volume of open heart surgeries is projected by using the actual use rate, as required by Rule 59C-1.033(7)(6)2, rather than a trended use rate. If these adjustments to the data are made to achieve numeric need, then Baptist's application could be approved without a showing of not normal circumstances. The memorandum also reported the October 1991-September 1992 volumes of cardiac cath admissions at Baptist as 2,677, at Sacred Heart as 2053, and at HCA West Florida as 1,915, with the conclusion that Baptist "had the largest number of cardiac catheterization admissions of the three hospitals." The evidence in this proceeding is that the memorandum was in error. Actual volumes for October 1991-September 1992 were 912 at Baptist, not 2677. Dr. Howell found Baptist's proposal consistent with health care reform trends towards eliminating the need for CON regulation by enhancing market competitive forces, as a part of Florida's managed competition model, as explained in the Sharpe analysis. Similarly, Dr. Luke described the 1980's use of the CON process to control costs by limiting duplication and the rejection of institution specific planning as outdated. Dr. Luke also favors a model of competition for cost controls. At this time, however, these positions have not been adopted in Florida Statutes and rules. The 1994 Florida Health Security Plan, however, recommends the continuation of CON review of all tertiary services, including open heart surgery. That plan was submitted as a part of AHCA's 1994 legislative proposals. Ms. Dudek described traditional "not normal" circumstances as issues related to financial, geographic, or programmatic access to the proposed service by potential patients, and not facility specific concerns. Facility specific concerns, in this case, include Baptist's attempt to retain cardiologists who wish to perform procedures not approved at Baptist and to improve its position to compete for managed care contracts. Baptist has failed to show not normal circumstances for the departure from the open heart surgery rule, statutes and prior complications of the criteria to the review of CON applications. Baptist has also failed to demonstrate that the facts of this case justify a departure from the guidelines set by rule for the need methodology, use rate and population projections, and the minimum volumes at existing providers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying the application of Baptist Hospital of Pensacola for certificate of need number 7184 to establish an adult open heart surgery program in Agency for Health Care Administration District 1. DONE AND ENTERED this 18th day of November, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER 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 18th day of November, 1994. APPENDIX To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Sacred Heart Hospital of Pensacola's Proposed Findings of Fact. 1-11. Accepted in or subordinate to Finding of Fact 3. 12-14. Accepted in or subordinate to Finding of Fact 15. Accepted in or subordinate to Finding of Fact 4. Accepted in Finding of Fact 16. Accepted in Finding of Fact 2. Accepted in Findings of Fact 2, 3 and 4. Accepted in Finding of Fact 5. Accepted in Finding of Fact 3. Accepted in Findings of Fact 3 and 4. Accepted in Finding of Fact 5. Accepted in Findings of Fact 3 and 4. Accepted in Finding of Fact 24. Accepted in Finding of Fact 18. Issue not reached. 27-28. Accepted in Findings of Fact 11 and 12. Accepted first two sentences in Findings of Fact 15 and 16. Remainder issue not reached. Accepted. Accepted. 32-35. Accepted in Findings of Fact 11 - 16. 36. Accepted in Findings of Fact 6 and 7. 37-38. Subordinate to Finding of Fact 6 and 7. 39. Accepted in Finding of Fact 60. 40-46. Accepted in or subordinate to Finding of Fact 15. 47-49. Accepted in or subordinate to Finding of Fact 16. 50-53. Accepted in or subordinate to Finding of Fact 26. 54-64. Accepted in or subordinate to Findings of Fact 3 and 15. 65-70. Accepted in or subordinate to Findings of Fact 12 and 15. 71. Issue not reached. 72-78. Accepted in or subordinate to Findings of Fact 4, 12, and 16. 79-88. Accepted in or subordinate to Findings of Fact 18-20. 89-95. Accepted in Finding of Fact 15. 96. Accepted in Finding of Fact 20. 97-101. Accepted in or subordinate to Finding of Fact 15. Subordinate to Findings of Fact 4 and 16. Accepted in or subordinate to Findings of Fact 4 and 16. Accepted in Finding of Fact 3. 105-110. Accepted in or subordinate to Findings of Fact 21-30 and 75. Accepted in Finding of Fact 12. Accepted in Findings of Fact 3-5 and 17. 113-121. Accepted in or subordinate to Finding of Fact 29 and 30. 122-126. Accepted in or subordinate to Finding of Fact 27. 127-135. Issue not reached. 136-138. Accepted in or subordinate to Findings of Fact 9 and 10. 139-141. Accepted in general in Findings of Fact 74 - 77. 142-149. Accepted in or subordinate to Findings of Fact 29 and 30. West Florida's Proposed Findings of Fact. Accepted in Findings of Fact 3 and 4. Accepted in Findings of Fact 1 and 6. 3-13. Accepted in or subordinate to Findings of Fact 61-76. 14-15. Accepted in or subordinate to Findings of Fact 1 and 68. 16. Accepted in or subordinate to Findings of Fact 64-68 and 75. 17-21. Accepted in Findings of Fact 6-7. 22-24. Accepted in or subordinate to Finding of Fact 17. 25. Accepted in Findings of Fact 2 and 11. 26-27. Accepted in Findings of Fact 3 and 4. 28. Subordinate to Finding of Fact 3 and 4. 29-30. Accepted in Finding of Fact 17. 31-32. Accepted in Finding of Fact 11. 33. Accepted in Findings of Fact 15 and 16. 34-36. Subordinate to Findings of Fact 11 and 12. 37-45. Accepted in or subordinate to Findings of Fact 4 and 16. 46-55. Accepted in or subordinate to Findings of Fact 11-14. 56-79. Accepted in or subordinate to Finding of Fact 14, 29, 30 and 55. 80-83. Accepted in Findings of Fact 68, 75 and 77. 84. Accepted in Findings of Fact 29 and 30. 85-87. Accepted in Findings of Fact 27 and 28. 88. Accepted in Findings of Fact 17-19. 89-90. Accepted in Findings of Fact 21-24. 91-92. Accepted in Finding of Fact 15. 93-97. Accepted in Finding of Fact 16. 98-100. Accepted in or subordinate to Findings of Fact 61, 63, 71-74 and 77. 101. Accepted in Findings of Fact 27-28. 102-105. Accepted in Findings of Fact 9 and 10. Accepted in or subordinate to Finding of Fact 11. Accepted in Finding of Fact 75. Accepted in Findings of Fact 23-24. Baptist Hospital, Inc.'s and AHCA's Proposed Findings of Fact. Accepted. Accepted in Finding of Fact 1. Accepted in Finding of Fact 6. Accepted in Finding of Fact 12. Accepted in Finding of Fact 7. Accepted in Finding of Fact 72. Accepted in Finding of Fact 8. Accepted in Finding of Fact 2. 9-11. Accepted in Finding of Fact 21. Accepted in Findings of Fact 2, 51 and 60. Accepted in Finding of Fact 24. 14-16. Accepted in Finding of Fact 34. Accepted in Finding of Fact 3. Accepted in Finding of Fact 4. 19-24. Accepted in Findings of Fact 21-23. 25-30. Accepted in or subordinate to Finding of Fact 26. 31-37. Accepted in or subordinate to Findings of Fact 21-26. 38. Rejected in Finding of Fact 23. 39-53(a-g) Accepted in or subordinate to Findings of Fact 18-24. 54. Rejected in Finding of Fact 20. 55-58. Accepted in Finding of Fact 15. Rejected in Finding of Fact 15. Accepted in Finding of Fact 15. Accepted in Finding of Fact 26. Accepted in Finding of Fact 15. 63-66. Rejected conclusions in Finding of Fact 15. Accepted in or subordinate to Finding of Fact 15. Rejected conclusions in Finding of Fact 15. 69-78. Accepted in or subordinate to Finding of Fact 15. 79-81. Rejected in or subordinate to Finding of Fact 17. 82-84. Rejected in or subordinate to conclusion in Finding of Fact 17. 85. Subordinate to Finding of Fact 15. 86-87. Accepted in or subordinate to Findings of Fact 13 and 21. 88-90. Accepted in or subordinate to Finding of Fact 18. 91-94. Rejected in Finding of Fact 15. 95-97. Accepted in or subordinate to Finding of Fact 15. 98-121. Issues not reached or rejected in Findings of Fact 74-77 except that the reference to a shared cardiology program should be understood to mean unified operation of programs under one group of cardiologists serving two hospitals, not "joint, cooperative or shared," as AHCA has previously defined those terms in construing subsection 408.035(1)(e), Florida Statutes. Accepted in or subordinate to Finding of Fact 4. Accepted in Finding of Fact 4. 124-132. Issue not reached or rejected in Findings of Fact 74-77 except that the reference to a shared cardiology program should be understood to mean unified operation of programs under one group of cardiologists serving two hospitals, not "joint, cooperative or shared," as AHCA has previously defined those terms in construing subsection 408.035(1)(e), Florida Statutes. 133-134. Accepted in Findings of Fact 15-18. 135. Accepted in Finding of Fact 75. 136-138. Conclusion not support by testimony cited. 139-145. Accepted in Findings of Fact 2, 36, 37, 38 and 57. 146-152. Accepted in or subordinate to Findings of Fact 1, 29 and 30. 153-165(a-c) Rejected conclusions that highest projections of growth in open heart surgery is reasonable in District 1 in Findings of Fact 11-16. 165(d) Rejected as insignificant number in Finding of Fact 12. 165(e-g) Rejected in Finding of Fact 19. 165(h) Accepted in Findings of Fact 9-10. Rejected in Finding of Fact 29. Accepted as shared is defined in Finding of Fact 20. 168-172. Rejected in Findings of Fact 29-30. 173-177. Rejected conclusions in Findings of Fact 29-30. 178-181. Rejected in Findings of Fact 4, 16, 17 and 18. 182-186. Accepted in 1 as explained in Findings of Fact 27 and 28. Rejected in part in Finding of Fact 52 and accepted in part in Findings of Fact 60. Rejected as most relevant in Findings of Fact 60. 189-199. Accepted in Finding of Fact 25. 200-201. Issue not reached. COPIES FURNISHED: William Wiley, Esquire Darrell White, Esquire Charles A. Stampelos, Esquire McFarlain, Wiley, Cassedy & Jones 600 First Florida Bank Building 215 South Monroe Street Tallahassee, Florida 32301 John Radey, Esquire Jeffrey Frehn, Esquire Aurell, Radey, Hinkle, Thomas & Baranek 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 Michael J. Cherniga, Esquire Greenberg, Traurig, Hoffman Post Office Drawer 1838 Tallahassee, Florida 32302 W. Dexter Douglass, Esquire John A. Rudolph, Jr., Esquire Douglass & Powell Post Office Box 1674 Tallahassee, Florida 32302 Richard Patterson, Esquire Agency for Health Care Administration 325 John Knox Road Tallahassee, Florida 32303 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue The issue in this case is whether either Mease Health Care (Mease) or St. Anthony's Hospital (St. Anthony's), or both, meet the statutory and rule criteria for a Certificate of Need (CON) to operate an open heart surgery program, and therefore, whether the Department of Health and Rehabilitative Services (Department) should approve either, or both, of their CON Applications.
Findings Of Fact The Parties Mease is a 278 bed, non-profit acute care hospital located in Dunedin, Florida, which is within the Department's Service District V. Its service area is mid-Pinellas through Pasco Counties, with mid-Pinellas to northern Pinellas being its primary service area. It has operated a special procedures room since before July 1, 1977, but that room is not a cardiac catheterization laboratory. The special procedures room has been staffed with persons trained in treating critical care patients, with special knowledge of cardiovascular medication and catheterization equipment. The catheterization team usually consists of a physician, special procedures nurse, and at least two dedicated radiographer technologists. Procedures performed at Mease in the special procedures room include renal arteriograms, pulmonary arteriograms which involve passing a catheter through a right side chamber of the heart into the lungs, as well as cerebral and femoral arteriograms. Pulmonary angiograms, right ventriculography and right atrial injections are all currently performed at Mease, with right catheterization procedures performed in the CCU and special procedures lab. The special procedures room is not used by radiologists or cardiologists at Mease to do any therapeutic or diagnostic studies of the left chambers of the heart, but rather these procedures are performed at Plant or Largo Medical Center in Clearwater. The Mease special procedures room does not have the more sophisticated equipment necessary to perform catheterizations in the left chambers of the heart, and such equipment would be found in a CCL. Mease does not have a CON for inpatient cardiac catheterization, but does have a separate pending application for such program. It has an outpatient cardiac catheterization lab which opened in April, 1989. Mease proposes to do angioplasties on an outpatient basis, which is contrary to the Department's Rule 10-5.011(1)(e)2b, which defines this as an inpatient procedure. Mease Clinic is located adjacent to Mease Hospital/Dunedin, and consists of approximately 90 physicians who have a contractual relation with Mease. Mease Clinic is a major source of referrals for Mease Hospital/Dunedin. St. Anthony's is a 434 bed, not-for-profit acute care hospital located in St. Petersburg, Florida, which is within the Department's Service District V. Its primary service area is southern Pinellas County, south of Ulmerton Road, where 80% of its patients reside. It provides a full range of services, including inpatient cardiac catheterization, with a CCL, coronary care unit, holter monitor service, and echocardiography laboratory. St. Anthony's presently has 5 cardiologists on staff, and will be adding 3 more. It offers a full array of diagnostic services including nuclear cardiography, basic electrocardiography, a magnetic resonance imaging unit. St. Anthony's is also the site of the Rogers Heart Foundation which performs research, education, and clinical diagnostic studies involving cardiovascular diseases. Plant is a 740 bed, general acute care, not-for-profit hospital located on an 11 building campus in Clearwater, Florida, approximately 3 to 4 miles south of Mease. It provides a wide range of services, including open heart surgery, medical/surgical with all subspecialties, obstetrics and psychiatry. It also operates a nursing home, ACLF, ambulatory surgery center, rehabilitation center, and arthritis center. Bayfront is a 518 bed, not-for-profit, full service acute care hospital located in St. Petersburg, Florida, adjacent to Children's. It is connected to Children's by an enclosed passageway, and operates a shared diagnostic, open heart surgery and cardiac catheterization program with Children's. The usual procedure under this shared progam is that adult patients requiring open heart surgery are admitted to Bayfront the day prior to surgery, and then are prepared and transported through the passageway by Bayfront personnel to Children's, where the actual surgery is performed. Normally the patient is kept overnight at Children's following surgery, and is then returned to Bayfront by Bayfront personnel to continue recovery, and eventual discharge. Children's is a 113 bed children's hospital located in St. Petersburg, Florida, approximately two miles from St. Anthony's. It is a full service tertiary facility, which serves as a referral center for children from throughout the State of Florida, and will have 6 operating rooms, 2 CCLs, and 13 ICU beds when construction underway is completed. It has an approved CON for 55 additional beds. Two of its operating rooms are used for open heart surgery. It has an open heart surgery program which has been in operation since the early 1970's, with 3 pediatric cardiologists and 12 to 15 adult cardiologists on staff. The Department is the state agency which is responsible for administering Sections 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for Certificates of Need (CON) are filed, reviewed, and either granted or denied by the Department. Currently, Children's/Bayfront, Plant, and Largo Medical Center, which is located near Ulmerton Road in central Pinellas County, have existing open heart surgery programs. There is an additional approved CON for an open heart surgery program at Bayonet Point Hospital in Pasco County. The 3 existing programs each have more than one operating room dedicated for open heart surgery. For every dedicated open heart surgery suite, approximately 500 open heart surgery cases can be performed per year, and thus, each of these existing programs in District V has the capacity to perform well over 500 cases each year. The Applications On or about September 28, 1988, Mease filed an application with the Department for a CON to implement an open heart surgery program at its hospital in Dunedin, Florida. This application was designated as CON Application Number 5679. The Department reviewed this application, and on October 13, 1988, forwarded an omissions letter to Mease. Mease responded to the omissions letter on November 14, 1988, and on November 15, 1988 the Department deemed its application complete. Thereafter, the Department reviewed and considered all material received from the applicant, and issued its State Agency Action Report (SAAR) on or about January 12, 1989, noticing its intent to deny CON 5679. Mease timely filed a petition for formal hearing to challenge the Department's notice of intent to deny this CON, and Plant timely intervened in opposition to this application. On or about September 28 1988, St. Anthony's filed an application with the Department for a CON to implement an open heart surgery program at its hospital in St. Petersburg, Florida. This application was designated as CON Application Number 5678. The Department reviewed this application, and on October 13, 1988, forwarded an omissions letter to St. Anthony's. St. Anthony's responded to the omissions letter on November 11, 1988, and the Department deemed its application complete. Thereafter, the Department reviewed and considered all materials received from the applicant, and issued its SAAR on or about January 12, 1989, noticing its intent to deny CON 5678. St. Anthony's timely filed a petition for formal hearing to challenge the Department's notice of intent to deny this CON, and both Bayfront and Children's timely intervened in opposition to this application. On or about May 26, 1989, Mease filed certain revisions to its CON application, purportedly by agreement of counsel. However, these revisions were not filed with, or reviewed by, the Department in the preparation of its SAAR. The applicants and intervenors in this proceeding are all located in District V, which is composed of Pinellas and Pasco Counties. There are no subdistricts within District V for purposes of open heart surgery programs, and the Department's numeric need methodology for such programs. The open heart surgery and population growth rates for northern Pinellas and Pasco Counties exceed that of southern Pinellas County, south of Ulmerton Road. However, the total population of south Pinellas exceeds that of northern Pinellas. Utilization rates are also lower in south Pinellas than elsewhere in District V. Stipulations The parties stipulated that: The licensure and accreditation of each hospital in this proceeding is not at issue and does not have to be proven; The equipment proposed by Mease and St. Anthony's is adequate, and the costs projected for that equipment are reasonable, as well as the costs associated with architectural design and construction; St. Anthony's and Mease have the ability to finance the proposed project costs; St. Anthony's, Bayfront and Children's have stipulated to each other's standing in Case Number 89-0727; Plant has stipulated that Mease renders quality care in its existing programs; and The term "case" means "admissions" or "discharges", and there can be multiple procedures performed in each case. State Health Plan Objective 4.2 of the State Health Plan applicable to this application is to "maintain an average of 350 open heart surgery procedures per program in each district through 1990." (Emphasis Supplied.) The goal set forth in the State Plan relative to open heart surgery programs is to ensure the appropriate availability of such services at reasonable costs. These applications are not consistent with Objective 4.2. If these application were to be approved, there would be 6 (3 existing and 3 approved) programs in the District. The number of procedures projected for 1990 is 1271, and if this is divided by 6 programs, the result is an average of only 212 procedures per program. If only one of these two application were to be approved, and the number of procedures projected for 1990 were to be divided by 5 instead of 6, the result of 254 would still fall below the 350 standard. Approval of either of these applications will also significantly and adversely impact the ability of the already approved program in the District, located at Bayonet Point Hospital in Pasco County, to achieve an acceptable level of service. In the State Health Plan narrative, it is recognized that "quality of patient care is a primary concern in open heart surgery programs due to the potential consequences to the patient of poorly trained and/or skilled staff." In order to ensure quality, and in recognition of the relationship between the volume of open heart surgery procedures and quality, the State Plan references the Department's requirement, set forth by rule, that a minimum of 200 adult procedures be performed within 3 years of initiation of an open heart program. The narrative also notes that a broad range of services must be provided to fulfill the requirements of an open heart surgery program. Both of these applications are partially consistent with these narrative statements in the State Health Plan since they have a record of providing quality care, and offering a complete range of services within departments at these hospitals, where a broad range of diagnostic techniques and expertise are available. However, it was not established that a minimum of 200 adult open heart surgical procedures would be performed at either Mease or St. Anthony's within three years of initiation of this program. Local Health Plan The applicable portions of the District V Health Plan recommend that in a comparative review of open heart surgery applications, preference should be given to those hospitals with a documented record as a major referral center for open heart surgery, and which serve the entire community regardless of ability to pay, using the proportion of Medicaid patient days of the planning area total as a measure. The Local Plan also recommends that future expansion of open heart surgical programs occur so as to serve population areas which will generate a minimum of 350 open heart operations annually. Finally, the Local Plan states that applicants should be able to justify the projected minimum number of 200 procedures stated in the Department's rule within three years of the beginning of service, there should be a numeric need shown in accordance with the Department's numeric need methodology for open heart surgery, existing programs should be performing the number of procedures required in the Department's methodology, and priority should be given to applicants in areas which do not have existing or approved programs. District V is not divided into subdistricts for purposes of determining the need for additional open heart surgery programs. Neither of the applicants in this case are major referral centers, and neither provides a significant volume of services to Medicaid or chronically underserved groups, as discussed further below, although they have provided services to those who are unable to pay. According to the Department's numeric need methodology, there is no need for any additional open heart surgery programs in District V. There are existing open heart programs in both north and south Pinellas County, the primary service areas of each of these applicants. The Department's Numeric Need Methodology and the "350 Standard" Rule 10-5.011(1)(f)8, Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for additional open heart surgery programs. It provides a formula by which the number of open heart procedures for the horizon year, in this case 1990, are to be estimated. (See Finding of Fact 19 for an explanation of the interchangeable use of the terms "procedures" and "cases".) Pursuant to the formula, there are projected to be 1271 open heart surgery procedures performed in 1990 in District V. This number of projected procedures is then divided by 350 procedures in order to determine the number of programs which will be needed. See Rule 10-5.011(1)(f)11b. Using this methodology, the Department has identified the need for 3.6 (rounded to 4) programs in the District in the horizon year. Since there are currently 3 existing (Plant, Bayfront/Children's and Largo Medical Center) and 1 approved program (Bayonet Point Hospital) in District V, the Department has concluded that there is no projected numeric need for either of these additional programs in 1990. The Department will not normally approve a CON for a new open heart surgery program unless a numeric need is projected under its methodology. In performing the calculations under its numeric need methodology, the Department correctly determined that the actual use rate in District V was 110.35 procedures per 100,000 population. This actual use rate properly does not adjust for outmigration of residents of District V to facilities outside the District. It has been the consistent policy of the Department in determining actual use rates to consider only the total number of procedures performed at facilities within the District since the numeric need methodology calculates the need for additional programs within the same District. As long as there are sufficient resources to serve the volume of patients needing service in a given District, it does not matter where those patients reside. Patients choose to go to another District for open heart services for many reasons other than a lack of resources within their own District, such as physician preference. Therefore, it cannot be concluded that all patients who outmigrate for one reason or another will return to their own District for services if an additional program is approved. For this reason, as well as the double counting of the same patients which would result if they were counted in determining the actual use rate in both the District in which they reside, and in the District to which they outmigrated for service, the Department's interpreptation and policy is reasonable. For purposes of applying the Department's numeric need methodology rule, the words "cases", "procedures", and "admissions" are used interchangeably. This is the result of the historical development of the rule, which preceded the development and implementation of DRG's precisely defining "procedures". Thus, while the rule states that need for open heart surgery programs shall be determined by computing the projected number of open heart surgical "procedures", the Department has consistently interpreted this rule to mean the number of "cases", and used the number of "cases" in performing the calculations under the methodology. Hospitals reporting data to local health councils generally report the number of cases or discharges, and most health planners similarly use the number of patients or discharges when calculating the need for a new program. Through the testimony of Michael L. Schwartz, an expert in health care planning, Mease erroneously attempted to inflate the need projected under the rule by using "procedures" instead of "cases" in its calculations. It applied the multiplier of 1.77 or 1.44 to reported "cases", since this represents an estimate of the number of procedures per case, and thus incorrectly projected a need for an additional program. The Mease methodology is in error because it is inconsistent with the Department's reasonable, historical interpretation and application of this rule, as well as the manner by which data is reported under the rule to local health councils. Recognizing that the numeric need methodology does not project the need for any additional programs, the applicants herein both seek to justify the approval of their applications under a "not normal" rationale, which relies primarily upon outmigration of patients from District V to Hillsborough County in District VI. In fact, outmigration is the only "not normal" circumstance raised in the Mease application. Therefore, arguments at hearing that the existence of the Mease Clinic should also constitute a "not normal" circumstance are rejected. The data demonstrates insignificant outmigration from Pinellas County. From July 1987 through June 1988, only 32 patients (5.9%) outmigrated from north Pinellas where Mease is located and only 36 (6.8%) outmigrated from south Pinellas where St. Anthony's is located. The main outmigration was from Pasco County in which approximately 85.5% of Pasco residents receiving open heart surgery (488 of 571) outmigrated from District V. However, there is now a CON approved program in Pasco County which will be located at Bayonet Point Hospital which will be available to serve Pasco residents who have been outmigrating to District VI. There is a direct relationship between the volume of open heart surgery procedures performed at a facility and the quality of care provided at such facility, with lower mortality rates generally at hospitals with higher volumes than those with low volumes. Therefore, in addition to its numeric need calculation, the Department has also developed a "350 Standard" to address patient safety and quality of care concerns by ensuring that each existing and approved open heart surgery program achieves a volume sufficient to assure quality and efficiency prior to approval of a new program. Rule 10- 5.011(1)(f)11aI, Florida Administrative Code, prohibits the establishment of new open heart surgery programs unless: . . . the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart cases per year. . . Bayfront/Children's urges an interpretation and application of the 350 Standard in a manner which would require each existing and approved program to actually operate at the level of 350 cases per year. Since approved programs are not yet operational, and therefore cannot operate at the 350 level, they argue that the intent of this Standard, as set forth in the above-cited rule, is to preclude the approval of any additional programs while there are approved programs, or existing programs which are not meeting the 350 Standard. To the contrary, the Department and the applicants urge that the 350 Standard be applied by averaging the actual number of cases at existing programs, and the number of cases which are reasonably projected to be performed at approved programs. Under this interpretation, as long as the average between cases which are performed at existing, and which are reasonably projected to be performed at approved programs exceeds 350, then the further approval of an additional program is not prohibited. Having considered the testimony and evidence presented by the parties, and in particular the testimony of Sharon Gordon-Girven, who was accepted as an expert in health planning, which is found to be more credible, consistent, and reasonable on this point than the testimony of Michael C. Carroll, who was accepted as an expert in health planning and hospital administration, it is found that the Department's interpretation and application of the 350 Standard is reasonable and consistent with the terms of Rule 10-5.011(1)(f)11aI. The Department has consistently applied this 350 Standard since this rule's adoption by averaging caseloads at existing programs and reasonably projected caseloads for approved programs. To interpret this Standard as urged by Bayfront/Children's would impose a moratorium on new open heart surgery programs while there is an already approved, but not operational, program in a District, or while a newly operational program has not yet attained the 350 Standard. There is no basis for this prohibitory interpretation which would not only reduce competition, but would also be inconsistent with sound health planning and the State Health Plan Objective 4.2, as discussed above. Quality of Care Both Mease and St. Anthony's are accredited by the Joint Commission on Accreditation of Health Care Facilities and have a record of providing quality care in their existing programs. On average, hospitals performing greater than 200 open heart procedures per year have superior surgical outcomes than hospitals doing less than 200 procedures. Mortality rates are significantly lower at hospitals performing more than 200 procedures annually than at those performing less. It was established that there is a direct relationship between volume of open heart surgical procedures and quality of care at facilities with open heart surgery programs. Therefore, the existence of more open heart programs than are needed in an area may result in some existing programs not achieving sufficient volume to assure patient safety and quality of care. Rule 10-5.011(1)(f)5d, Florida Administrative Code, was adopted by the Department in order to set forth the minimum volume deemed necessary to assure quality of care, and provides, in part: There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. Although the applicants urge that they will be able to meet this threshold level within three years, they failed to establish by competent substantial evidence that they would actually attract the patients necessary to perform either the number of open heart procedures projected in their applications, or this minimum number of 200 procedures required by the Department to assure quality of care in its third year of operation, given the current pattern of physician referrals in the area, their market share in relation to those of existing programs, and actual utilization levels for the existing District V programs. Without the assurance of sufficient volume to meet the 200 procedure threshold established by the Department by rule, the validity of which is not at issue in this case, the applicants have failed to show that they will be able to achieve and maintain a patient volume in their proposed program which will assure quality of care in their proposed open heart surgery program. St. Anthony's sought to question the quality of care provided at the Bayfront/Children's program by citing an 8% mortality rate in 1987-88, and a 5.5% rate in 1988-89, while 3% is the national standard. However, mortality rates are only one indicator of quality, and a significant number of these cases at Bayfront/Children's involved complex open heart surgery on patients whose mean age was significantly higher than would be expected in a normal case mix, which presents a greater risk potential than less complex surgery on a younger case mix. In any event, this issue was not clearly raised in St. Anthony's application. Further, the evidence that was received, including testimony of physicians on staff at St. Anthony's and Children's/Bayfront, establishes that the quality of care at the Children's program is excellent, and that scheduling problems relating to availability of operating rooms are being resolved. It was not shown that there is any adverse impact on quality from having to move patients between Bayfront and Children's for open heart surgery. The fact that Mease does not have a CON for an inpatient cardiac catheterization program adversely affects the potential quality of care of any open heart surgery program at its facility since the medically preferred practice when performing such surgery is to have inpatient cardiac catheterization available. Open heart surgery programs do not, and should not, operate without this inpatient cardiac catheterization capability. Availability and Access While the addition of these two new programs would obviously increase the availability of services in the District, open heart surgery services are already reasonably available in District V. St. Anthony's is only two miles from the Bayfront/Children's program in St. Petersburg, and Mease is located in Dunedin, approximately 3 to 4 miles north of Plant in Clearwater. The two hour travel time standard is already being met in District V, and geographic accessibility will not be appreciably or significantly increased by these proposals. There is excess capacity in existing and approved open heart surgery programs in District V during most of the year, including at the Bayfront/Children's and Plant programs. Therefore, there is ready access to, and availability of open heart surgery services to patients in the District. The applicants did not establish that approval of their applications would enhance access to open heart surgery services for the medically indigent. Despite the assertion in these applications that each program would be available to the underserved, there is no definite commitment to serve charity care patients as a percentage of total patient days or of total revenue. Bayfront and Children's exceed St. Anthony's in their commitment to indigent, charity care. As a percentage of total patient days in 1987, Medicaid patients represented 2.3% of St. Anthony's, and 2.1% of Mease's total patient days, while for Children's, Medicaid patients in 1987 represented 34.2%, and for Bayfront, they represented 8.9% of total patient days. While unstable patients who have to be transferred from one hospital to another face increased risks, it was not shown that transfers from Mease to Plant, or from St. Anthony's to the Bayfront/Children's program have actually jeopardized the safety of patients or resulted in a reduction in the quality of care received by patients. Transfer delays are exacerbated by seasonal increases in population in District V, but there continues to be a reasonable likelihood that patient transfers can be accommodated, even during seasonal population increases, without adverse impacts to patient care. However, a large majority of open heart surgery cases are non-emergency that can be scheduled for surgery after diagnosis without any compromise in patient care. Emergency patients can be given priority, and there are sufficient available beds to accommodate emergency patients, regardless of seasonal delays, and such seasonal delays do not establish that there is a lack of available beds in District V which would require the approval of either of these applications. Alternatives Considered The applicants did not fully explore alternatives, including less costly alternatives, to a new program at their facility, such as a joint or shared program with an existing provider. This would have been particularly relevant to these applications since District V already has a quality joint program at Bayfront/Children's which is operating successfully in the community. A less costly alternative to approval of either, or both, of these applications would be greater utilization of existing programs, especially where excess capacity exists, such as at the Bayfront/Children's and Plant programs, and in view of there being an already approved program in District V at Bayonet Point. Personnel Availability and Costs There has been a long-term shortage of nurses, particularly in intensive care and open heart surgery, and this shortage is present in District V not merely for nursing staff, but also for technical support staff, and is particularly acute in operating room and critical care personnel. It is not always possible to fill open heart surgery or critical care nursing positions with trained personnel. At hearing, St. Anthony's proposed a joint training program with St. Joseph's Hospital in Tampa for open heart personnel. However, this was not explicitly raised in the St. Anthony application, and therefore, it cannot be considered. The applicants will compete with existing providers in attracting open heart surgery nursing and technical staff. The implementation of these new programs would have an adverse impact on the ability of existing and approved programs to attract and retain trained open heart surgery nursing and technical staff, and can reasonably be expected to increase personnel costs for these providers. The salaries and benefits identified in these applications are generally reasonable and complete. However, Mease's estimate of the number of additional nursing positions, or FTE, which would be required throughout the hospital to accommodate the workload resulting from an open heart surgery program is incomplete and inadequate, and St. Anthony's failed to fully consider the need for additional personnel for its proposed open heart step-down unit, angioplasty recovery, open heart "stat" lab, and resperator machine operators. Financial Feasibility In their applications, Mease has projected 200 open heart surgery cases, and St. Anthony's has projected 150 open heart surgery cases, in their first year of operation; Mease has projected 240 cases and St. Anthony's projected 200 cases in their second year; St. Anthony's projected 250 cases in their third year of operation, but Mease did not include a third year projection. However, it is specifically found that these projections are not reasonable, based upon the testimony and evidence received, as well as the results of the Department's numeric need methodology calculations, performed pursuant to Rule 10-5.011(1)(f)8, the validity of which is not at issue in these proceedings. A basic assumption used by Mease in the preparation of its pro forma is flawed. The utilization projections which drive the necessary calculations in the pro forma are based upon a percentage of patients who have cardiac catheterizations who subsequently have to have open heart surgery. That percentage is 25%, but is based upon experience in which the facility at which these patients received this treatment had both inpatient cardiac catheterization and open heart surgery programs. Mease does not have inpatient cardiac catheterization, and therefore, there is a reasonable likelihood that the percentage of cardiac catheterization patients who would choose to be transferred from another facility, such as Plant, to Mease for open heart surgery would be substantially less than 25%, thereby reducing Mease's projected utilization. For example, it was shown that 75% of patients who receive inpatient cardiac catheterization remain at the same hospital for open heart surgery, if that becomes necessary and if that hospital has both programs. The pro forma which has been filed by St. Anthony's includes revenues that St. Anthony's is already receiving for treatment of patients who are subsequently transferred to Bayfront/Children's for open heart surgery. This amounts to approximately $11,000 per admission which St. Anthony's is already receiving and which, therefore, should not have been shown on its pro forma of revenues to be expected from a new open heart surgery program. The inclusion of this amount results in inflating St. Anthony's revenue projections. Additionally, St. Anthony's has incorrectly estimated its Medicare utilization at 65%, while it should have been estimated at 80% of patient mix. This error also has the effect of inflating expected revenues, and placing unjustified greater significance than there should be on its proposed fixed price discount, which is discussed later, and which applies only to non-Medicare, non-Medicaid, non-charity cases. For the July 1990, planning horizon in District V, the Department's numeric need methodology projects that there will be 1271 open heart surgery procedures. With referral patterns in place and existing providers with operational and well regarded programs, it is unlikely that either applicant would have an automatic, equal share of the District's pool of open heart patients, or even that they would perform the number of procedures projected in their pro forma for their first and second years of operation. In fact, the 3 existing providers in District V performed 1215 procedures (355 at Children's, 416 at Plant, and 444 at Largo Medical Center) between July 1987 and June 1988, leaving fewer than 56 procedures projected through the Department's numeric need methodology for the one already approved program and these applicants, if they were to be approved. It defies logic and reason to argue that the applicants will achieve their projected caseloads, given the existing levels of service at existing programs in District V, the fact there is an additional program that has already been approved, and the fact that the Department's numeric need methodology projects 1271 procedures in 1990. Since the applicants base their assessment of financial feasibility upon their unsubstantiated, inflated projections, and since the applicants have not established the reasonableness of these projections, the long-term financial feasibility of these proposed new programs has not been shown. Further, the applicants have also failed to establish that they can reasonably be expected to achieve the level of 200 procedures in their third year, and therefore, they have also failed to show that they can achieve that minimum level which the Department, by rule, requires to ensure quality of care. In other respects, the assumptions used by the applicants in their pro forma are reasonable, including their inflation factor for income, bad debt, expenses, and depreciation. Effect on Competition and Costs It cannot be determined whether there will be a significant difference between the charges proposed by each of these applicants and the actual charges at existing providers. Actual charges are dependent on case mix, Medicare percentage, payor mix and illness severity. Meaningful charge comparisons can only be made for hospitals in the same Hospital Cost Containment Board (HCCB) peer grouping based on case mix, Medicare percentage and location, and the parties in this case are in various groupings. This finding is based on the testimony of Margo Kelly, who was accepted as an expert in health care planning and finance, and Larry Ward, an expert in hospital finance and financial feasibility, and applies to both overall hospital charges and charges for specific services. There are simply too many variables to make any meaningful comparison of charges between hospitals which are in different HCCB peer groupings. A unique aspect of the St. Anthony's application is that it has proposed a fixed fee of $32,000, adjusted 6% annually for inflation, for open heart surgery for the first 3 years of the program, if approved. However, this factor is not as significant as it may appear from St. Anthony's pro forma since St. Anthony's has erroneously underestimated its Medicare mix at 65% instead of 80%, based upon actual Medicare percentages at existing programs, and thus, the mix of patients to whom this fixed fee would apply was overestimated by 15%. The fixed fee program is applicable to such a limited number of patients that the program is insignificant as a factor upon which approval of this application should be based. Additionally, based on the testimony of Sharon Gordon-Girven, it is found that while a fixed fee may be an attractive aspect of a CON application, it is not a "not normal" circumstance which can be used to approve an application notwithstanding a showing of no numeric need. It has not been shown whether there would be an appreciable positive impact on costs in the health care community if either, or both, of these applications were approved. When health care services are duplicated and associated costs are spread over the same number of patients, charges for those patients tend to increase. The evidence showns there is virtually no price competition for open heart surgery services. Mease has underprojected charges for its open heart surgery program by estimating an average length of stay of only 10 days instead of 13, which is the average at other area hospitals, and also by failing to include cardiac catherization charges, which should be included for those patients on whom both a catheterization and open heart surgerical procedure are performed in the same episode of care. As previously discussed, there would be greater competition among existing and approved programs in District V for trained open heart surgery and critical care nurses, which are in short supply, and it can reasonably be expected that greater competition for trained personnel who are in short supply will eventually result in higher salaries and health care costs. Impact on Existing and Approved Programs As discussed above, approval of these applications will adversely affect the ability of existing providers to attract and retain trained open heart surgery and critical care RNs due to the already existing shortage of personnel to fill these positions, and the fact that one already approved program would become operational prior to either of these programs, if they were to be approved. The proposed primary service area for Mease overlaps with the primary service area of Plant, and the primary service area of St. Anthony's overlaps with the primary service area of the Bayfront/Children's program. Therefore, these facilities are competing for the same open heart surgery patients. Patients referred to Plant by Mease physicians for open heart surgery account for approximately 30% of Plant's current total caseload, and if these patients are lost, the financial impact on Plant would be approximately $4.5 to $5 million in lost revenues. The same surgical group that does 90% of the surgeries at Plant is expected to do open heart surgeries at Mease, if the Mease CON is approved. The viability of the Bayfront/Children's program might be endangered, financially and programatically, if the St. Anthony's application is approved. From July 1987, through June 1988, 39% of the adult open heart surgical procedures performed at Bayfront/Children's were referred from St. Anthony's cathing cardiologists. A substantial number of these patients can be expected to be lost if the St. Anthony's program is approved, and this can reasonably be expected to significantly decrease utilization of the Bayfront/Children's program, with resulting loss in revenues. Bayfront reasonably estimates a resulting loss of $400,000 in its net income. It was also shown that Bayfront is already incurring a net loss in income from its open heart surgery program, which would only be exacerbated by the loss of a substantial number of patients to St. Anthony's. Comparision of Applicants While St. Anthony's does have an existing inpatient cardiac catheterization program, Mease does not. The Mease outpatient cardiac cath lab only opened in April, 1989, and therefore, its experience to date with outpatient cardiac catheterization is minimal. Mease proposes to do angioplasties in its outpatient cardiac cath lab, which is specifically prohibited by Departmental Rule 10-5.011(1)(e)2b, and is an unacceptable medical practice. Thus, while St. Anthony's patients would be able to receive complete and continuous care at its facility, Mease patients would still have to be transferred to another hospital for inpatient cardiac caths and angioplasties. There is already an approved open heart surgery program in the northern part of District V which will be located at Bayonet Point, and this new program will address the outmigration circumstance which has been occuring from Pasco County to Hillsborough County, upon which Mease has based its "not normal" argument in support of its application. Although population growth is greater in northern Pinellas than in south Pinellas, the total population of south Pinellas remains larger, and thus, there remains a larger population base for open heart surgery in south Pinellas than in north Pinellas. There is only one open heart surgery program in south Pinellas (Bayfront/Children's) while there are two existing programs in north Pinellas (Largo and Plant). Mease has only 5 operating rooms, while St. Anthony's has 12, and total beds at St. Anthony's exceed beds at Mease by 434 to 278. Of the two applications at issue on this proceeding, St. Anthony's is the superior application for an additional open heart surgery program in District V, if one were to be approved.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order which denies the application of Mease for CON 5679, and of St. Anthony's for CON 5678. DONE AND ENTERED this 29th day of November, 1989 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 1989. APPENDIX Rulings on Proposed Findings of Fact filed by Mease: Adopted in Finding 1. Adopted in Finding 8. Adopted in Finding 1. Rejected as irrelevant and not based on competent substantial evidence. 5-6. Adopted in Finding 1. 7-8. Rejected as immaterial. Rejected in Finding 31, and otherwise as immaterial. Rejected as immaterial. Rejected in Findings 34, 35 and otherwise as immaterial. Adopted in Finding 24. Rejected in Findings 31, 46. Rejected as irrelevant and immaterial. 15-16. Rejected in Finding 43, and otherwise as immaterial. 17-18. Adopted in Finding 1, but otherwise Rejected as unnecessary, and not based on competent substantial evidence. Rejected in Finding 11. Adopted in Finding 7, but otherwise Rejected as unnecessary. Rejected in Findings 11, 49. rejected as immaterial and not based on competent substantial evidence. Rejected in Finding 40. 24-33. Rejected in Finding 38, and otherwise as immaterial and not based on competent substantial evidence. 34-35. Rejected as irrelevant and immaterial. 36. Adopted in Findings 49, 50. 37-38. Rejected in Findings 21, 26. 39-43. Rejected in Finding 17, and otherwise as irrelevant and immaterial. Adopted in Finding 38. Rejected as irrelevant and immaterial. 46-48. Rejected in Finding 32, and otherwise as irrelevant. 49. Rejected in Finding 30. 50-51. Rejected as immaterial and unnecessary. Rejected in Findings 45, 47. Rejected as immaterial. Adopted and Rejected in part in Finding 46. Rejected as immaterial and irrelevant. Adopted in Finding 40. Rejected as unnecessary. Rejected in Findings 7, 30 and otherwise as speculative. 59-62. Adopted in Finding 11, but otherwise Rejected as unnecessary and immaterial. 63-64. Rejected as not based on competent substantial evidence. Adopted in Finding 2. Adopted in Finding 11. Rejected as unnecessary. Adopted in Finding 30. Rejected as immaterial and unnecessary. Adopted and Rejected in part in Finding 51. Adopted in Findings 15, 17. Rejected in Finding 44, and otherwise as immaterial. Rejected in Finding 31. 74-80. Adopted and Rejected, in part, in Findings 12, 19. 81-85. Adopted and Rejected, in part, in Finding 20 and otherwise Rejected as immaterial. Rejected as not based on competent substantial evidence. Rejected in Finding 50, and otherwise as irrelevant. 88-89. Rejected as immaterial and irrelevant. Rejected in Findings 7, 30, and otherwise as unnecessary. Rejected as irrelevant and immaterial. Rejected as immaterial. Rejected in Findings 7, 30, and otherwise as unnecessary. Rejected in Findings 27, 49. Rejected in Findings 1, 29, and otherwise as immaterial. Rejected as unnecessary and immaterial. Adopted in Finding 24, but otherwise Rejected in Findings 1, 29. Rejected in Findings 38, 41. 99-100. Rejected in Finding 46, and otherwise as immaterial. Rejected in Finding 43. Rejected in Finding 45. Rejected in Finding 46. 104-105 Rejected in Findings 37, 38, 41. 106-107 Rejected in Findings 34-36. Rejected in Finding 38. Adopted, in part, in Finding 12. Rulings on Proposed Findings of Fact filed by St. Anthony's: Rejected as unnecessary. Adopted in Findings 12, 24. Adopted in Finding 12. 4-6. Adopted in Finding 9. Adopted in Findings 8, 9. Rejected as immaterial. Adopted in Findings 20, 44. 10-13. Adopted in Finding 2, but otherwise Rejected as unnecessary and cumulative. 14-15. Rejected as immaterial and unnecessary. Rejected in Finding 31. Adopted in Finding 7. 18-20. Adopted in Finding 40, but otherwise Rejected as 21-22. Adopted in Findings 7, 20. Adopted in Finding 2. Rejected in Finding 11. Rejected in Finding 11, and otherwise as immaterial. 26-27. Adopted and Rejected, in part, in Finding 11, and otherwise Rejected as immaterial. Adopted in Findings 4, 5. Rejected as irrelevant and immaterial. Rejected as irrelevant and not based on competent substantial evidence. Adopted in Finding 40. Rejected in Finding 20. Rejected in Finding 18, and otherwise as irrelevant. 34-36. Rejected in Findings 11, 20 and otherwise as irrelevant. 37-42. Rejected in Findings 28, 30, 31 and otherwise as not based on competent substantial evidence. 43-47. Rejected in Finding 28. Rejected as not based on competent substantial evidence. Adopted in Finding 17. Adopted in Findings 18, 20. Rejected in Finding 18. Rejected in Findings 18, 20. Adopted in Finding 40. Adopted in Finding 20. Rejected in Findings 13, 14, 16. Rejected in Findings 16, 27, 30, 31. Rejected as immaterial, unnecessary and cumulative. Adopted in Finding 11, but otherwise Rejected as irrelevant. Rejected in Findings 14, 30. Rejected in Findings 17, 18, 20. Rejected as immaterial and irrelevant. Rejected in Findings 27, 37, 40, 41. Rejected in Findings 11, 20 and otherwise as irrelevant and immaterial. 64-66. Rejected in Finding 17, and otherwise as irrelevant and not based on competent substantial evidence. 67-68. Adopted in Finding 24, but Rejected in Finding 27. Rejected in Finding 41. Adopted in Finding 36. 71-80. Adopted in Finding 44, but Rejected in Findings 43, 45 and otherwise as not based on competent substantial evidence. 81-85. Adopted in Finding 36, but Rejected in Findings 34, 35. 86. Adopted in Finding 7, but otherwise Rejected as unclear. 87-90. Rejected in Findings 17, 47-49, 51. Rejected in Findings 27, 51. Rejected in Findings 34, 35, 48. Adopted in Findings 1, 52. 94-99. Adopted in Finding 52, but otherwise Rejected as immaterial and not based on competent substantial evidence. Rulings on Proposed Findings of Fact filed by the Department: Adopted in Findings 12, 24. Adopted in Findings 8, 9. 3-6. Adopted in Finding 2. Rejected as unnecessary and immaterial. Rejected in Finding 31, and otherwise as not based on competent substantial evidence. 9-10. Adopted in Finding 5, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 31. 12-15. Adopted in Finding 4, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 28. Rejected in Finding 43. 18-19. Adopted in Finding 28. Adopted in Findings 7, 20, 52, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 1. Adopted in Finding 19. Adopted in Finding 7. Adopted in Finding 3, but otherwise Rejected as immaterial and unnecessary. Adopted in Findings 7, 30. Adopted in Finding 45. Adopted in Finding 50. Adopted in Finding 20, but otherwise Rejected as unnessary. Adopted in Findings 13, 30, 35. Adopted in Finding 40. Adopted in Finding 17. Adopted in Finding 18. Rejected as unnecessary and cumulative. Adopted in Finding 21, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding 17. Adopted in Finding 18. 37-38. Adopted in Finding 20. 39. Adopted in Findings 34, 35. 40-41. Adopted in Finding 30. 42. Adopted in Findings 45, 47-51. 43-44. Rejected as unnecessary and cumulative. Rulings on Proposed Findings of Fact filed by Plant: Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 4. Adopted in Finding 1. Adopted in Findings 16, 17. Adopted in Finding 11. Adopted in Findings 7, 30. Rejected as immaterial and unnecessary. Adopted in Finding 17. 11-12. Adopted in Finding 19. 13-14. Adotped in Findings 19, 20. 15-16. Adopted in Finding 1, but otherwise Rejected as immaterial and unnecessary. 17. Rejected as unnecessary. 18-19. Adopted in Findings 7, 30. Adopted in Finding 36. Adopted in Findings 35, 47, but otherwise Rejected as unnecessary. Adopted in Findings 25, 27 but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 34. Adopted in Findings 37, 38. 25-26. Adopted in Finding 46, but otherwise Rejected as unnecessary. 27. Rejected in Finding 42. 28-30. Adopted in Findings 45, 50. Ruling on Proposed Findings of Fact filed by Bayfront/Children's: Adopted in Finding 2. Adopted in Finding 9. Adopted in Finding 5. Rejected as unnecessary and immaterial. Adopted in Finding 5. Adopted in Finding 31, but otherwise Rejected as cumulative. Adopted in Finding 4. Rejected as immaterial and cumulative. Adopted in Findings 4, 49. 10-13. Adopted in Finding 4, but otherwise Rejected as unnecessary and cumulative. 14-17. Adopted in Finding 28, but otherwise Rejected as unnecessary and cumulative. 18-19. Rejected as immaterial and unnecessary. 20-28. Adopted in Findings 39, 44, but otherwise Rejected in Finding 43 and as immaterial and unnecessary. Adopted in Finding 7, but otherwise Rejected as unnecessary and immaterial. Adopted in Findings 11, 49, but otherwise Rejected as unnecessary. Adopted in Findings 7, 30, 40. Rejected as unnecessary and immaterial. Adopted in Finding 17. Adopted in Finding 18. Rejected as cumulative. Adopted in Finding 21, but otherwise Rejected as unnecessary. Adopted in Finding 17. Adopted in Findings 49, 51. 39-40. Adopted in Finding 18. 41-44. Adopted in Finding 20, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding 30, but otherwise Rejected as cumulative and unnecessary. Adopted in Finding 18, but otherwise Rejected as cumulative and unnecessary. Adopted in Findings 34, 35, 47, 48. Adopted in Finding 51. 49-51. Adopted in Findings 30, 31. Adopted in Findings 34, 35, 47, 48. Rejected as unnecessary and immaterial. Rejected as cumulative. COPIES FURNISHED: W. David Watkins, Esquire P. O. Box 6507 Tallahassee, FL 32314-6507 Ivan Wood, Esquire 1221 Lamar, Suite 1400 Four Houston Center Houston, TX 77010-3015 John H. Parker, Esquire 1200 Carnegie Building 133 Carnegie Way Atlanta, GA 30303 Guyte McCord, Esquire P. O. Box 82 Tallahassee, FL 32302 Cynthia Tunnicliff, Esquire P. O. Drawer 190 Tallahassee, FL 32302 Stephen A. Ecenia, Esquire P. O. Drawer 1838 Tallahassee, FL 32301 Darrell White, Esquire P. O. Box 2174 Tallahassee, FL 32316-2174 S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler, Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700 =================================================================
The Issue The issue for determination is whether an agency statement, and criteria used in support of the statement, constitute a rule under Subsection 120.52(16), Florida Statutes (1993), whether the statement and criteria have been adopted as a rule pursuant to Section 120.54, Florida Statutes (1993), and whether the statement and criteria violate Subsection 120.535(1), Florida Statutes (1993).
Findings Of Fact Sacred Heart initiated this proceeding by filing a Petition alleging that, in reviewing the Baptist application, AHCA developed a statement which violates the provisions of Section 120.535(1), Florida Statutes, because the statement should have been promulgated as a rule. The statement, as described by Sacred Heart, is as follows: The Agency may, in its discretion, approve a CON application to establish an adult open heart surgery program notwithstanding findings by it that: 1) Need is not indicated pursuant to Florida Administrative Code Rule 59C-1.033(7)(c), i.e., approval of a new program will reduce the 12 month total to an existing adult open heart surgery program in the district below 350 open heart surgery operations; (2) the applicable fixed need pool for adult open heart surgery programs in the District is zero; and, (3) the application failed to demonstrate "not normal" circumstances justifying the approval of its application. By contrast, Rule 59C-1.033(7)(c) establishes the formula for determining numeric need and also provides: (c) Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery opera- tions. . . . In reaching the preliminary decision to approve the Baptist application, various AHCA staff considered and discussed the facts presented, and the merits of the Baptist application. Dr. James T. Howell, the AHCA Division Director for Health Policy and Cost Containment, made the decision to approve the Baptist open heart surgery CON, because of Baptist's substantial, active, sophisticated cardiology program, its status as a high disproportionate share provider, its size, and because the results of the numeric need calculation and the formula for determining the reduced volume at existing providers were close to that required by rule. In February, 1993, after the numeric need publication and prior to the filing of the application at issue in this case, Dr. Howell, Albert Granger, and Robert Sharpe of AHCA met with the Mayor of Pensacola who is also Senior Vice President of Baptist Health Care and President of Baptist Health Care Foundation, and Baptist's Vice President for Planning who expressed frustration over the denials of its prior open heart surgery CON applications. Baptist submitted CON applications for open heart surgery in 1987, 1989, 1991, 1992, and 1993. Among the issues of concern was the status of Sacred Heart and West Florida Regional as grandfathered providers resulting in their having "a permanent franchise." Baptist representatives expressed concern about their ability ever to secure an open heart surgery program under the current rules. After that meeting, the rule amendment process was initiated to allow consideration of data reported up to 3 months, rather than 6 months prior to the publication of the fixed need pool. At the time the Baptist application for CON 7184 was reviewed, the amendment had not been adopted. No other change in the open heart surgery rule has been made subsequent to the review of the prior Baptist CON application. When the Baptist application for CON 7184 was filed initially, Laura MacLafferty was assigned as AHCA's primary reviewer. The state agency action report ("SAAR") represents her factual analysis of the application, although she did not and, routinely, does not make recommendations to issue or deny CONs. Ms. MacLafferty and her supervisor, Alberta Granger, are not aware of any AHCA non-rule policy to determine if a calculation of minimum volume is "close" enough to the 350 standard of the rule, nor any agency guidelines to determine when a hospital is "large" or "operates a large cardiology program" which should include open heart surgery. Subsequent to reviewing the Baptist application, in December 1993, Ms. MacLafferty reviewed another open heart surgery application from District 1, filed on behalf of Fort Walton Beach Medical Center. In her review of both the Baptist and Fort Walton applications, Ms. MacLafferty found no documentation that patients in District 1 experienced problems with access to open heart surgery services. Ms. MacLafferty submitted the draft SAAR to a supervisor, Alberta Granger. The draft SAAR was retrieved from her desk, prior to Ms. Granger's reviewing it. It was removed by Elizabeth Dudek, who heads AHCA's CON and health care board sections. Ms. Granger did not review the SAAR, which was prepared by Ms. MacLafferty. The final draft was returned to Ms. Granger for her to sign on July 7, 1993. This was the only time since Ms. Granger became supervisor in the CON office, that she has not reviewed and discussed with Ms. Dudek SAARs prepared by her staff. Ms. Granger had been the primary reviewer of Baptist's 1989 CON application. Ms. Granger and her supervisor, Ms. Dudek, are aware that in this case and in one or more of its prior CON open heart surgery applications, Baptist argued that its size, scope of cardiology services, and proposed fixed rate structure were reasons to approve its proposal. Ms. Granger stated, and Ms. Dudek confirmed, that the usual procedure was not followed in the review of this and one other application in this batching cycle. In this batching cycle, Dr. Howell requested that Mr. Sharpe, head of AHCA's planning section, also review those two open heart surgery applications. Ms. Dudek recalls, that prior to 1987, there were two batches of approximately 12 total applications in which agency personnel other than the CON staff was involved in the review of CON applications. In making his decision on the Baptist application, Dr. Howell consulted Ms. Dudek and Mr. Sharpe. Ms. Dudek, who heads the CON and health care board section, was not initially in favor of the approval of the Baptist application. Mr. Sharpe, head of the planning section, prepared a 9 page analysis of the pros and cons of the Baptist proposal. The Sharpe analysis demonstrates that an increase of 9 additional open heart surgeries during the 12 month reporting period, and the use of the more current data under the pending rule revision would have resulted in the need for one additional open heart surgery program in District 1. The memorandum also demonstrated that a lower future volume of open heart surgeries is projected by using the actual use rate, as required by Rule 59C-1.033(7)(6)2, rather than a trended use rate. If these adjustments to the data are made to achieve numeric need, then Baptist's application could be approved without a showing of not normal circumstances. The memorandum also reported the October 1991-September 1992 volumes of cardiac cath admissions at Baptist as 2677, at Sacred Heart as 2053, and at HCA West Florida as 1915, with the conclusion that Baptist "had the largest number of cardiac catheterization admissions of the three hospitals." The evidence in this proceeding is that the memorandum was in error. Actual volumes for October 1991-September 1992 were 912 at Baptist, not 2677. Dr. Howell found Baptist's proposal consistent with health care reform trends towards eliminating the need for CON regulation by enhancing market competitive forces, as a part of Florida's managed competition model, as explained in the Sharpe analysis. Similarly, Dr. Luke described the 1980's use of the CON process to control costs by limiting duplication and the rejection of institution specific planning as outdated. Dr. Luke also favors a model of competition for cost controls. At this time, however, these positions have not been adopted in Florida Statutes and rules. The 1994 Florida Health Security Plan recommends the continuation of CON review of all tertiary services, including open heart surgery. That plan was submitted as a part of AHCA's 1994 legislative proposals. Ms. Dudek described traditional "not normal" circumstances as issues related to financial, geographic, or programmatic access to the proposed service by potential patients, and not facility specific concerns. Facility specific concerns, in this case, include Baptist's attempt to retain cardiologists who wish to perform procedures not approved at Baptist and to improve its position to compete for managed care contracts. Baptist and AHCA contend that the intent to approve the application is predicated upon the exercise of AHCA's discretion to determine whether the circumstances justify a departure from the "normal" operation of the rule methodologies. As stated by Baptist and AHCA, this position is not inconsistent with the wording of the rule, but reflects a disagreement with Sacred Heart over what constitutes not normal circumstances. AHCA interprets Rule 59C-1.033 as giving the agency flexibility, in the exercise of its professional judgment, to approve open heart surgery applications when the rule methodology does not result in a numeric need for a new program, and/or the calculation intended to assure the 350 minimum procedures for established providers yields a lower number. Both sections of the open heart surgery rule have been upheld with the not normal circumstances provisions included. St. Mary's Hospital v. HRS, 13 FALR 2096 (F.O. 5/1/91). In the review of certificate of need applications, the weight to be accorded a particular statutory or rule criterion varies based upon the facts and circumstances of each case. If an earlier application is denied, and a new one submitted, the weight to be afforded certain criterion in the review of the more recent application may be different if the facts and circumstances are different. It is not consistent, however, for AHCA to treat the same facts differently, or to reach different conclusions of law on the same facts. In 1987, the agency responsible for CON regulation, denied a Baptist application, in the absence of numeric need, for the express purpose of protecting the 350 volumes at existing providers. In the preceding 12 months, there were 45 emergency angioplasties performed at Baptist, Sacred Heart's open heart surgery volume was 291, and West Florida Regional's was 344. The Baptist application was denied in a SAAR, which is replete with the references to the relationship of volume to quality, and which concludes: There is insufficient need for a third open heart surgery program in District One. It would lower the average number of procedures below the 350 recommended in the Rule and it would have a negative impact on existing providers. SAAR, CON Action No. 5120 at p.17. In early 1990, another Baptist application for an open heart surgery CON was denied. Using the preferences from the 1989 state health plan, the agency found that Baptist was (1) in a large county with a higher than average elderly population, (2) a disproportionate share provider, which would serve patients regardless of their ability to pay, (3) large enough to propose a fixed price structure for 3 years, and (4) capable of providing all the supplementary procedures for a complete cardiac program. Baptist was also found to have met the quality of care standard and to have the resources to implement the program. In addition, the fixed rate proposal was viewed as enhancing competition. The agency recommended denial, after finding no need for the project, no enhanced access or quality of care benefits and that existing providers volumes would fall below 350. The 1989 state health plan is also applicable to the review of CON 7184. Using the same 1989 preferences, the findings on the preferences in this case are essentially the same, except that the elderly population in Escambia is now below the state-wide average. See, DOAH Cases Nos. 93-4886 and 93-4887, Findings of Fact 53-60 (R.O. 11/18/94). By 1992, the use rate indicated a need for 2.48 open heart surgery programs in District One. Baptist asserted as "not normal" circumstances: (1) scheduling difficulties at Sacred Heart, (2) its status as a Level II trauma center, and (3) a fixed price structure at 85 percent of the average rate per DRG for the two existing providers. In its analysis of Baptist's asserted "nor normal" circumstances, the agency noted that "[a]pparently, Baptist has made no attempt to refer cases to West Florida Regional." The agency rejected the assumption that a trauma center has a need for open heart surgery services. The agency treated the proposed pricing structure as one reason for concluding that Baptist's proposed open heart program would reduce patient volumes at Sacred Heart and West Florida Regional. See, SAAR CON Action No. 6774, pp. 3-5. In this case, AHCA made a mistake of fact and failed to follow its precedents in determining not normal circumstances. See, Finding of Facts 16 and 17, supra. Due to the regulatory scheme which establishes the certificate of need review process and the criteria in statutes and rules which have be weighed and balanced, it is impossible to have a rule which would describe every set of circumstances which would justify departure from the "normal" operation of a rule methodology. The agency has, however, described the conditions which should be alleviated by the approval of a CON under not normal circumstances. In the 1987 CON 5120 SAAR, the agency found: There is no accessibility problem, geographic, programmatic or financial, noted by the applicant or the Local Health Council, for patients in District One for open heart surgery. SAAR, CON Action No. 5120 at p.6. The "not normal" circumstance claimed by Baptist do not involve access problems for District 1 residents and have been rejected as such by the agency in the past.
The Issue Whether the adult open heart surgery rule in effect at the time the certificate of need (CON) applications were filed, and until January 24, 2002, or the rule as amended on that date is applicable to this case. Which, if any, of the applications filed by Martin Memorial Medical Center, Inc. (Martin Memorial); Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and Boca Raton Community Hospital, Inc. (BRCH) meet the requirements for a CON to establish an adult open heart surgery program in Agency for Health Care Administration (AHCA) Health Planning District 9, for Okeechobee, Indian River, St. Lucie, Martin, and Palm Beach Counties, Florida.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the agency which administers the certificate of need (CON) program for health care facilities and programs in Florida. It is also the designated state health planning agency. See Subsection 408.034(1), Florida Statutes. For health planning purposes, AHCA District 9 includes Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. See Subsection 408.032(5), Florida Statutes. AHCA published a fixed need pool of zero for additional open heart surgery programs in District 9, for the January 2002, planning horizon. The mathematical need formula in the rule, using the use rate for open heart surgery procedures in the district as applied to the projected population growth, indicated a gross numeric need for 7.9 programs in District 9. After rounding off the decimal and subtracting four, for the number of existing District 9 open heart surgery programs, the formula showed a numerical need for four additional ones. The need number defaulted to zero, however, because one of the existing programs, at Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center (Lawnwood), had not reached the required minimum of 350 surgeries a year, or 29 cases a month for 12 months prior to the quarter in which need was published. Having initiated services in March 1999, the Lawnwood program had not been operational for 12 months at the time the applications were filed in October 1999. The other existing providers of adult open heart services in District 9, in addition to Lawnwood, are Palm Beach Gardens Community Hospital, Inc., d/b/a Palm Beach Gardens Medical Center (PBGMC); Columbia/JFK Medical Center Limited Partnership, d/b/a JFK Medical Center (JFK); and Tenet Healthsystem Hospitals, Inc., d/b/a Delray Medical Center (Delray). All are intervening parties to this proceeding. In the Pre-Hearing Stipulation, the parties agreed that the Intervenors have standing to participate in this proceeding. Despite the publication of zero numeric need, five hospitals in District 9 applied for CONs to establish new adult open heart programs asserting need based on not normal circumstances. Three of those applications are at issue in this case: CON Number 9249 filed by Martin Memorial Medical Center, Inc. (Martin Memorial); CON Number 9250 by Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and CON Number 9248 by Boca Raton Community Hospital, Inc. (BRCH). AHCA initially reviewed and denied all of the applications. After changing its position before the final hearing, AHCA supports the approval of the applications filed by Martin Memorial and BRCH. Martin Memorial Martin Memorial, the only hospital in Martin County, and the only party/applicant not located in Palm Beach County, operates two facilities, a total of 336 beds, on two separate campuses under a single license. The larger hospital, in Stuart, has 236 beds and is located approximately 20 miles south of Lawnwood and 30 miles north of PBGMC. Martin Memorial owns and maintains, at the hospital, its own ambulance service used exclusively for hospital-to-hospital transfers. The drive from Martin Memorial to Lawnwood averages 38 minutes. The drive time to PBGMC averages 48 minutes. By helicopter, it takes 11 or 12 minutes to get from Martin Memorial to PBGMC. The remaining 100 Martin Memorial Hospital beds are located on its southern campus, approximately six miles south of the Stuart facility. Martin Memorial is a private not-for-profit hospital, established in 1939. The parent corporation also operates an ambulatory care center, physician group, billing and collection company, and a foundation. Martin Memorial is applying to operate an open heart program at its Stuart location, where it currently offers cardiology, hematology, nephrology, pulmonary, infectious disease, pathology, blood bank, anesthesiology, diagnostic nuclear medicine, and intensive care services. Martin Memorial has a 25-bed telemetry unit, a 14-bed medical intensive care unit, a nine-bed surgical intensive care unit, and a 22-bed progressive care unit, with an identically equipped 16-bed overflow unit used only for high seasonal occupancy, from approximately December to April. If its CON is approved, Martin Memorial will dedicate four surgical intensive care unit beds and six progressive care beds for post-open heart surgery patients. Martin Memorial agreed to condition its CON on the provision of 2.4% of the project's gross revenues for charity care and 2% for Medicaid. The total estimated project cost is $6.5 million. Martin Memorial intends to affiliate with the University of Florida and its teaching facility, Shands Hospital, to assist in establishing the program and training staff. The cardiovascular surgeon is expected to be a full-time faculty member who will live and work in Martin County. Although initially opposed, AHCA now supports Martin Memorial’s application primarily because (1) it has the largest cardiac catheterization (cath) program at any hospital in this state which does not also provide open heart services; (2) it has a medium size and growing Medicare population, which constitutes the age group most likely to require open heart surgery and related services; (3) Martin County residents now must receive open heart and related services at hospitals outside Martin County, primarily in areas ranging from Palm Beach County south to Dade County; (4) emergency heart attack patients who present at Martin Memorial-Stuart could receive primary angioplasties without transfer; and (5) it is a not-for-profit hospital, while all of the existing open heart providers in the District are for- profit corporate subsidiaries. Of the applicants, Martin Memorial is also located the greatest distance from the existing providers. Bethesda Memorial Bethesda has 362 licensed beds located in Boynton Beach. JFK is nine miles north or an average drive of 18 minutes from Bethesda. Delray is nine miles south or an average drive of 17 minutes from Bethesda. Established in February 1959, Bethesda is a not-for- profit subsidiary of Bethesda Health Care Systems, Inc., which also operates some for-profit subsidiaries, including Bethesda Medical/Surgical Specialists, Bethesda Management Services, and Bethesda Comprehensive Cancer Institute. Bethesda is a disproportionate share provider of Medicaid and Medicare services. The services currently available at Bethesda include obstetrics, Level II and III neonatal intensive care, cardiology, orthopedics, pediatrics, neurological and stroke care, peripheral vascular surgery, wound care, pulmonary and infectious disease care. Bethesda recently eliminated a 20-bed unit for adult psychiatric services, and a 20-bed skilled nursing unit. Currently, at Bethesda, the sickest patients are placed in a 10-bed critical care unit. The hospital also operates a 12- bed surgical intensive care unit, an eight-bed medical intensive care unit, and 30 and 25-bed telemetry units. Bethesda was planning to open a 20-bed extension to the telemetry unit, all in private rooms, in January 2002. If an open heart surgery program is established, Bethesda, will add an eight-bed cardiovascular intensive care unit to care post-operatively for the patients. Bethesda offered to condition its CON on the provision of 3% of total open heart surgeries to Medicaid and 3% of total open heart surgeries to indigent patients. Bethesda's estimated total project cost is $4 million, $1.7 million for equipment, and $2.24 for construction. Bethesda will receive assistance from Orlando Regional Medical Center in training personnel and developing protocols for an open heart program. At Orlando Regional, a statutory teaching hospital, the number of open heart cases ranges from 1,300 to 1,600 a year. Bethesda has a contract with a physicians' group to provide a board-certified cardiovascular surgeon to serve as medical director for the open heart program. AHCA’s position is that the Bethesda application is "approvable" but, of the Palm Beach County applicants, less desirable than that of BRCH. By contrast, Bethesda's experts emphasized (1) the absence of any overlap with the Lawnwood market; (2) the greater need for a new program, based on the volume of cases, in Palm Beach County than elsewhere in the District; (3) the size, growth, and age of the population within Bethesda's market area, and (4) the ability of Bethesda to enhance access for underserved groups, particularly Medicaid patients. Boca Raton Community Hospital BRCH is licensed for 394 beds. Located in southern Palm Beach County, close to the Broward County line, BRCH is from eight to nine miles south of Delray and approximately 15 miles north of North Ridge Medical Center (North Ridge), in adjacent Broward County. On average, the drive from BRCH to Delray takes 20 minutes. The drive from BRCH to North Ridge takes about 25 minutes. Founded in the late 1960's, BRCH operates as a not-for- profit corporation. BRCH has a staff of 750 physicians and 1,600 employees. Services at BRCH include cardiology, a 10-bed Level II neonatal intensive care unit, hematology, nephrology, pulmonology, radiology, nuclear medicine, and neurology. If approved and issued a CON for adult open heart surgery, BRCH will build a new facility for the program, including two new cath labs, an electrophysiology lab and 12 intensive care beds. In the CON, the estimated construction cost was $16.5 million and the estimated equipment cost was $2.7 million of the $20 million estimated for the total project. BRCH agreed to having conditions on its CON (1) to provide 5% of open heart cases in year two to uninsured patients, (2) to establish an outreach program to increase the utilization of open heart services among the uninsured, and (3) to relinquish the CON if it fails to perform at least 350 open heart surgery procedures a year in any two consecutive years after the end of the second year of operations. AHCA determined that it should change its initial position opposing the approval of the BRCH application to one of approval because of (1) the large Medicare population in the service area; (2) the volume of emergency room heart attack patients; (3) the district out-migration for services primarily to North Ridge; (4) the large, well-developed interventional cardiology program; and (5) the not-for-profit organizational structure. When AHCA decided to support the approval of the BRCH application, it did so, in part, based on erroneous data. The cath lab volume was assumed to be approximately 1,800 caths a year, as compared to the actual volume of 667 caths for the year ending March 2001. Having considered the corrected data, AHCA’s expert described BRCH’s application as significantly less compelling, but still preferable to that of Bethesda. BRCH is the largest hospital in number of beds in Florida which does not have an open heart surgery program. AHCA also responded favorably to identified "cultural" access issues, described as underservice to demographic groups, based on race, gender, and class. BRCH presented a plan to equip a mobile unit to provide diagnostic screenings and primary care in underserved areas. Pre-Hearing Stipulations The parties stipulated that all of the applications met the statutory requirements concerning the application content and filing procedures of Sections 408.037 and 408.039, Florida Statutes (1999), and Rule 59C-1.033, Florida Administrative Code. Martin Memorial, Bethesda, and BRCH have a history of providing quality care. See Subsection 408.035(1)(c), Florida Statutes (1999). There are no existing outpatient, ambulatory or home care services which can be used as alternatives to inpatient adult open heart and angioplasty services. See Subsection 408.035(1)(d), Florida Statutes (1999). Martin Memorial and Bethesda have sufficient available funds for capital and operating expenses required for their proposed open heart surgery programs. See Subsection 408.035(1)(h), Florida Statutes (1999). Martin Memorial complied with the requirements related to costs and methods of construction, and equipment for the proposed project. Except for the contention that it omitted $1,687,180 in fixed equipment costs and that the proposed construction project is excessively large and expensive, the parties stipulated that BRCH reasonably estimated construction and equipment costs, including costs and methods of energy provision. See Subsection 408.035(1)(m), Florida Statutes (1999). The parties agreed that Subsections 408.035(1)(p), and 408.035(2)(e), Florida Statutes, related to nursing home beds, are not at issue at in this proceeding. If Bethesda, BRCH, and Martin Memorial can recruit the necessary, competent nursing and surgical staff, they will meet the requirements of Rule 59C-1.033(3), (4)(b), (4)(c), and (5)(c), Florida Administrative Code. Adult open heart surgery services are currently available to District 9 residents within the two-hour travel standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Bethesda, BRCH, and Martin Memorial are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), assuring quality as required by Rule 59C-1.033(5)(a), Florida Administrative Code. The parties agreed that if Bethesda, BRCH, and Martin Memorial can recruit the necessary nursing and surgical personnel, their programs would meet the requirements of Rule 59C-1.033(4)(b), (4)(c), (5)(b), and (5)(c), Florida Administrative Code, except that JFK and Lawnwood did not agree that the applicants satisfied the requirements related to cardiovascular surgeons. Martin Memorial will be able to obtain perfusionist services, as required by Rule 59C-1.033(5)(b)5, Florida Administrative Code. Bethesda and BRCH projected reasonable staffing patterns, in their CON schedules 6A, given projected census levels, although the ability to recruit staff and adequacy of projected salaries are at issue. The rule criteria related to pediatric open heart surgery are not applicable to this proceeding. Disputed Statutory and Rule Criteria The following statutory criteria and applicable in this case: Subsections 408.035(1)(a), (b), (c) - for comparison; (e), (f), (g), (h) - related to funding for BRCH, and related to staff recruitment and salaries; (i), (j), (k), (l), (m) - for Bethesda, and related to the size, scope, and fixed equipment cost for BRCH, (n), and (o); and Subsections 408.035(2)(a), (b), (c), and (d), Florida Statutes. The criteria in Rules 59C-1.030, and of Rule 59C-1.033(5)(b) - related to staffing, except as stipulated - are at issue. The parties have also raised the issue of whether AHCA is consistent in applying its agency rules related to open heart cases. The District 9 health plan contains two preferences for open heart applicant hospitals, the first for hospitals with established cardiac cath programs, the second for applicants with a documented commitment to serve patients regardless of their ability to pay or county of residence. All of the applicants have established diagnostic cardiac cath programs and related cardiology services. During the cardiac cath procedure, a catheter is inserted into a cardiac chamber to diagnose heart disease. During a therapeutic cardiac cath procedure, or angioplasty, the catheter with a balloon-tip is inserted into a coronary artery and inflated to open blockages. The latter requires open heart surgery back-up in case a vessel is ruptured and thus, an open heart surgery certificate of need. Martin Memorial operates the largest cardiac cath program at a hospital in Florida which does not also offer open heart surgery. At Martin Memorial, 1,885 inpatient and outpatient caths were performed in 1999, 1,770 in 2000, and 1,286 in the first nine months of 2001. Cardiac caths are only performed at the Stuart facility. Non-invasive cardiology services began in the 1970's at Martin Memorial. A CON to establish the first cardiac cath lab was issued in 1989, and a second, CON-exempt cath lab opened in 1998. Martin Memorial also offers pacemaker implants and peripheral angioplasties to eliminate clots in other areas of the body, for example, in the legs, electrocardiography, echocardiography, stress tests, and cardiac rehabilitation. Neither electrophysiology studies nor defibrillator implants are performed at Martin Memorial. Martin Memorial has an open staff of cardiologists, meaning that its cath lab is available for use by any of the invasive cardiologists on staff. The facilities include two cardiac cath procedure rooms, a control room for the laboratory, a five-bed holding room and a two-bay inpatient recovery area. Bethesda also has an established cardiac cath program with an open staff. Seventeen cathing physicians were listed on the Bethesda roster for the month of March 2001. Of those, five were also the only cardiologists allowed to perform caths at the closed lab at JFK. Some of these cardiologists are permitted to perform emergency angioplasties at Bethesda. Bethesda has, at least, two cardiovascular surgeons on staff. From 1995 to 1998, the volume of cardiac caths at Bethesda increased over 60%, from 133 to 213. For the 12 months ending August 31, 2000, Bethesda cardiologists performed 428 caths. For the 12 months ending September 30, 2001, the cath volume was 506 cases. Currently, cath procedures at Bethesda are performed in one lab with recently upgraded digital equipment. As part of the planned expansion of the hospital, the existing lab will be relocated and a second one added. Permanent pacemakers are implanted at Bethesda, but internal cardioverter defibrillator procedures, electrophysiology, and table studies are not performed. Cardiac cath services, at BRCH, started in 1987. Two cath labs with state-of-the-art digital equipment are used. In the 12 months ending March 31, 2001, there were 667 inpatient and outpatient caths performed at BRCH. Currently, cardiac services at BRCH are the largest source of admissions, approximately 20% of total admissions. The available services include echocardiography, tilt table studies, electrocardiography, stress tests, cardiac wellness and rehabilitation programs, electrophysiology studies, and internal cardioverter defibrillator implants. Each year, one or two "rescue" or salvage angioplasties are performed in extreme, life- threatening circumstances at BRCH. Forty-nine cardiologists are on the closed "invitation-only" medical staff at BRCH, 47 are board-certified and approximately half are invasive cardiologists. The staff also includes seven electrophysiologists, five of whom are board-certified, and seven thoracic surgeons, five of whom perform open heart surgeries at other hospitals. For the first two years of operating an open heart program, BRCH intends to have a closed program, by virtue of an exclusive contract with a single group of cardiovascular surgeons. Subsection 408.035(1)(a) - district health plan preference for serving patients regardless of county of residence or ability to pay; and Subsection 408.035 (1)(n) - history of and proposed services to Medicaid and indigent patients Martin Memorial, Bethesda, and BRCH will serve patients regardless of residence and, they contend, will enhance access for Medicaid, indigent, charity and/or self-pay patients. Each applicant has offered to care for patients in some of these categories as a condition for CON approval. The proposed conditions, are, for Martin Memorial, 2.4% of total project revenues for charity and 2% of admissions for Medicaid patients. Martin Memorial provides a number of services without charge, including follow-up education to former inpatients to assist them in managing diseases such as asthma, diabetes, congestive heart failure and chronic obstructive pulmonary disease. Obstetric care includes one free home visit by a nurse/midwife to check the health of newborns and mothers. Office space is provided for a free clinic for the "working poor" of Martin County, which receives approximately 10,000 annual visits from a patient base of about 2,000 patients. Over $100,000 a year is provided for an indigent pharmacy program. Combining the outreach services with other charitable contributions, including charity care, Martin Memorial valued "community benefits" at $24 million in 1998, $30.5 million in 2000. When Martin Memorial received an inpatient cardiac cath CON, it agreed to provide a minimum of 2.5% of total cardiac caths to Medicaid patients and 3% to charity care. Due to changes in state regulation, Medicaid and charity care for cardiac caths no longer needs to be reported to the state. That data, representing as it does, the base of patients from which open heart cases will come, is useful in evaluating Martin Memorial's projections. In 1999, seven-tenths of one percent of the patients in Martin Memorial's cath lab were Medicaid and four-tenths of one percent were indigent. In 2000, seven-tenths of one percent were Medicaid and two-tenths of one percent were indigent. Martin's cath lab data indicates that its projected open heart levels of Medicaid and indigent care are not attainable. Bethesda offered a commitment to provide 3% of total open heart cases for Medicaid patients and 3% to indigent patients annually. Historically, Bethesda has cared for a relatively large number of Medicaid, minority, and indigent patients. It is recognized as a disproportionate share provider of Medicaid care under the Florida program and of Medicare under the Federal program. The Palm Beach County Health Department provides approximately $1 million a year to Bethesda for charity care. As a percentage of gross revenue, Bethesda provided 8.8% Medicaid and 3.46% charity care in 1999. Approximately 54% of the charity care is attributable to obstetrics and pediatric services. Bethesda's younger patient base and the number of adult open heart Medicaid cases from Bethesda's service area, 2.4% or 7 cases in the year ending September 2000, raise the issue of its ability to generate sufficient cases to meet the proposed commitment. In 1995, 20 of the 36 total resident Medicaid open heart surgeries were performed at the three providers in District 9, Delray, JFK, and PBGMC. In 1999, when Lawnwood began open heart care, the Medicaid volume at the District providers increased to 51 of the 64 total Medicaid resident cases. In 2000, the four programs treated a net number of 56 of 60 resident Medicaid cases. A program at Bethesda also could reasonably be expected to increase the number of Medicaid and charity cases performed in the District, in volume and by reversing outmigration, but the patients must come from a base of patients with cardiac diagnoses. For the year ending September 2000, in Bethesda's service area, 4.9% of cardiac patients were Medicaid and charity patients combined, 1.6% Medicaid and 3.3% charity. Assuming that the same proportions could be maintained for open heart surgeries, Bethesda cannot achieve 3% Medicaid and, although unlikely, has a chance of reaching 3% charity only in the best case scenario. If approved, BRCH commits to providing 5% of total OHS in the second year to uninsured patients and to establish an outreach program to increase utilization by uninsured patients. BRCH has, over the past three and a half years, established outreach programs, which include having nurses and social workers in schools, providing free physical examinations to children who do not have primary care doctors, and performing echocardiograms for high school athletes, equipping police and fire rescue units with portable defibrillators, and operating mobile units for mammography screenings and vans to transport patients to and from their homes for hospital care. A free dental screening program is operated in conjunction with Nova Southeastern University. BRCH also operates a family medical center approximately seven miles west of the hospital. Recently, the Foundation for BRCH purchased, for $1.8 million, a large bus to equip as a mobile clinic. The mobile diagnostic unit is intended to reach uninsured patients to provide primary care and ultimately open heart surgery care to those who might not otherwise be screened, diagnosed and referred. No information was available and no decisions had been made about the staff and equipment, or service areas for use of the van. Because of the lack of more specific plans, it is impossible to determine whether the outreach effort has any reasonable prospects for success in meeting any unmet need. For the years ending June 1996, 1997, and 1998, BRCH provided six-tenths of one percent, and five-tenths of one percent of gross revenues for charity care. In 2000, BRCH provided one-half of one percent for charity care and, in 2001, twenty-seventh hundreds of a percent. The historical levels do not support the proposed commitment of 5% of open heart surgeries for uninsured patients in the second year of the program. Although worded to apply only to the second year, BRCH's President and CEO testified concerning the condition without limiting it to the second year. In Boca Raton Community Hospital, Inc.'s Proposed Recommended Order (Reformatted), filed on July 5, 2002, the condition is described as follows: 49. As conditions of CON approval, Boca will, beginning in the second year of operation of the program and continuing thereafter, provide a minimum of five percent each year of OHS cases to uninsured patients, and establish an outreach program to locate and provide OHS and cardiology services to uninsured patients in Palm Beach County. (Boca Ex. 3 at Schedule C; Pierce, 1899). Boca reasonably decided to focus on the needs of the uninsured, rather than Medicaid patients, because of the low volume of Medicaid patients who require OHS services. (Pierce, 1902). At BRCH, Medicaid and Medicaid health maintenance organization (HMO) care as a percent of total ranged from 1.3% to 1.4% from 1996 through 1998. BRCH projected serving 1.2% to 1.3% open heart Medicaid cases, or four patients in the first year and 1.5% to 1.6%, or seven Medicaid patients in the second year. The projections are consistent with its history although BRCH offered no Medicaid condition. Bethesda and BRCH also claimed not normal circumstances exist in District 9 due to the disparity in open heart care for uninsured and Medicaid patients as compared to the insured. For uninsured residents of Palm Beach County during the twelve months ending June 30, 2000, the use rate was 4.7 per 1000, as compared to 21.8 per 1,000 for insured open heart patients. For angioplasty patients, the insured use rate was 38.2, but the uninsured rate was only 8.9. Assuming that the use rates should not be so different, the discrepancy in access for the uninsured is significant and unfortunate but was not shown to be a not normal circumstance in the health care delivery system. The applicants' proposals, unlikely as they are to meet even the proposed conditions, are inadequate to increase access materially for the uninsured. Comparisons of the level of Medicaid provided statewide to that provided in District 9 without consideration of other factors, including age and income levels, were not useful in analyzing access. Assertions that any discrepancy in care for potential Medicaid open heart patients constitutes a not normal circumstance are not substantiated by this evidence. Subsection 408.035(1)(b) and (2)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing facilities in District Nine In 2006, the population in District 9 is projected to reach 1.2 million people, of which approximately 992,378 will reside in Palm Beach County, 119,573 in Martin County, 181,406 in St. Lucie County, 106,790 in Indian River County, and 31,140 in Okeechobee County. In District 9, throughout Florida, and in the United States, heart disease is the leading cause of death. In 2000, heart disease was the cause in 522 of 1,560 total deaths in Martin County, and 4,337 of 12,795 total deaths in Palm Beach County. From 1995 to 2000, the number of Florida residents having open heart surgeries increased 15.1%. During the same period of time, the number of District 9 resident cases, regardless of where the surgeries were performed, increased from 3,119, to 3,938, an increase of 755 OHS cases, or 24%. Palm Beach County residents represented 427 of the 755 increase, and 2,633 of the total of 3,938 resident cases. The distribution of the remaining 1,305 District resident cases by county was as follows: 597 from St. Lucie, 339 from Martin, 269 from Indian River, and 100 from Okeechobee County. More recent data, however, indicates trends towards a leveling off or even decline in the number, but an increase in the complexity of open heart procedures. Some experts describe open heart volumes having reached a "plateau" in the United States, in Florida, and in District 9. Last year, the number of open heart surgeries in the United States declined 22%. The statewide volume of cases was 32,199 in 1996, 33,507 in 1997, 34,013 in 1998, and 32,097 in 1999. At District 9 hospitals, open heart volumes were 1,670 in 1994, 1,841 in 1995, 2,152 in 1996, 2,407 in 1997, 2,527 in 1998, 2,656 in 1999, and 2,650 in 2000. Cardiac Catheterizations and Angioplasties The major reason given for the stable and declining open heart volume is the increase in the utilization of angioplasty, or therapeutic cardiac cathing, an alternative which costs less and is less invasive. Angioplasty procedures increased from 1995-2000, by over 2,500 cases for District 9 residents, and over 2,600 cases in District 9 hospitals, from 2,104 cases in 1995, to 4,714 in 2000. Among the procedures generally referred to as angioplasties are percutaneous transluminal angioplasty (PTCA) or balloon angioplasty, percutaneous transluminal coronary rotational atherectomy (PTCRA), and the insertion of scaffolding- like devices, called stents, to prevent re-occlusion of coronary arteries. In Florida, diagnostic cardiac caths may be performed at facilities which do not have angioplasty and open heart surgery programs, but angioplasties must be performed, except in rare emergency circumstances, only at hospitals which are licensed to provide open heart services, in case back-up surgery is needed. Lawnwood Regional Lawnwood is located in Fort Pierce, in St. Lucie County, which is second to Palm Beach County in population and in District 9 resident open heart cases. Lawnwood is owned by a subsidiary of HCA, the Hospital Corporation of America, formerly known as Columbia. HCA is a for-profit, investor-owned corporation which owns and operates approximately 200 hospitals in the United States. A $17 million addition at Lawnwood, designed for the open heart program, includes two dedicated operating rooms and a 12-bed intensive care unit. The Lawnwood program has a full-time staff of two surgeons and one additional surgeon who divides his time between Lawnwood and PBGMC. Lawnwood, having opened its program early in 1999, is not considered a mature program. In addition, Lawnwood has had some difficulties with accreditation and disputes with cardiologists. Lawnwood reported one open heart case in the first quarter of 1999, and 143 or 144 for the year. In calendar year 2000, between 330 to 340 open heart surgeries were performed at Lawnwood. In calendar year 2001, the volume was between 333 and 336 cases. Depending on the source of the data, the volume at Lawnwood was reported to be as high as 364 for the twelve months ending September 30, 2000; in a range from 336 to 396 for the twelve months ending March 31, 2001; and up to 412 for the twelve months ending July 2001. The variances result from seasonal patient utilization, and from AHCA’s use, for the fixed need pool, of the most current available data which it receives from the various local health councils. That data is submitted on handwritten or typed forms which are not uniform across districts. Subsequently, the hospitals provide electronic data tapes directly to AHCA, which if properly decoded, should provide more accurate statistics. While there may be variances either way, in this case, the lower volumes for Lawnwood were derived from the more reliable electronic tapes. Based on that data and the testimony of the cardiac surgeon who is the director of the program at Lawnwood, the annual volume of open heart surgeries was approximately 330 in 2000, and 348 in 2001. The new rule, adopted on January 24, 2002, reduces the minimum number required for existing programs to 300 a year, or 25 adult operations a month. The number of angioplasties performed at Lawnwood increased from 465 in 1999, to 845 in 2000. Palm Beach Gardens Medical Center South of the four relatively small northern counties in District 9, PBGMC has 204 beds located in northern Palm Beach County. It is a subsidiary of Tenet Healthsystem Hospitals (Tenet). Adult open heart surgery has been available at PBGMC since 1983. The surgeries are typically performed in two or three of the 11 operating rooms, although five are equipped to handle open heart cases. PBGMC has 94 telemetry beds, and 32 intensive care beds, eight designated for cardiovascular intensive care patients. PBGMC has four cardiac cath labs and separate electrophysiology labs. The medical staff of approximately 400 physicians includes about 200 cardiologists, 24 invasive cardiologists and seven cardiac surgeons. The number of open heart cases at PBGMC was 700 in 1994, 801 in 1995, 913 in 1996, 1,028 in 1997, 1,045 in 1998, 1,124 in 1999, 940 in 2000, and 871 in 2001. The number of angioplasties increased from 552 in 1994, to 1,019 in 1997, to 1,431 in 2000. JFK JFK, which has 387 beds, is located roughly in the center of Palm Beach County, in the City of Lake Worth. Like Lawnwood, JFK is an HCA's subsidiary, having been purchased by that corporation in 1995. Open heart services and cardiac cath services began simultaneously at JFK in 1987. JFK has three open heart operating rooms. JFK, after a major expansion, has a separate entrance to its three cardiac cath laboratories, a dedicated electrophysiology suite, for treatment of arrhythmias, and 17- patient holding area. JFK provides all cardiac services, except heart transplants. The average age of patients at JFK is 74 years old. The medical staff of 504 board-certified or board- eligible physicians includes 25 cardiologists, five invasive cardiologists, two electrophysiologists, and three cardiac surgeons. JFK has recently accepted applications from but not yet extended privileges to three additional cardiovascular surgeons. Volumes of open heart cases at JFK were, with some variances depending on the data source, approximately 428 in 1994, 434 in 1995, 630 in 1996, 674 in 1997, 711 in 1998, 613 in 1999, 621 in 2000, and 610 in 2001. The number of angioplasties ranged from 709 in 1994, to 1,152 in 1997, to 1,281 in 2000. Delray Delray, with 343 beds, in Delray Beach, is the trauma center for southern Palm Beach County. Open heart care began at Delray in 1986. The surgeries are currently performed in three of ten, but soon to be a total of twelve operating rooms with shelled-in spaces set aside for two more. Patients recover in a 15-bed surgical intensive care unit. The Delray medical staff of over 600 physicians has close to 60 cardiologists, including 15 invasive cardiologists and six cardiovascular surgeons. Delray has three cath lab rooms and seven bays for holding patients pre- and post-procedure. For the years 1994 through 2001, open heart volumes at Delray were 542, 606, 609, 705, 771, 758, 759, and 738, respectively. During the same period of time, the annual number of angioplasty procedures increased from 591 in 1994, to 810 in 1997, to 929 in 2000. The existing CON-planned and approved programs in the District are well distributed geographically and allocated appropriately based on population. Considering the declining utilization, the like and existing open heart surgery programs are available and accessible. Subsection 408.035(1)(f) - services that are not reasonably and economically accessible in adjoining areas Over 30% of District 9 resident open heart cases are performed in other districts, the vast majority at North Ridge in District 10 (Broward County). The district outmigration for a service when excessive or difficult can indicate access or quality concerns and constitute a not normal circumstance for approval of a new program. In this case, with adequate available services in District 9 and its close proximity, the outmigration to North Ridge, which is 15 miles or 25 minutes from BRCH is not a not normal circumstance. There is also substantial overlap in the medical staff at both hospitals which allows continuity of care for patients despite transfers. The argument that families, particularly an older spouse, will necessarily have to drive farther to visit the patient is rejected, since that depends on where in the district the person resides not on the distances between hospitals. North Ridge has 391 licensed beds, with 260 to 270 acute care beds in use. At North Ridge, cardiovascular surgeons usually use three OHS operating rooms, although a fourth is also available. Open heart patients recover in a six-bed cardiovascular intensive care unit. The reported volumes of open hearts at North Ridge have been from 1994 through 2001, respectively, 864, 935, 893, 826, 882, 890, 905, and 795. The total number of open heart cases in District 10 has been declining since 1998. The volume of angioplasties at North Ridge increased from 793 in 1994, to 829 in 1997, to 1,155 in 2000, consistent with a rising District 10 use rate from 2.95 to 3.66 over the same period of time. The staff at North Ridge includes 107 cardiologists, 27 interventional cardiologists, and 17 cardiovascular surgeons, many of whom also regularly perform open heart surgeries at Holy Cross, which is approximately a mile south of North Ridge in Fort Lauderdale. At Holy Cross, which also has established referral networks from District 9, open heart volumes declined from a high of 753 in 1998 to 693 in 2000. All of the open heart services proposed by the applicants are reasonably available in adjoining areas, in Districts 10 and 11 to the south and in the other districts to the north. Subsection 408.035(1)(c) - comparisons of quality; and Subsection 408.035(1)(e) - joint, cooperative or shared resources; and Subsection 408.035(1)(g), (h), and (k) - need for research, educational and training programs or facilities for medical and health care professionals; and Subsection 408.035(1)(h) and Rule 59C-1.033 - recruitment, training and salaries for staff The parties stipulated that the applicants have a history of providing quality care. Martin Memorial was accredited with commendation by the JCAHO in 1997, which is now called accreditation without Type I Recommendations. That was followed, in July 2001, with a score of 93 on survey items with some follow-up improvements required related to patient assessment and nutrition. Martin Memorial offers internships, and residencies for training non-physician medical personnel from Barry University, Indian River Community College, and Florida Atlantic University. The cancer center at Martin Memorial is affiliated with the Moffitt Center. Despite the absence of an open heart program, Martin Memorial has participated in clinical trials of cardiac drugs. The Shands Healthcare System of nine affiliated hospitals, including two research and teaching hospitals, is the model for the relationship proposed with Martin Memorial. The partnerships are intended to upgrade the care available in community hospitals and to establish, for complex cases, referral networks for the Shands teaching hospitals. Shands has already satisfied itself that Martin Memorial meets its due diligence test for the quality of its existing program and philosophical compatibility. If Martin Memorial's CON is approved, Shands will assist in training staff for the program. Initially, the program will have one cardiovascular surgeon, a University of Florida medical school faculty member, in Martin County. When that surgeon is ill or on vacation, others from the University of Florida will be available. The logistics of the plan raises questions about the adequacy of coverage to meet the 24-hour requirements of Rule 59C-1.033, Florida Administrative Code. In the JCAHO survey process, Bethesda received a score of 97, as a result of its survey in June 2000, and was accredited for the maximum allowable time, three years. Personnel for a Bethesda program can be appropriately trained at Orlando Regional, a statutory teaching hospital with a high volume open heart program. In June 2000, BRCH received a JCAHO score of 96. BRCH maintains a scholarship program for new nurses making a two-year commitment, and an on-site educational department with a preceptorship for training operating room and emergency room nurses. Nursing students from Florida Atlantic University (FAU), which is located across Glades Road from BRCH, rotate at BRCH. FAU is in the process of establishing a medical school. There is a severe shortage of nurses in the United States, in Florida, and in District 9. All of the hospitals in District 9 have resorted to highly competitive and innovative recruitment and retention strategies, including international recruiting, signing bonuses, child care and, of course, rising salaries and benefits. The demand is greater and shortages more severe in highly specialized areas, such as critical care, telemetry and open heart surgery nursing. The average age of nurses has also increased to 46 or 47 years old, while enrollment in nursing schools and the number of nursing school professors have declined. All of the applicants concede that recruiting and retaining nurses for new open heart program will be a challenge. The likely results are a loss of experienced nurses from existing programs, an increase in total health care costs, an increase in vacancies, and, at least temporarily a decline in the quality of experienced nursing care in existing open heart programs. At this time, there is no evidence that declining open heart utilization will eventually alleviate the shortage of experienced nurses. It has, so far, only eased the need to resort as frequently to other extreme and expensive alternatives, including pay overtime, contracting with private agencies, and bringing in traveling nurses. Subsection 408.035(1)(m) - size, scope and fixed equipment cost at BRCH; Subsection 408.035(2)(c) - alternatives to new construction; and Subsection 408.035(1) (h) - funding for BRCH BRCH plans to construct a 74,000 square-foot cardiac care facility, which will include two open heart operating rooms and two cardiac cath labs, an electrophysiology lab, 12 cardiovascular intensive care beds, and 18 cardiac cath lab bays. Only 18,568 square feet are attributable to the open heart operating rooms and cardiovascular intensive care unit which compares favorably with Bethesda's estimate of 17,759 square feet for the same functions. It is not possible, therefore, to conclude that the size of the BRCH project is excessive as compared to that proposed by Bethesda. BRCH underestimated the cost for fixed equipment for the open heart project by approximately $1.6 million. That omission resulted in understated estimates of depreciation by approximately $275,000. The total project cost for BRCH is approximately $2.2 million when almost $2 million in omitted equipment costs is added to the original estimate of $20 million. All pending capital projects, as shown on Schedule 2 of the BRCH application, total $54 million. With combined cash and investments of $160 million, the BRCH foundation has sufficient funds for the hospital's projects. Although BRCH earned profits of $6.6 million and $7.3 million in 1998 and 1999, respectively, the hospital lost $30 million from operations due to billing and collection errors in 2000. BRCH has a donor who has stated a willingness to donate $20 million for the cardiac care center. BRCH has the funds necessary to build the facility. With Medicare capital cost reimbursement completely phased out, there is insufficient evidence of a direct impact on health care costs based on this proposed capital expenditure. Subsection 408.035(1)(i) - short and long term financial feasibility Martin Memorial initially projected that its program would perform 360 open heart surgeries in year one and 405 in year two. As a result of changes in the use rate, Martin Memorial lowered its second year projection to 375 surgeries while increasing staffing levels. Even if projected open heart surgery revenues of $264,000 in the second year decline in proportion to expected lower utilization, estimated angioplasty revenues of $468,000, are sufficient to make up the deficit and to keep the combined program financially feasible in the short and long term. Bethesda projected volumes of 165 open heart surgeries in the first year and 270 in the second year. Assuming Bethesda's revenues are 90% of the district average, the combined net profit for open heart and angioplasty services is reasonably expected to be approximately $750,000 in the second year operations. The project is profitable, therefore, financially feasible in the short and long term. BRCH's expert projected volumes of 308 open heart surgeries and 289 angioplasties in the first year, and 451 open heart surgeries and 422 angioplasties in the second year. If utilization projections are correct, then BRCH will receive incremental net income of $1.6 million from the open heart surgery program and $825,000 from the angioplasty services. Factoring in claims that the Medicare case weight was overstated and depreciation underestimated, the BRCH project is, nevertheless, financially feasible for the short and long term. Typically, any open heart surgery program that can reach volumes in the range of 200 to 250 cases, will be financially feasible. The establishment of an open heart program also has a "halo effect," for the hospital, attracting more patients to the cardiac cath labs and other related cardiology services. Open heart surgery and angioplasty tend to be profitable, generating revenue which hospitals use to offset losses from other services. Subsection 408.035(1)(j) - needs of HMOs All of the applicants will enter into contracts with, but none is a health maintenance organization. Subsection 408.035(1)(l) - probable impact of fostering competition to promote quality assurance and cost-effectiveness Hospitals with higher volumes of open heart surgeries and angioplasties usually have higher quality as measured by lower mortality rates and fewer complications. The open heart surgery rule, in effect at the time the applications were filed, established a minimum volume of 350 annual admissions for existing providers. In the rule as amended on January 24, 2002, the minimum volume for existing programs was reduced to 300. The divisor in the formula for determining need, which represents the average size of a program in the district, was 350 prior to amendment and 500 subsequently. The minimum and average volumes in the rule set, in effect, the protected range for existing programs, not the optimal size, or "cut point" at which outcomes are worse below and better above. According to the American College of Cardiology and American Heart Association (ACC/AHA) the evidence is clear that outcomes are better if an individual performs at least 75 procedures at a high volume center with more than 400 cases. The ACC/AHA guidelines indicate, although more controversial and less clearly established, that acceptable outcomes may be achieved if the individual operator performs at least 75 procedures in centers with volumes from 200 to 400 cases. Because the relationship between higher volumes and better outcomes is continuous and linear, and because research showing the benefits of primary angioplasty with or without open heart surgery back-up is preliminary and limited, the position of the ACC/AHA is, in summary, as follows: The proliferation of small angioplasty or small surgical programs to support such angioplasty programs is strongly discouraged. (Journal of the American College of Cardiology, Vol. 37, no. 8 June 15, 2001, pp. 2239xvii (Tenet Exhibit 5)) An open heart program at Martin Memorial will redirect cases that would otherwise have gone to Lawnwood, PBGMC, and JFK. The proposed Martin Memorial Service area overlaps that of Lawnwood in southern St. Lucie County, an area which generates one quarter of the open heart cases at Lawnwood. Lawnwood is reasonably expected to lose 56 open heart cases a year with total volume going down below 300, resulting in loss of $1.8 million, or 20% of its total revenues. Lawnwood would have unacceptably low volumes threatening the quality of the open heart program. PBGMC, as a result of a new program at Martin Memorial, will lose approximately 170 and 180 open heart cases annually and an equal number of angioplasties reducing its open heart volume to approximately 700 a year. The financial loss would range from $4 to $5 million a year, as compared to total net income which was between $20 and $30 million a year for past three years. PBGMC would not suffer an adverse impact sufficient to threaten either the quality or the financial feasibility of the open heart program or total hospital operations. JFK, which currently receives most of the angioplasty referrals from Martin Memorial, is expected to lose from 25 to 30 open heart cases, and 65 to 70 angioplasties each year during the first two years of a Martin Memorial program. The estimated financial loss to JFK is $1.7 million, a significant detriment when compared to $2.8 million in net income from operations in calendar year 2000. Approval of open heart program at Bethesda will adversely affect case volumes at JFK and Delray. Bethesda projected that, in its first year, 75% of its cases would have gone to Delray and 25% to JFK, and that by the third year, the split would be even at 50% from Delray and 50% from JFK. JFK, depending on the approach to the impact analysis, will lose from 40 to 60 open heart cases in the first year, from 90 to 110 in the second year, and from 115 to 170 in the third year of a program at Bethesda. The volumes of lost angioplasties is expected to be slightly higher. The resulting combined open heart and angioplasty financial loss is $6.6 million, far greater than the significant detriment expected from a Martin Memorial program alone. The annual volume of open heart cases at JFK would be approximately 400 to 500, assuming flat not continued declining utilization. If Bethesda offered the service, Delray's open heart volumes would decline by 124 cases in the first year and by 248 cases in the third year of operations, decreasing total volume to 500 or 600 annual surgeries. Delray had a net income from operations of approximately $24.7 million in 2000, which would indicate that neither quality nor financial stability would be significantly adversely affected. If an open heart program is approved for BRCH, the volumes of cases at Delray and North Ridge will decline. Delray would be expected to lose 163 open heart cases and 235 in years one and two, respectively, and equal numbers of caths and angioplasties, resulting in annual open heart cases reduced from the low 700s to approximately 500 cases. Delray's pre-tax revenue was $39 million in 2001. In terms of quality and financial stability, Delray can withstand the adverse impact of a new program at BRCH. North Ridge would lose approximately 124 open heart cases in year one and 178 in year two, and similar numbers of caths, reducing open heart volumes from the upper 700s to approximately 600 annual cases. North Ridge's pre-tax income was $21 million for the year ending May 31, 2001. It appears that North Ridge could, even with the adverse impact of BRCH, maintain a quality, financially viable open heart program. Subsection 408.035(l) - probable impact on costs The applicants, all not-for-profit corporations, contend that the fact that District 9 has only for-profit open heart hospitals affects charges and is a not normal circumstance for the approval of one or more not-for-profit. District 9 is the only district in Florida in which all open heart providers are for-profit corporations. Statewide, not-for-profit open heart hospitals charge 31% less than for-profit. Martin Memorial's CON proposal includes a charge structure below that at existing programs. Bethesda's planned charges are 10% less than the District 9 average for open heart and angioplasty services. BRCH is the applicant which is most likely to increase competition in District 9, based on the Herfindahl-Hirschman Index (HHI). The HHI's measurement of competition in a market used by economists frequently to analyze anti-trust issues. Charges are not a factor in up to 75% of open heart/angioplasty cases reimbursed by payors, such as Medicare, at set flat rates. In approximately 10% of cases, including complex "outlier" cases exceeding the range for flat rate reimbursement and for other payors on a percent-of-charges basis, charges are not irrelevant. But, the evidence to demonstrate lower charges were applicable to patients of the same severity was questionable. Subsection 408.035(1)(o) - continuum of care There is insufficient evidence the any applicant is preferable based on its ability to promote a continuum of care in a multilevel system. Subsection 408.035(2)(a) - alternatives to inpatient services There are no alternatives to inpatient services for open heart surgery and angioplasty patients. Subsection 408.035(2)(d) - patients who will experience serious problems in the absence of the proposed new service The applicants and AHCA determined that new open heart surgery programs are needed mainly to provide emergency or "primary" angioplasty to patients suffering heart attacks (acute myocardial infections). Primary angioplasty is an alternative to "clot busting" medications, or thrombolytics, and to open heart surgery. Performed on an emergency basis, the three different treatments are used to restore blood flow before heart muscle dies. Because "time is muscle," patients benefit only if treated within a relatively short time after the onset of symptoms. The goal is 90 minutes from door-to-balloon for angioplasty. The decision to treat a patient with a particular therapy is based on a number of factors assessed during triage. Paramedics in consultation with ER doctors at the receiving hospital frequently begin triage and administering medications and oxygen in ambulances equipped with sophisticated diagnostic equipment. As the statistical data demonstrates, angioplasty, whether scheduled or emergency, is increasingly becoming the preferred therapy. Some studies have shown improved outcomes, higher survival rates and fewer complications, from primary angioplasty as compared to thrombolytics. Comparisons have not been made over extended periods of time, and the apparent benefits of angioplasty have not been duplicated in community hospitals as compared to clinical trials in high volume research centers. Estimates of the number of people who could benefit from the availability of angioplasty services at the applicants vary based on the number of elderly in the service area, the number of non-traumatic chest pain ER visits, delays in transfers of emergency patients, and the number of patients being transferred to existing providers for angioplasties or open heart surgeries. Martin Memorial selected five patients as examples of those who could be served in an open heart program at Martin Memorial. The anecdotal evidence of transfer "delays" is insufficient to demonstrate bed unavailability or capacity constraints. Martin Memorial-Stuart and Martin Memorial South transferred 240 heart attack patients to open heart surgery hospitals. Only 18 of the emergency heart attack patients who presented at the Martin Memorial ER were transferred from the ER. Approximately ten patients a year are so unstable that an intra- aortic balloon pump is required during transfer. Martin Memorial presented evidence of delays of two hours or more in transfers of 84 patients from its cath labs to open heart surgery hospitals. The transfer records, created for subsequent certificate of need litigation, were of questionable probative value. The case studies were inadequate to establish whether "delays" were reasonable or not. Factors such as physician consultation time, time to stabilize a patient for transfer and the assumed travel time seem to have been included in the time periods. Bethesda transferred 270 patients for cardiac care from October 1999 through September 2000. Thirty patients were transferred, from November 2000 to July 2001, for angioplasties or open heart surgery after having cardiac caths at Bethesda. Bethesda failed to establish that transfers were delayed due to capacity problems at existing hospitals because emergency patients were not classified separately, and the causes of the time lapses were not identified. Of the applicants, BRCH has the busiest ER, with 50,000 to 52,000 annual visits compared to approximately 48,000 at the two Martin Memorial locations combined. BRCH admitted 439 heart attack patients through its ER during the year ending June 30, 2000. The majority of patients are treated with thrombolytics at BRCH. BRCH transfers approximately one emergency heart attack patient a week on average, or from 30 to 50 a year, for interventional cardiac procedures. BRCH's presentation of evidence of delays in transfers was flawed. The data was collected and used only for litigation, and was incomplete. Some patient records were lost and others were deleted due to inaccurate data. Of the applicants, BRCH is located in an area with the largest percentage of the population age 65 and older, approximately 35%, as compared to 24% in Martin Memorial's service area. Agency Consistency Martin Memorial, through expert witness testimony, compared its situation to that of Brandon, a hospital in AHCA District 6, which was issued an open heart surgery CON in 2001. The expert noted that Martin Memorial and Brandon are both in five county health planning districts, and that they are 19 and from 15 to 17 miles, respectively, from the nearest open heart provider. Three of the counties in District 6 have open heart programs, including Hillsborough County where Brandon is located, as compared to two District 9 counties, St. Lucie and Palm Beach, but not Martin. The Martin Memorial primary service area projected population is 238,861 for 2004, 24.1% aged 65 and older. The Brandon service area population projection is 309,000 for 2004, with 10.5% aged 65 and older. Brandon has 255 beds, Martin Memorial-Stuart has 236. Brandon had 53,000 emergency room visits, and Martin Memorial, at both locations, had 48,503 in 1999. Before defaulting to zero, the numerical formula yielded a need for 3.27 additional open heart programs in District 6 as compared to 3.9 in District 9. Other specific comparisons favorable to Martin Memorial included the number of heart attack patients presenting at its ER, cath lab volumes, patient transfers for open heart and angioplasty procedures. Among others, there are several significant distinguishing facts in Florida Health Sciences Center, Inc. v. Agency for Health Care Administration, Case No. 00-0481CON, (R.O. Mar. 30, 3001, F.O. Oct. 17, 2001) aff'd per curiam sub nom, University Community Hospital v. Agency for Health Care Administration, Case No. 1DO1-3592, et al. (Fla. 1st DCA Sept. 19, 2002), the Brandon case. In that case, the two existing providers performing fewer than 350 cases a year, Blake Medical Center, and Manatee Memorial Hospital, both in Manatee County, were mature programs located 40 miles from Brandon with no service area overlap. By contrast, Lawnwood which is not a mature program and, therefore, has not reached its potential volume, is 20 miles from Martin Memorial, and has an overlapping service area. Martin Memorial's ER volume and the number of transfers from its ERs are the combined experience from two locations. The more accurate comparison is 27,000 ER visits at Martin Memorial-Stuart to 53,000 at Brandon. Emergency heart attack patients presenting at Martin Memorial South would continue to require transfers for primary angioplasty. Finally, the decision in Brandon was based, in large part, on transportation difficulties, inadequate interfacility ambulances and traffic congestion, which are not factors in District 9. Factually, the case of Halifax Hospital Medical Center, d/b/a Halifax Medical Center v. Agency for Health Care Administration, et al., Case No. 95-0742 (AHCA Jan. 14, 1997) is also distinguishable. The applicant could have no effect on the low volume providers located 80 miles to the north. That was one not normal circumstance. Need existed because of another not normal circumstance, i.e., capacity constraints at the only other provider in the same primary service area. In Oak Hill Hospital v. AHCA, Case No. 00-3216CON (R.O. Oct. 4, 2001, F.O. Jan. 22, 2002), appeal dismissed sub nom Hernando HMA, Inc. v. HCA Services of Florida, Inc., Case No. 1DO2-854 (Fla. 1st DCA June 6, 2002), the two approved applicants were in separate counties which constituted entirely separate health care markets. Neither applicant would adversely affect the low volume providers. After the Administrative Law Judge recommended approval of the Citrus County applicant, AHCA, engaging in what appears to be a comparative review of the two remaining applicants from Hernando County, approved a second applicant from the same district at the same time. Some facts are similar to those in this case: The average drive time between hospitals was 30 minutes; transfers and admissions procedures required additional time; there was a recognition of increasing preferences for reperfusion of heart muscle using primary angioplasty; patients and families experience stress and anxiety as a result of transfers. Institution-specific issues included the transfer of 600 cardiac patients by ambulance from Oak Hill, the size of the cardiology and cardiac cath programs (1,641 caths in 1999), the larger elderly population in the service area, and the hospital's size.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying Certificate of Need Application Number 9248 filed by BRCH, Certificate of Need Application Number 9249 filed by Martin Memorial, and Certificate of Need Application Number 9250 filed by Bethesda. DONE AND ENTERED this 11th day of November, 2002, in Tallahassee, Leon County, Florida. S 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 11th day of November, 2002. COPIES FURNISHED: Lealand McCharen, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Gerald L. Pickett, Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Sebring Building, Suite 310K St. Petersburg, Florida 33701 Lori C. Desnick, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 W. David Watkins, Esquire R. L. Caleen, Jr., Esquire Watkins & Caleen, P.A. 1725 Mahan Drive, Suite 201 Post Office Box 15828 Tallahassee, Florida 32317-5828 H. Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street Post Office Box 2174 Tallahassee, Florida 32316-2174 Paul H. Amundsen, Esquire Amundsen, Moore & Torpy, P.A. 502 East Park Avenue Post Office Box 1759 Tallahassee, Florida 32302 Robert D. Newell, Jr., Esquire Law Firm of Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Seann M. Frazier, Esquire Michael J. Cherniga, Esquire Greenberg Traurig, P.A. 101 East College Avenue Tallahassee, Florida 32302
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Lakeland Regional Medical Center (LRMC), is a 897-bed private, not-for-profit, general acute care hospital located at 1324 Lakeland Hills Boulevard, Lakeland, Florida. It is considered a major regional referral hospital and provides a wide range of tertiary services, including open heart surgery. The facility is located in District 6 and is one of six facilities in the district having an existing open heart surgery program. Respondent, Department of Health and Rehabilitative Services (HRS), is the state agency charged with the responsibility of administering the Health Facility and Services Development Act, also known as the Certificate of Need (CON) law. On September 26, 1988 intervenor, Winter Haven Hospital, Inc. (WHH), filed with HRS an application for a CON seeking authority to establish an open heart surgery program at its facility in Winter Haven, Florida. After reviewing the application, on February 3, 1989, HRS published notice of its intent to issue the requested CON. If approved, this program would be in competition with similar programs operated by LRMC and intervenor, Hillsborough County Hospital Authority d/b/a Tampa General Hospital (TGH). Those two parties have initiated formal proceedings in Case Nos. 89-1286 and 89-1287 to contest the proposed grant of authority. Intervenor, Venice Hospital, Inc. (Venice), has a pending application for authority to establish an open heart surgery program in a separate administrative proceeding and has intervened in opposition to LRMC's rule challenge. It is noted that LRMC, WHH and TGH are located in District 6 while Venice is located in an adjoining, but separate, district. All parties have standing in this proceeding. In order for HRS to grant a certificate of need, it is necessary for an applicant to satisfy all relevant rule and statutory criteria. In this vein, the agency has promulgated Rule 10-5.011(1)(f), Florida Administrative Code (1987), which contains certain criteria pertaining to open heart surgery programs. That rule provides in relevant part as follows: (f)2. Departmental Goal. The Department will consider applications for open heart surgery programs in context with applicable statutory and rule criteria. The Department will not normally approve applications for new open heart surgery programs in any service area unless the conditions of Sub-paragraphs 8. and 11., below, are met. * * * 11.a. There shall be no additional open heart surgery programs established unless: (1) the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year, (Emphasis added) * * * The requirements of this rule, which are unambiguous, and other pertinent statutory and rule criteria, are to be applied by HRS to all applicants, including WHH, during the CON review process. Although the rule itself is not being challenged by LRMC, subparagraph 11.a. of the rule is at the heart of this controversy. Petitioner and TGH contend that the clear language of the rule requires that, absent the existence of not normal circumstances, HRS may not award a CON unless each existing and approved open heart surgery program in the service area is operating at and is expected to continue to operate at 350 procedures per year. Because there are now six approved and existing open heart surgery programs in the district, petitioner argues that the rule mandates that, before a new program can be authorized, each of the six programs must meet the required level of 350 procedures per year. They contend further that the particular policy applied by HRS to WHH's application is not apparent on the face of rule 10-5.011(1)(f)2. and thus it constitutes an unpromulgated rule. In preliminarily approving WHH's application, HRS admits that it used a so-called averaging policy which it agrees may be described in the following manner: HRS has formulated and is applying in reviews of Certificate of Need ("CON") applications for new open heart surgery services a policy of general applicability that is uniformly and consistently applied, which calls for the averaging of the utilization of existing and approved adult open heart surgery programs in the applicable service area, and which deems subparagraph 11.a.(I) of Rule 10-5.011(1)(f), Fla. Admin. Code, to be met if the average utilization of all such existing and approved programs in that service area is at least 350 cases (the "Averaging Policy"). Pursuant to its Averaging Policy, HRS will approve a CON application for a new adult open heart surgery program under Rule 10- 5.011(1)(f), Fla. Admin. Code, even if each existing and approved program in the proposed service area is not operating at a minimum of 350 adult cases per year, and even if no "not normal" circumstances are presented in the application or found to exist in the State agency Action Report. Stated another way, HRS deemed subparagraph 11.a. to have been met in WHH's case because, after dividing the total number of procedures performed district wide by the number of existing and approved programs, there were an average number of procedures in excess of 350 for each program in the district. It used this averaging process even though two programs were not operational at the time the review process took place, and only two (LRMC and TGH) of the six programs had actually performed more than 350 procedures during the specified time period being measured. 1/ Thus, the averaging policy used by HRS allows approval of a CON application for open heart surgery even if only some programs in a district, rather than each, have the required 350 case volume. The averaging technique has not been reduced to writing in a memorandum, manual or agency policy directive, and it has not been formally adopted as a rule. In this regard, HRS, but not WHH and Venice, has admitted that the policy is indeed a rule. The results of applying that "rule" are contained in the state agency action report issued by HRS and made a part of this record. HRS has consistently and uniformly applied this averaging technique in every open heart surgery case except one since the rule was adopted in substantially its present form on February 14, 1983. 2/ It has been applied without discretion by those HRS personnel who have the responsibility of administering the CON law and regulations. The proponents of the averaging policy argued first that the language in subparagraph 11.a. authorized its use. However, nothing in the language of the existing rule expressly refers to an averaging process. They also contended that when other provisions within the rule are read, the use of the policy becomes apparent. More particularly, they pointed to subsection (7) of the rule which requires that the provision of open heart surgery be consistent with the state health plan. That plan provides in part that one of its objectives is to maintain an average volume of 350 procedures at all programs in the state. However, the state health plan is not mentioned in subparagraph 11.a., subsection (7) does not track or mirror the averaging technique, and the same subsection does not alert the user of the rule to the fact that an averaging process will be applied.
The Issue Whether proposed rule amendments to Rule 59C- 1.033(7)(c) and (7)(d), Florida Administrative Code, published in the Notice of Change on June 15, 2001, constitute an invalid exercise of delegated legislative authority. Whether the proposed rule is invalid due to the absence of a provision specifying when the amendments will apply to the review of certificate of need applications to establish open heart surgery programs.
Findings Of Fact The Agency is responsible for administering the Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. The goals of the Act are containment of health care costs, improvement of access to health care, and improvement in the quality of health care delivered in Florida. AHCA initiated the rulemaking process by proposing amendments to existing Rule 59C-1.033, Florida Administrative Code, the rule for determining the need for adult open heart surgery (OHS)1 services, which currently provides, in part, that: Adult Open Heart Surgery Program Need Determination. a new adult open heart surgery program shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district. One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; or One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 29 adult open heart surgery operations per month. Provided that the provisions of paragraphs (7)(a) and (7)(c) do not apply, the agency shall determine the net need for one additional adult open heart surgery program in the district based on the following formula: NN =((Uc x Px)/350)) -- OP>=0.5 Where: NN = The need for one additional adult open heart surgery program in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. Uc = Actual use rate, which is the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool, divided by the population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used in calculating Uc shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used in calculating Uc shall be for July of the preceding year. The population estimates shall be the most recent population estimates of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. Px = Projected population age 15 and over in the district for the applicable planning horizon. The population projections shall be the most recent population projections of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc x Px)/(OP+1). If the result is less than 350 no additional open heart surgery program shall normally be approved. Based on the issues raised by the Petitioner, Bethesda, and the factual evidence presented on these issues, AHCA must demonstrate that its proposed amendments to the existing OHS rule are valid exercises of delegated legislative authority or, more specifically, that it (a) followed the statutory requirements for rule-making, particularly for changing a proposed rule; (b) considered the statutory issues necessary for the development of uniform need methodologies; (c) acted reasonably to eliminate potential problems in earlier drafts of the proposed rule; (d) used appropriate proxy data to project the demand for the service proposed; (e) appropriately included county considerations for a tertiary service with a two-hour travel time standard; and (f) was not required to include a provision advising when CON applications would be subject to the new provisions. Rule challenges and rule development process The existing rule was challenged by IRMH on June 27, 2000, in DOAH Case No. 00-2692RX. Martin Memorial intervened in that case, also to challenge the rule. Like IRMH, Martin Memorial was an applicant for a certificate of need (CON), the state license required to establish certain health care services, including OHS programs, in Florida. Both are located in AHCA health planning District 9, as is the Petitioner in this case, Bethesda. AHCA entered into a settlement agreement with IRMH and Martin Memorial on September 11, 2000, which was presented when the final hearing commenced on September 12, 2000. Prior to the rule challenge settlement agreement, staff at AHCA had been discussing, over a period of time, possible amendments to the OHS rule to expand access and enhance competition. Issues raised by AHCA staff included the continued appropriateness of OHS as a designated tertiary service and the anti-competitive effect of the 350 minimum volume of OHS cases required of existing providers prior to approval of a new provider in the same district. The staff was considering whether the rule was too restrictive and outdated given the advancements in technology and the quality of OHS programs. The relationship of volume to outcomes was considered as various studies and CON applications were received and reviewed, as was the increasing use of angioplasty also known as percutaneous coronary angioplasty, referred to as PTCA or simply, angioplasty, as the preferred treatment for patients having heart attacks. Angioplasty can only be performed in hospitals with backup open heart services. During an angioplasty procedure, a catheter or tube is inserted to open a clogged artery using a balloon-like device, sometimes with a stent left in the artery to keep it open. Discussions of these issues took place at AHCA over a period of years, during the administrations of the two previous Agency heads, Douglas Cook and Reuben King-Shaw. In August 2000, AHCA published notice of a rule development workshop to consider possible changes to the OHS rule. Because it could not get the parties to settle DOAH Case No. 00-2692RX at the time, rather than proceed with the workshop while defending the existing rule, AHCA cancelled the workshop. As a result of the September 11, 2000, settlement agreement, on October 6, 2000, AHCA published a proposed rule amendment and notice of a workshop, scheduled for October 24, 2000. That version of a proposed rule would have changed Subsection (7)(a) of the OHS Rule to allow approval of "additional programs" rather than being limited to approval of one new program at a time in a district. The October proposal would have also eliminated OHS from the list of tertiary health services in Rule 59C-1.002(41). Tertiary health services are defined, in general, in Subsection 408.032(17), Florida Statutes, as follows: "Tertiary health service" means a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service. Examples of such services include, but are not limited to, organ transplantation, specialty burn units, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. The agency shall establish by rule a list of all tertiary health services. With this statutory authority, AHCA adopted Rule 59C- 1.002(41), Florida Administrative Code, to provide a more specific and complete list of tertiary services: The types of tertiary services to be regulated under the Certificate of Need Program in addition to those listed in Florida Statutes include: Heart transplantation; Kidney transplantation; Liver transplantation; Bone marrow transplantation; Lung transplantation; Pancreas and islet cells transplantation; Heart/lung transplantation; Adult open heart surgery; Neonatal and pediatric cardiac and vascular surgery; and Pediatric oncology and hematology. As an additional assurance that tertiary services are subject to CON regulation, the tertiary category is specifically listed in the projects subject to review in Subsection 408.036, Florida Statutes. The October 2000 version included a proposal to increase the divisor from 350 to 500 in the formula in Subsection (7)(b), to represent the average size of existing OHS programs, but to decrease from 350 to 250, the minimum number required of an existing provider prior to approval of a new program in Subsection (7)(a)2. The definition of OHS would have been amended to add an additional diagnostic group, DRG 109, to delete DRG 110 and to eliminate the requirement for the use of the heart-lung by-pass machine during the surgery. Most controversial in the October version was a separate county- specific need methodology for counties which have hospitals but not OHS programs, in which residents are projected to have 1,200 annual discharges with a principal diagnosis of ischemic heart disease. On October 24, 2000, AHCA held a workshop on the proposed amendments. At the workshop, AHCA Consultant, John Davis, outlined the proposed changes. As a practical matter, eight Florida counties are not eligible to provide OHS because they have no hospitals. When Mr. Davis applied the county-specific need methodology, as if it were in effect for the planning horizon of January 2003, six Florida counties demonstrated a need for OHS: Hernando, Martin, Highlands, Okaloosa, Indian River, and St. Johns. Two of these, Martin and Indian River are in AHCA District 9. AHCA has already approved an OHS program for Martin County, at Martin Memorial. Mr. Davis also presented a simplified methodology for reaching the same result. In support of the proposed rule, AHCA received data, although not adjusted by the severity of cases, showing better outcomes in hospitals performing from 250 to 350 OHS, as compared to larger providers. Although the majority of heart attack patients are treated with medications, called thrombolytics, for some it is inappropriate and less effective than prompt, meaning within the so-called "golden hour," interventional therapies. In these instances, angioplasty is considered the most effective treatment in reducing the loss of heart muscle and lowering mortality. Opposing the proposed rule at the October workshop, Christopher Nuland, on behalf of the FSTCS, testified that OHS is still a highly complex procedure, that it requires scarce resources, equipment and personnel, and should, therefore, be available in only a limited number of facilities. In general, however, the opponents complained more about process rather than the substance of the proposal. Having petitioned on October 13, 2000, for a draw-out proceeding instead of the workshop, those Petitioners noted that AHCA had obligated itself to predetermined rule amendments based on the settlement agreement, regardless of information developed in the workshop. The draw- out Petitioners were the Florida Hospital Association, Association of Community Hospitals and Health Systems of Florida, Inc., Delray, Lakeland Regional Medical Center, Punta Gorda HMA, Charlotte Regional Medical Center, JFK, HCA Health Services of Florida, Inc., d/b/a Regional Medical Center Bayonet Point; Tampa General and the FSTCS. While agreeing that OHS is complex and costly, supporters of the proposed rule, particularly the declassification of OHS as a tertiary service, noted that many cardiologists are now trained to do invasive procedures. In support of fewer restrictions on the expansion of OHS programs in Florida, other witnesses at the October workshop discussed delays and difficulties in arranging transfers to OHS providers, possible complications from deregulated diagnostic cardiac catheterizations at non-OHS provider hospitals, and hardships of travel on patients and their families, especially older ones. On December 22, 2000, AHCA published another proposal, which retained most of the October provisions, continuing the elimination of OHS from the list of tertiary services, the addition of DRG 109, the deletion of DRG 110, the elimination of the requirement for the use of a heart-lung by-pass machine, and the authorization for approval of more than one additional OHS program at a time in the same district. The minimum number of OHS performed by existing providers prior to approval of a new one continued from the October 2000 version, to be decreased from 350 to 250, and the divisor in the numerical need formula continued to be increased from 350 to 500. As in the October version, the requirement that existing providers be able to maintain an annual volume of 350 OHS cases after approval of a new program was stricken. The separate need methodology for counties without an OHS program was simplified, as proposed by Mr. Davis, and was as follows: Regardless of whether need for additional a new adult open heart surgery programs is shown in paragraph (b) above, need for one a new adult open heart surgery program is demonstrated for a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 through 414.9. The projected number of county residents who will be discharged with a principal diagnosis of ischemic heart disease will be determined as follows: PIHD = (CIHD/CoCPOP X CoPPOP) Where: PIHD = the projected 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over; CIHD = the most recent 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over, as available in the agency's hospital discharge data base; CoCPOP = the current estimated population age 15 and over for the county, included as a component of CPOP in subparagraph 7(b)2; CoPPOP = the planning horizon estimated population age 15 and over for the county, included as a component of PPOP in subparagraph 7(b)2; If the result is 1200 or more, need for one adult open heart surgery program is demonstrated for the county will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc X Px)/(OP + 1). If the result is less than 350 no additional open heart surgery program shall normally be approved. County-specific need identified under paragraph (c) is a need occurring because of the special circumstances in that county, and exists independent of, and in addition to, any district need identified under the provisions of paragraph (b). A program approved pursuant to need identified in paragraph (c) will be included in the subsequent identification of approved and operational programs in the district, as specified in paragraph (a). On January 17, 2001, a public hearing was held to consider the December amendments. Opponents complained that the proposals resulted from a private settlement agreement rather than a public rule development workshop as required by law. They noted that declassification of OHS as a tertiary service is contrary to the recommendations of AHCA's CON advisory study group and the report of the Florida Commission on Excellence in Health Care, co-chaired by AHCA Secretary Reuben King-Shaw, created by the Florida Legislature as a part of the Patient Protection Act of 2000. The risk of inadvertently allowing some OHS procedures to become outpatient services was also raised, because of the statute that specifically states that tertiary services are CON-regulated. The reduction from 350 to 250 in the annual volume required at existing programs prior to approval of new ones was criticized for potentially increasing costs due to shortages in qualified staff, including surgical nurses, perfusionists, recovery and intensive care unit nurses, who are needed to staff the programs. The potential for approval of more than one program at a time, under normal circumstances, was viewed as an effort to respond to the needs of two geographically large districts out of the total of eleven health planning districts in Florida. That, in itself, one witness argued demonstrated that more than one approval at a time should be, as it currently is, a not- normal circumstance. The combination of the district-wide and county- specific need methodologies was criticized as double counting. The district formula which relied on the projected number of OHS, overlapped with the county formula, which used projected ischemic heart disease discharges, to the extent that the same patient hospitalization could result in first, the diagnosis, and then the OHS procedure. Approximately, eighteen percent of diagnosed ischemic heart disease patients in Florida go on to have OHS. The county-specific methodology was also characterized as inappropriate health planning based on geo- political boundaries rather than any realistic access barriers. Although 500, the average size of existing programs was the proposed divisor in the formula, and 250 was the threshold number existing providers, the proposal included the deletion of any provision assuring that existing programs maintain some minimum annual volume, which is 350 in subsection 7(e) of the current rule. AHCA representatives testified that the proposal to delete a minimum adverse impact was inadvertent. The combined effect of a district-wide need methodology, an independent but overlapping county need methodology, and the absence of an adverse impact provision, created concern whether approvals based on county need determinations could reduce volumes at providers in adjacent counties to unsafe levels. Some health planners predicted that, as a consequence of adopting the December draft, like the October version, a number of new OHS programs could be coming into service at one time, seriously draining already scarce resources. One witness, citing an article in the Journal of the American Medical Association, testified that higher volume OHS providers, those over 500 cases, do have better outcomes, and that the relationship persists for angioplasties, including those performed on patients having heart attacks. Florida has 63 or 64 OHS programs. Of those, 25 to 30 percent have annual OHS volumes below 350 surgeries a year. The demand for OHS is increasing slowly and leveling off. AHCA was warned, at the January public hearing by, among others, Eric Peterson, Professor of Cardiology, Duke University Medical Center (by videotaped presentation); and Brian Hummel, M.D., a Cardiothoracic Surgeon in Fort Myers, President of the Florida Society of Thoracic and Cardiovascular Surgeons, that simultaneously easing too many provisions of the OHS rule was a risk to the quality of the programs and the safety of patients. Among other specific comments made at the January public hearing related to the December proposal were the following: This change would authorize a county- specific methodology to support approving a program on the theory that that county needs better access to open heart surgery program. Yet there is no inquiry under the proposed provision into how accessible adjacent programs are or, indeed, how low the volumes of adjacent programs are. Most blatantly, the county provision requires double counting and double need projections. (AHCA Ex. 7, p. 14, by Elizabeth McArthur). The proposed rule creates an exemption for counties that are currently without open heart surgery programs. One can only surmise that the purpose of this exemption is to improve access, and certainly improving access is an appropriate goal and it is possible that there are few situations around the state where access to open heart surgery is a concern, but the proposed rule is completely inadequate and a thoroughly inappropriate way to identify which situations those are . . . (AHCA Ex. 7, p. 26, by Carol Gormley). With the county exemption provision, the Agency has stumbled on an entirely new method for estimating need. In fact, the only good thing about this provision is that it demonstrates that the Agency actually can look at some alternative ways to estimate need, and the use of data about incidence of ischemic heart disease might be one of those. Certainly it should be explored if there is ever a valid planning process that addresses open heart surgery. However, the proposed rules cobble together the county- based epidemiology with the district-wide demand based formula, and I believe that this method is not applicable for evaluating access to care. It is not applicable because the provision only considers the population's rate of ischemic heart disease and does not even attempt to assess the extent to which county residents with ischemic disease are, in fact, already receiving open heart surgery. Therefore, a determination that county residents generate at least 1,200 ischemic heart disease discharges annually does nothing to indicate whether or not they experience any barriers to obtaining that needed service. * * * Another problem with county exemption permission [sic: provision] is that the addition of this assessment, quote "regardless of the results of the district need formula," end quote, constitute double counting of a need in districts where counties without programs are located. (AHCA Ex. 7, p. 27-30, by Carol Gormley). * * * As further evidence of the benefits of limiting open heart surgery to a few high volume programs, the Society would like to place into record the following articles. The first one you've heard on several occasions is the Dudley article, "Selective referral to high volume hospitals." The second, from Farley and Osminkowski, is, "Volume-outcome relationships and in- hospital mortality: Effective changes in volume over time," from Medicare in January of 1992. There's another article from Grumbach, et al., "Regionalization of cardiac surgery in the United States and Canada," again from JAMA. Another article from Hannon, et al., "Coronary artery bypass surgery: The relationship between in-hospital mortality rate and surgical volume after controlling for clinical risk factors," Medical Care. Hughes, et al., "The effects of surgeon volume and hospital volume on quality care in hospitals," again from Medical Care; finally, Riley and Nubriz, "Outcomes of surgeries among Medicare aged: Surgical volume and mortality." Each of these scholarly articles comes to the same inevitable conclusion: outcomes improve as the volume of cardiac surgeries in any given program and hospital increases, therefore increasing the number of hospitals in which these services are provided inevitably will lead to an increase in morbidity. (AHCA Ex. 7, p. 83-84, by Christopher Nuland). * * * On or before the January public hearing, AHCA also received the following written comments: Martin Memorial supports the exception provision for Counties that do not have an open heart surgery program and have a substantial number of residents experiencing cardiovascular disease. This provision ensures an even dispersion of programs, and that adequately sized communities are not denied open heart surgery. (Martin Memorial Ex. 6, Letter of 10/24/2000, from Richard M. Harman, Chief Executive Officer, Martin Memorial, to Elizabeth Dudek) * * * Adding new open heart surgery programs to counties that currently lack programs will increase geographic access to coronary angioplasty services as well as open heart surgery. Primary angioplasty is now the treatment of choice for a significant percentage of patients presenting in the emergency department with acute myocardial infarction (patients who would otherwise be treated with thrombolytic drugs to dissolve blood clots in occluded coronary arteries). Thus, the provision of the proposed regulations that addresses the need for open heart surgery at a county level will also increase access to life-saving invasive cardiology services. The effect of the proposed rule changes is to slightly broaden the circumstances in which the Agency would see presumed need for new programs. Initially, the increase in the number of programs presumed to be needed would be only five. These potential new approvals would be in counties which currently have no programs. This is consistent with the reasoning that supports removing open heart surgery from the list of tertiary procedures. All else equal, distributing new programs to counties where they already exist is reasonable in light of the goal of improving geographic accessibility of advanced cardiology services. As with the other draft proposed rule changes, there is no certainty that any programs will be approved on the basis of the county-specific need formula in (7)(c). These proposed programs would still have to meet the statutory and rule criteria. As discussed above, a number applications for programs have been ultimately denied even when presumed need was shown by the need formula. We recommend adoption of this additional formula for demonstrating need. (IRMH Ex. 1, p. 25, Comments of Ronald Luke, J.D., Ph.D., 10/24/2000) In what could be interpreted as an admission that the process resulting in the development of the earlier drafts was flawed, Jeff Gregg, Chief of the AHCA CON Bureau, concluded the January public hearing by saying, . . . in terms of the analysis that the Agency did about the proposed rule, I would simply have to tell you that CON staff was not involved in that analysis, and that's CON staff including myself. So I cannot elaborate on what went into it. But having said that, I do want to assure you that CON staff will be involved in further analysis and we will do our best to consider all the points that have been made and present them as clearly and concisely as we can in assisting the Agency to formulate its response to this hearing. (AHCA Ex. 7, p. 86). The December draft was also challenged by a number of Petitioners in DOAH Case No. 01-0372RP, filed on January 26, 2001, and ten other consolidated cases. In response to the criticism that the adverse impact provision should not have been deleted and because that omission was unintended, AHCA published another proposed amendment to the OHS rule, on May 4, 2001, reinstating a minimum adverse impact volume, this time set at 250 OHS operations, down from 350 in the existing rule. On May 31, 2001, AHCA and the other parties to DOAH Case No. 01-0372RP and the consolidated cases entered into another settlement agreement, which provided: that in an effort to avoid further administrative proceedings, without conceding the correctness of any position taken by any party, and in response to materials received in to the record on or before the public hearing, the Agency for Health Care Administration agrees to publish and support . . . The Notice of Change . . . (Bethesda Ex. 34, p. 2-3). In upholding that agreement, AHCA superseded or revised all prior drafts and published a notice of change on June 15, 2001. In this final version, AHCA limited normal approval of a new OHS program to one at a time, used 500 as the numeric need formula divisor, increased the required prior-to-approval OHS minimum volume at mature existing providers from 250 in the October version to 300 (down from 350 in the existing rule) and for non- mature programs from a monthly average of 21 in the October draft to 25 (down from 29 in the existing rule), retained the classification of OHS as a tertiary service, and altered the separate, independent county need methodology to make it a county preference. The June 15th version, containing Subsections 7(c) and 7(d), which are challenged in this case is as follows: Adult Open Heart Surgery Program Need Determination. An additional open heart surgery programs shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district; One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 300 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 25 adult open heart surgery operations per month. * * * Provided that the provisions of paragraphs (7)(a) do not apply, the agency shall determine the net need for an additional adult open heart surgery programs in the district based on the following formula: NN=[(POH/500)-OP]> 0.5 where: NN = the need for an additional adult open heart surgery programs in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. POH = the projected number of adult open heart surgery operations that will be performed in the district in the 12-month period beginning with the planning horizon. To determine POH, the agency will calculate COH/CPOP x PPOP, where: COH = the current number of adult open heart surgery operations, defined as the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool. CPOP = the current district population age 15 years and over. PPOP = the projected district population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used for CPOP shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used for CPOP shall be for July of the preceding year. The population estimates used for COP and PPOP shall be the most recent population estimates of the Executive Office of the Governor that are available to the agency 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. In the event there is a demonstrated numeric need for an additional adult open heart surgery program pursuant to paragraph (7)(b), preference shall be given to any applicant from a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; and Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 In the event no numeric need for an additional adult open heart surgery program is shown in paragraphs (7)(a) or (7)(b) above, the need for enhanced access to health care for the residents of a service district is demonstrated for an applicant in a county that meets the criteria of paragraph (7)(c)1. and 2. above. An additional adult open heart surgery program will not normally be approved for the district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 300 open heart surgery operations. Bethesda objects to Subsections 7(c) and 7(d) as invalid. It challenges the rule promulgation process as a sham, having resulted from settlement negotiations rather than from statutorily mandated considerations and processes. That charge was, in effect, conceded by AHCA, as related to the October draft. That version carried over into the December draft, essentially unchanged, but did gain support at the October workshop. The October and December versions are not at issue in this proceeding. The proposed rule amendments at issue in this proceeding must have been supported by information provided to AHCA before or during the January public hearing. The proposal at issue differs substantially from the terms of the September settlement agreement, but is precisely what was attached to the May 31, 2001, settlement agreement. For example, the settlement agreement of September 11, 2000, included a proposal to reduce the prior minimum volume of cases at existing OHS providers from 350 to 250, but in May and June, that number was set at 300. AHCA, in the September settlement agreement, was to eliminate any limitation on the number of additional programs approved at a time, but the May and June version retains the one-at-a-time provision of the existing rule. AHCA agreed to determine county numeric need independent of and in addition to district numeric need, in September, but that provision is, in the May 31st and June 15th version, a preference. In September 2000, AHCA agreed to delete adult OHS from the list of tertiary services in Rule 59C-1.002(41), but it is a tertiary service in the May and June version. Bethesda is correct that the records of the October workshop and January public hearing contained criticisms of the county need methodology but no specific proposal to modify it into a preference. The first draft of that concept is the May 31, 2001, settlement agreement. (See Findings of Fact 26 and 27). Statutory rule-making issues Subsection 408.034(3), Florida Statutes, provides that: The Agency shall establish, by rule uniform, need methodologies for health care services and health facilities. In developing uniform need methodologies, the agency shall, at a minimum, consider the demographic characteristics of the population, the health status of the population, service use patterns, standards and trends, geographic accessibility, and market economics. As required by statute, AHCA considered the demographics and health status of the population and examined, as a part of the rule adopting process, age-specific calculations of ischemic heart disease. AHCA relied on statistical evidence of the relationship of ischemic heart disease and OHS. In 1999, for example, there were 33,027 OHS in Florida, and 25,257 of those patients had a primary diagnosis of ischemic heart disease. Consideration of service use patterns, and standards and trends related to OHS led AHCA to increase the divisor in the numeric need formula to maintain the average size of 500 surgeries for existing providers. The availability of more reliable data than that collected when the existing rule was promulgated allowed AHCA to propose reliance on residential use rates. The trend towards the use of angioplasty, as a preferred treatment for heart attack patients, and the need for timely geographical access to care are major factors for AHCA's proposal to consider a county services within the normal need analysis or as a not normal indication of a need for enhanced access when a county has a critical mass of heart disease patients. Geographical accessibility is also addressed in the travel time standard in the existing rule, which the proposal would not change. AHCA received testimony on the issue of market economics and health status, related to care for indigent and minority patients in not-for-profit, county-funded hospitals, and related to reimbursement formulas. The record demonstrates that AHCA was provided with evidence on the effect of scare resources on the costs of operating OHS programs. County-specific need methodology in earlier drafts as compared to the county preference in 7(c) and the need for enhanced access in 7(d) Bethesda alleges that the county preference in the June version is essentially another need methodology, like the county-specific need methodology in the earlier versions of the proposed rule. Bethesda also contends that a preference for a hospital because it is in a county which does not have an open heart program over a reasonably accessible facility in an adjoining county in the same district is irrational health planning which could lead to a maldistribution of programs. The county-specific need methodology was first included in the September settlement agreement, and the preference in 7(c) and need for access in 7(d), originated after the January 17, 2001, public hearing. During the public hearing, counsel for the Florida Hospital Association complained that the county-specific need methodology precluded any inquiry into accessibility and volumes at adjoining programs. Another representative of the Florida Hospital Association surmised that the goal of the county exemption was improved access but explained that it was an inappropriate means to identify access concerns. For example, while Hernando County would qualify for need with the separate methodology, most of its residents, 97 percent receive OHS services at a hospital in another district which is only 13 miles from the population center. (See Finding of Fact 26). The preference under normal circumstances in Subsection 7(c) and finding of need for enhanced access in Subsection 7(d), must be supported by evidence that county boundaries, in general, do create valid access issues. On or before the January workshop, information provided to AHCA indicated that some special inquiry into access issues related to CON applications for programs in counties without OHS programs is warranted. See Finding of Fact 27). AHCA found correctly that counties matter for several reasons. First is the fact that emergency services are funded and organized by counties, in general, and operated by municipal and county agencies. Approximately 60 percent of heart attack patient discharges in Florida are admitted through emergency rooms. Emergency heart attack patients who live in counties with OHS programs are twice as likely to be taken to a hospital with OHS as those who live in counties without an OHS provider. Second, whether a patient is taken to an OHS provider affects the care received. The probability of having an angioplasty performed is almost 50 percent greater for residents of counties with OHS programs as compared to those in counties without an OHS program. Third, some health care reimbursement plans and health care districts are operated within counties, limiting financial access to out-of-county hospitals. AHCA has always considered whether or not a county has an OHS program as a part of access issues. The issue of greater access to OHS was the basis for AHCA's initial consideration of the possibility of easing the OHS rule. With the May and June draft, it has codified and specified when that policy will apply. AHCA's deputy secretary noted that geographic access in the absence of numeric need was the basis for approvals of OHS CONs for Marion County, and for hospitals located in Naples and Brandon. In each instance, the applicants argued a need for enhanced access. AHCA has experience in applying preferences as a part of balancing and weighing criteria from statutes, rules and local health plans, particularly to distinguish among multiple applicants. In the totality of the review process, other factors which Bethesda's expert testified should be considered, including financial, racial and other potential access barriers, are not precluded. Preferences related to specific locations within health planning areas are included in CON rules governing the need for nursing home beds and hospices. Bethesda noted that these are not tertiary services, suggesting that a county location preference is inappropriate for tertiary services, but similar preferences for OHS exist in some of the local health plans. In AHCA District 1, the CON allocation factors for OHS and cardiac catheterization services include a preference for applicants proposing to locate in a county which does not have an existing OHS program. In District 4, the preference favors an applicant located in a concentrated population area in which existing programs have the highest area use rates. District 5 is similar to District 4, supporting OHS projects in areas of concentrated population with the highest use rates. The District 8, like District 1, preference goes to the applicant located in a county without an OHS program. There is no evidence that the existing preferences have been difficult to apply within the context of other CON criteria for the review of OHS applications. In effect, the proposed amendments establish an uniform state-wide county preference which is more concrete in terms of the requirements for a potential patient base. Bethesda has questioned the rationale for standards which are, in effect, different in Subsection 7(c) as compared to Subsection 7(d). The lower requirement, according to Bethesda, 1200 ischemic heart diagnoses, in 7(d), applies when there is no numeric need. But, the 500 divisor and 300 minimum at existing providers, when combined with 1200 ischemic heart diagnoses is a heavier burden to meet in 7(c), although under normal circumstances. Bethesda did not adequately explain reasons for this objection to the proposed rule. In addition, it is not inconsistent logically for AHCA to require applicants to demonstrate lower numeric need in situations in which AHCA has determined that these will be, in general, a greater need for enhanced access. Bethesda also raised a concern for the eventual maldistribution of programs as a result of the county preference. In 1999, Palm Beach county residents received 2700 OHS, or an average of 900 cases for each of the three programs. The total for District 9 was 3800 cases in 1999. When 500 St. Lucie County resident cases, in which Lawnwood is an OHS provider, are combined with 2700 Palm Beach resident cases, that leaves only 650 resident cases from Okeechobee, Indian River and Martin Counties. If programs are approved in all three, then the total will be inadequate for each to reach 300 cases, while, presumably, the demand in Palm Beach could be increasing disproportionately and not be met adequately. Disproportionate need, the appropriate dispersion of programs, and the benefits of enhanced competition are among the factors which AHCA can consider along with county need when choosing among competing applicants. 1200 ischemic heart disease discharges The proposed amendments require a projection that residents will reach a threshold of 1200 cases of ischemic heart disease discharges as a condition for the entitlement to the numeric need preference or to demonstrate a not normal need for enhanced access. In general, ischemic heart disease, which is also known as coronary heart disease, is characterized by blocked arteries which, in turn, limit blood to heart muscles causing first the onset of angina from acute coronary syndrome, progressing on to acute myocardial infarction, or a heart attack. The use of heart disease as a proxy for OHS utilization is consistent with AHCA's use of live births in pediatric open heart surgery and pediatric cardiac catheterization rules, deaths in the hospice rule, and related diagnoses in organ transplantation rules rather than actual utilization. It was supported by information received during or before the January workshop (See Finding of Fact 26 and 27). Bethesda's criticism of the use of a proxy per se is also not well-founded because any single statistical approach could be misleading. For example, historic use rates can understate future use with a growing service or an artificially imposed access limit. Using heart disease data in a preference or a need for enhanced access as opposed to a need formula or conclusive finding allows more flexibility in determining need in conjunction with other significant factors. One of Bethesda's expert health planners was also critical of the use of 1200 ischemic heart disease diagnoses as inadequate for projecting OHS cases, and for not equating to approximately 300 annual OHS cases, the minimum required of existing providers in Subsection 7(a) and the minimum adverse impact allowed in Subsection 7(e). Based on actual historical Florida data, 1200 ischemic heart disease diagnoses on average resulted in 207 OHS in 1997, 203 in 1998, and 203 in 1999. Ischemic heart disease has approximately an 18 to 20 percent conversion rate to OHS, and results in a total of 76 to 80 percent of all OHS cases. OHS cases from other diagnoses added statistically another 54 OHS in 1997, 59 in 1998, and 61 in 1999, to those from ischemic heart disease, giving, in each year a total less than 300. Bethesda presented evidence of wide variations in the ischemic heart disease to OHS conversion ratios from county-to- county. For example, only 14 percent of Bradford County ischemic heart diseases converted to OHS, and only 11 percent of the 700 cases in Columbia County converted to OHS. In Columbia County, the average state conversion rate of 20 percent yields 140 cases but, in reality, there were only 78 OHS cases from Columbia County in 1999. Bethesda's expert concluded that conversion ratio discrepancies resulting in the approval of a program that cannot achieve 300 OHS, as required in Subsection 7(a)2. and 7 (e), of the proposed rule, could bar the approval of new programs when needed in the district and would not be of minimum required quality. Bethesda also proved that the accuracy of projected OHS cases can also be affected by patterns of patient migration for health care, particularly if in- and out-migration do not offset each other. In counties with OHS programs, the average out-migration for acute care is 10.7 percent, varying widely from 3.8 percent in Alachua County to 70 percent in Seminole County. In counties without an OHS provider, average out- migration for acute care is 44 percent, but ranges from 17.6 percent in Indian River County to 98 percent in Baker County. An average of 18 percent of the residents of Florida counties with OHS programs have their surgeries performed elsewhere. Like out-migration, in-migration for acute care, for ischemic heart disease care, and for OHS varies from county to county in Florida. Counties without OHS programs have acute care in-migration from lows of 5.3 percent for Flagler County up to highs of 40 percent for Columbia County. In counties with OHS, in-migration for acute care is as low as 8 percent for Brevard and Polk, and as high as 60 percent for Alachua County. Similarly, in-migration, as determined by ischemic heart disease discharges averages 19.4 percent in counties without OHS programs and approximately 25 percent in those with OHS. In-migration for OHS, averages 35.7 percent for the state, but that is derived from a range from 9.2 percent in Pinellas County to 74 percent in Alachua and Leon Counties. Bethesda demonstrated, patterns of migration for health care vary throughout Florida, but there are trends due to the presence of OHS programs. Average net in-migration to counties with OHS is 29 percent, and is positive in sixteen of the twenty-four counties with OHS programs. All of these differences can be considered within the regulatory scheme proposed by AHCA. The issue of whether 1200 residential ischemic heart disease diagnoses is, in fact, the critical mass of prospective OHS patients needed or is deceptive due to migration patterns, due to access to alternative providers or any other review criteria listed in rule or statutes can be considered on a case-by-case basis with the proposed amendments. Bethesda's specific concern is that Indian River with well over 1200 ischemic heart disease discharges could be approved even though that represented only 255 OHS cases, and that if Indian River is approved under the county preference provision, then Bethesda would not be approved under normal circumstances until Indian River achieved and was projected to maintain 300 OHS cases a year. That Bethesda may be delayed in meeting the requirements for normal need is likely, but that appears to be a function of its location as compared to existing providers as much as it is the result of the county preference. Bethesda is not precluded, however, under either the existing or proposed rules from demonstrating not normal circumstances in District 9 for the issuance of an OHS CON to Bethesda. Bethesda's assumption that 300 is the minimum volume required for adequate quality is not supported by studies from various professional societies. The American College of Cardiology, the American Heart Association, and the Society of Thoracic Surgeons set minimums of 200 to 250 annual hospital cases as the volumes necessary to maintain the skills of the staff. The American College of Surgeons, in 1996, published their opinion that 100 to 125 cases per hospital is sufficient for quality, while at least 200 cases a year are needed for the economic efficiency of a program. AHCA has never used the required and protected volumes as the volume which must also be projected for a new programs. In the current OHS rule, the volume required is 350 a year for existing programs but that has not been required of applicants. In the recent approval of an OHS CON for Brandon Regional Hospital, the applicant projected reaching 287 cases in the third year of operation. County preference, tertiary classification and travel time Bethesda argued that the tertiary classification, suggesting a regional approach, is inconsistent with having a county access provision. Bethesda correctly noted that the county provision first appeared in a draft which included the elimination of OHS from the list of tertiary services. But AHCA proposes to establish the county preference and to maintain OHS on the list of tertiary services under Rule 59C-1.002(41), and to maintain the two-hour drive time standard in Rule 59C- 1.033(4)(a). Substantial information, mostly from medical doctors and studies linking morbidity to low volume, supports the view that OHS continues to be a complex service. Obviously, those services in the tertiary classification range in complexity and availability from OHS at the lower level to organ transplantation at the upper level. The tertiary classification is justified to assure AHCA's continued closer scrutiny of OHS CON applications. It is also consistent with the increase in the need formula divisor to 500, which together serve as restrains on the approval of additional programs. AHCA reasonably concluded, based on case law and precedents with local health plan that it is not inconsistent to apply county preferences to OHS while it is classified a tertiary service. The two-hour travel time standard, is as follows: Adult open heart surgery shall be available within a maximum automobile travel time of 2 hours under average travel conditions for at least 90 percent of the district's population. The counties most likely qualify for the preference, based on meeting or exceeding 1200 residential ischemic heart disease diagnoses, are Citrus, Martin, Hernando, St. Johns, Highlands, Indian River, and Okaloosa. The population centers in each of these counties are well within two hours of an existing provider. Citrus County, in which there is an approved but not yet operational OHS program, is about an hour's drive from Marion County. Hernando is approximately 25 minutes from the Pasco County provider. The population center of St. Johns County is approximately 40 minutes away from Duval County OHS providers. Okaloosa County is approximately a one-hour drive away from Escambia County OHS providers. In District 9, Indian River is approximately a 30- minute drive from the Lawnwood OHS program. Martin Memorial, is an approved provider, is approximately 20 miles or 35 minutes from Lawnwood and 30 miles or 40 minutes from Palm Beach Gardens, another existing OHS provider. In the next three to five years, it is foreseeable that Okeechobee County in northwestern District 9 could qualify for the county preference. Adjacent to Okeechobee, Highlands County's population can drive either an hour and thirty minutes to a Charlotte County OHS program or an hour and twenty minutes to a Polk County facility. The evidence related to travel times, according to one of Bethesda's experts, demonstrates that the county preference is not needed to assure access which is already provided for each and every likely qualifying county. But the population centers in the entire state of Florida are all within the two- hour travel standard, and there has been no suggestion that Florida cease approval of new OHS programs. Bethesda's contention that no need exists for enhanced access if the travel time standard is met, and its claim that the rule is internally inconsistent with a county preference and two-hour drive time are rejected. Two hours is, as the rule clearly states, a "maximum" not a bar, and has never been interpreted by AHCA as a bar, to more proximate locations. Any other interpretation is an impossibility considering the numerous counties across the state with multiple programs, including Dade, Broward, Palm Beach, Hillsborough, Pinellas, Orange, Volusia, Duval, and Escambia, among others. AHCA can appropriately and consistently establish reasonable guidelines for choosing among applicants to enhance access within the maximum travel standard. There is no language in the proposed rule indicating when it will take effect. Although the issue was raised in Bethesda's petition, it failed to provide evidence or legal arguments at hearing or subsequently to support its objection to the omission. AHCA's deputy secretary testified that the agency reviews applications using need methodology rules in effect when the applications are filed. Before new rules are applied, applicants are given the opportunity to reapply to address new provisions in a rule.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that petitioner's applications for certificates of need to institute cardiac catheterization and open heart surgery services be GRANTED. Respectfully submitted and entered this 15th of January, 1979, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Kenneth F. Hoffman Rogers, Towers, Bailey, Jones and Gay Post Office Box 1872 Tallahassee, Florida 32302 Robert M. Eisenberg District IV Legal Counsel Post Office Box 2417-F Jacksonville, Florida 32231 Charles Collette Art Forehand, Administrator Assistant General Counsel Office of Community Medical Department of HRS Facilities 1317 Winewood Boulevard Department of HRS Tallahassee, Florida 32301 1323 Winewood Boulevard Tallahassee, Florida 32301
