The Issue Whether Certificate of Need (CON) Application No. 9992, filed by Sun City Hospital, Inc., d/b/a South Bay Hospital to establish a 112-bed replacement hospital in Riverview, Hillsborough County, Florida, satisfies, on balance, the applicable statutory and rule review criteria for approval.
Findings Of Fact The Parties A. South Bay South Bay is a 112-bed general acute care hospital located at 4016 Sun City Center Boulevard, Sun City Center, Florida. It has served south Hillsborough County from that location since its original construction in 1982. South Bay is a wholly-owned for-profit subsidiary of Hospital Corporation of America, Inc. (HCA), a for-profit corporation. South Bay's service area includes the immediate vicinity of Sun City Center, the communities of Ruskin and Wimauma (to the west and east of Sun City Center, respectively), and the communities of Riverview, Gibsonton, and Apollo Beach to the north. See FOF 68-72. South Bay is located on the western edge of Sun City Center. The Sun City Center area is comprised of the age- restricted communities of Sun City Center, Kings Point, Freedom Plaza, and numerous nearby senior living complexes, assisted- living facilities, and nursing homes. This area geographically comprises the developed area along the north side of State Road (SR) 674 between I–75 and U.S. Highway 301, north to 19th Avenue and south to the Little Manatee River. South Bay predominantly serves the residents of the Sun City Center area. In 2009, Sun City Center residents comprised approximately 57% of all discharges from SB. South Bay had approximately 72% market share in Sun City Center zip code 33573. (Approximately 32% of all market service area discharges came from zip code 33573.) South Bay provides educational programs at the hospital that are well–attended by community residents. South Bay provides comprehensive acute care services typical of a small to mid-sized community hospital, including emergency services, surgery, diagnostic imaging, non-invasive cardiology services, and endoscopy. It does not provide diagnostic or therapeutic cardiac catheterization or open-heart surgery. Patients requiring interventional cardiology services or open-heart surgery are taken directly by Hillsborough County Fire Rescue or other transport to a hospital providing those services, such as Brandon Regional Hospital (Brandon) or SJH, or are transferred from SB to one of those hospitals. South Bay has received a number of specialty accreditations, which include accreditation by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), specialty accreditation as an advanced primary stroke center, and specialty accreditation by the Society for Chest Pain. South Bay has also received recognition for its quality of care and, in particular, for surgical infection prevention and outstanding services relating to heart attack, heart failure, and pneumonia. South Bay's 112 licensed beds comprise 104 general medical-surgical beds and eight Intensive Care Unit (ICU) beds. Of the general medical-surgical beds, 64 are in semi-private rooms, where two patient beds are situated side-by-side, separated by a curtain. Forty-eight are in private rooms. Semi- private rooms present challenges in terms of infection control and patient privacy, and are no longer the standard of care in hospital design and construction. Over the years, SB has upgraded its hospital physical plant to accommodate new medical technology, including an MRI suite and state-of-the-art telemetry equipment. South Bay is implementing automated dispensing cabinets on patient floors for storage of medications and an electronic medication administration record system that provides an extra safety measure for dispensing medications. Since 2009, SB has implemented numerous programmatic initiatives that have improved the quality of care. South Bay is converting one wing of the hospital to an orthopedic unit. In 2001, South Bay completed a major expansion of its ED and support spaces, but has not added new beds. Patients presenting to the ED have received high quality of care and timely care. Since 2009, SB has improved its systems of care and triage of patients in the ED to improve patient flow and reduce ED wait times. Overall, South Bay has a reputation of providing high- quality care in a timely manner, notwithstanding problems with its physical plant and location. South Bay's utilization has been high historically. From 2006 to 2009, SB's average occupancy has been 79.5%, 80.3%, 77.2%, and 77.7%, respectively. Its number of patient discharges also increased in that time, from 6,190 in 2006 to 6,540 in 2009, at an average annual rate increase of 1.9%. (From late November until May, the seasonal months, utilization is very high, sometimes at 100% or greater.) Despite its relatively high utilization, SB has also had marginal financial results historically. It lost money in 2005 and 2007, with operating losses of $644,259 in 2005 and $1,151,496 in 2007 and bottom-line net losses of $447,957 (2005) and $698,305 (2007). The hospital had a significantly better year in 2009, with an operating gain of $3,365,113 and a bottom- line net profit of $2,144,292. However, this was achieved largely due to a reduction in bad debt from $11,927,320 in 2008 to $7,772,889 in 2009, an event the hospital does not expect to repeat, and a coincidence of high surgical volume. Its 2010 financial results were lagging behind those of 2009 at the time of the hearing. South Bay's 2009 results amount to an aberration, and it is likely that 2010 would be considerably less profitable. South Bay's marginal financial performance is due, in part, to its disproportionate share of Medicare patients and a disproportionate percentage of Medicare reimbursement in its payor mix. Medicare reimburses hospitals at a significantly lower rate than managed care payors. As noted, SB is organizationally a part of HCA's West Florida Division, and is one of two HCA-affiliated hospitals in Hillsborough County; Brandon is the other. (There are approximately 16 hospitals in this division.) Brandon has been able to add beds over the past several years, and its services include interventional cardiology and open-heart surgery. However, SB and Brandon combined still have fewer licensed beds than either St. Joseph's Hospital or Tampa General Hospital, and fewer than the BayCare Health System- affiliated hospitals in Hillsborough in total. South Bay's existing physical plant is undersized and outdated. See discussion below. Whether it has a meaningful opportunity for expansion and renovation at its 17.5-acre site is a question for this proceeding to resolve. South Bay proposes the replacement and relocation of its facility to the community of Riverview. In 2005, SB planned to establish an 80-bed satellite hospital in Riverview, on a parcel owned by HCA and located on the north side of Big Bend Road between I-75 and U.S. Highway 301. SB filed CON Application No. 9834 in the February 2005 batching cycle. The application was preliminarily denied by AHCA, and SB initially contested AHCA's determination. South Bay pursued the satellite hospital CON at that time because of limited availability of intercompany financing from HCA. By the time of the August 2007 batching cycle, intercompany financing had improved, allowing SB to pursue the bigger project of replacing and relocating the hospital. South Bay dismissed its petition for formal administrative hearing, allowing AHCA's preliminary denial of CON Application No. 9834 to become final, and filed CON Application No. 9992 to establish a replacement hospital facility on Big Bend Road in Riverview. St. Joseph's Hospital St. Joseph's Hospital was founded by the Franciscan Sisters of Allegany, New York, as a small hospital in a converted house in downtown Tampa in 1934. In 1967, SJH opened its existing main hospital facility on Martin Luther King Avenue in Tampa, Florida. St. Joseph's Hospital, Inc., a not-for-profit entity, is the licensee of St. Joseph's Hospital, an acute care hospital located at 3001 West Martin Luther King, Jr., Boulevard, Tampa, Florida. As a not-for-profit organization, SJH's mission is to improve the health care of the community by providing high- quality compassionate care. St. Joseph's Hospital, Inc., is a Medicaid disproportionate share provider and provided $145 million in charity and uncompensated care in 2009. St. Joseph's Hospital, Inc., is licensed to operate approximately 883 beds, including acute care beds; Level II and Level III neonatal intensive care unit (NICU) beds; and adult and child-adolescent psychiatric beds. The majority of beds are semi-private. Services include Level II and pediatric trauma services, angioplasty, and open-heart surgery. These beds and services are distributed among SJH's main campus; St. Joseph's Women's Hospital; St. Joseph's Hospital North, a newer satellite hospital in north Tampa; and St. Joseph's Children's Hospital. Except for St. Joseph's Hospital North, these facilities are land-locked. Nevertheless, SJH has continued to invest in its physical plant and to upgrade its medical technology and equipment. In February 2010, SJH opened St. Joseph's Hospital North, a state-of-the-art, 76-bed satellite hospital in Lutz, north Hillsborough County, at a cost of approximately $225 million. This facility is approximately 14 miles away from the main campus. This followed the award of CON No. 9610 to SJH for the establishment of St. Joseph's Hospital North, which was unsuccessfully opposed by University Community Hospital and Tampa General Hospital, two existing hospital providers in Tampa. Univ. Cmty. Hosp., Inc., d/b/a Univ. Cmty. Hosp. v. Agency for Health Care Admin., Case Nos. 03-0337CON and 03-0338CON. St. Joseph's Hospital North operates under the same license and under common management. St. Joseph's Hospital, Inc., is also the holder of CON No. 9833 for the establishment of a 90-bed state-of-the-art satellite hospital on Big Bend Road, Riverview, Hillsborough County. These all private beds include general medical-surgical beds, an ICU, and a 10-bed obstetrical unit. On October 21, 2009, the Agency revised CON No. 9833 with a termination date of October 21, 2012. This project was unsuccessfully opposed by TG, SB, and Brandon. St. Joseph's Hosp., Inc. v. Agency for Health Care Admin., Case No. 05-2754CON, supra. St. Joseph's Hospital anticipates construction beginning in October 2012 and opening the satellite hospital, to be known as St. Joseph's Hospital South, in early 2015. This hospital will be operating under SJH's existing license and Medicare and Medicaid provider numbers and will in all respects be an integral component of SJH. The implementation of St. Joseph's Hospital South is underway. SJH has contracted with consultants, engineers, architects, and contractors and has funded the first phase of the project with $6 million, a portion of which has been spent. The application for CON No. 9833 refers to "evidence- based design" and the construction of a state-of-the-art facility. (The design of St. Joseph's Hospital North also uses "evidence-based design.") St. Joseph's Hospital South will have all private rooms, general surgery operating rooms as well as endoscopy, and a 10-bed obstetrics unit. Although CON No. 9833 is for a project involving 228,810 square feet of new construction, SJH intends to build a much larger facility, approximately 400,000 square feet on approximately 70 acres. St. Joseph's Hospital Main's physical plant is 43 years old. The majority of the patient rooms are semi–private and about 35% of patients admitted at this hospital received private rooms. Notwithstanding the age of its physical plant and its semi–private bed configuration, SJH has a reputation of providing high quality of care and is a strong competitor in its market. St. Joseph's Hospital, Inc., has two facility expansions currently in progress at its main location in Tampa: a new five-story building that will house SJH neonatal intensive care unit, obstetrical, and gynecology services; and a separate, two-story addition with 52 private patient rooms. Of the 52 private patient rooms, 26 will be dedicated to patients recovering from orthopedic surgery, and will be large enough to allow physical therapy to be done in the patient room itself. The other 26 rooms will be new medical-surgical ICU beds at the hospital. At the same time that SJH expands its main location, it is pursuing a strategic plan whereby the main location is the "hub" of its system, with community hospitals and health facilities located in outlying communities. As proposed in CON Application No. 9610, St. Joseph's Hospital North was to be 240,000 square feet in size. Following the award of CON No. 9610, SJH requested that AHCA modify the CON to provide for construction of a larger facility. In its modification request, SJH requested to establish a large, state- of-the-art facility with all private patient rooms, and the desirability of private patient rooms as a matter of infection control and patient preference. AHCA granted the modification. St. Joseph's Hospital, Inc., thereafter planned to construct St. Joseph's Hospital North to be four stories in height. The plan was opposed. St. Joseph's Hospital, Inc., offered to construct a three-story building, large enough horizontally to accommodate the CON square footage modification. The offer was accepted. St. Joseph's Hospital, Inc., markets St. Joseph's Hospital North as "The Hospital of the Future, Today." The hospital was constructed using "evidence-based design" to maximize operational efficiencies and enhance the healing process of its residents –- recognizing, among other things, the role of the patient's family and friends. The facility's patient care units are all state-of-the-art and include, for example, obstetrical suites in which a visiting family member can spend the night. A spacious, sunlit atrium and a "healing garden" are also provided. The hospital's dining facility is frequented by community residents. In addition, SJH owns a physician group practice under HealthPoint Medical Group, a subsidiary of St. Joseph's Health Care Center, Inc. The group practice has approximately 19 different office locations, including several within the service area for the proposed hospital. The group includes approximately 106 physicians. However, most of the office locations are in Tampa, and the group does not have an office in Riverview, although there are plans to expand locations to include the Big Bend Road site. St. Joseph's Hospital, Inc., anticipates having to establish a new medical staff for St. Joseph's Hospital South, and will build a medical office building at the site for the purpose of attracting physicians. It further anticipates that some number of physicians on SB's existing medical staff will apply for privileges at St. Joseph's Hospital South. St. Joseph's Hospital, Inc., is the market leader among Hillsborough County hospitals and is currently doing well financially, as it has historically. For 2010, St. Joseph's Hospital Main's operating income was approximately $78 million. Organizationally, SJH has a parent organization, St. Joseph's Health Care Center, Inc., and is one of eight hospitals in the greater Tampa Bay area affiliated with BayCare. On behalf of its member hospitals, BayCare arranges financing for capital projects, provides support for various administrative functions, and negotiates managed care contracts that cover its members as a group. St. Joseph's Hospital characterizes fees paid for BayCare services as an allocation of expenses rather than a management fee for its services. In 2009, SJH paid BayCare approximately $42 million for services. St. Joseph's Hospital is one of three BayCare affiliates in Hillsborough County. The other two are St. Joseph's Hospital North and South Florida Baptist Hospital, a community hospital in Plant City. St. Joseph's Hospital South would be the fourth BayCare hospital in the county. Tampa General The Hillsborough County Hospital Authority, a public body appointed by the county, operated Tampa General Hospital until 1997. In that year, TG was leased to Florida Health Sciences Center, Inc., a non-profit corporation and the current hospital licensee. Tampa General is a 1,018-bed acute care hospital located at 2 Columbia Drive, Davis Island, Tampa, Florida. In addition to trauma surgery services, TG provides tertiary services, such as angioplasty, open-heart surgery, and organ transplantation. Tampa General operates the only burn center in the area. A rehabilitation hospital is connected to the main hospital, but there are plans to relocate this facility. Tampa General owns a medical office building. Tampa General is JCAHO accredited and has received numerous honors. Tampa General provides high-quality of care. Approximately half of the beds at TG are private rooms. Tampa General's service area for non-tertiary services includes all of Hillsborough County. Tampa General is also the teaching hospital for the University of South Florida's College of Medicine. As a statutory teaching hospital, TG has 550 residents and funds over 300 postgraduate physicians in training. Tampa General is the predominant provider of services to Medicaid recipients and the medically indigent of Hillsborough County. It is considered the only safety-net hospital in Hillsborough County. (A safety net hospital provides a disproportionate amount of care to indigent and underinsured patients in comparison to other hospitals.) A high volume of indigent (Medicaid and charity) patients are discharged from TG. In 2009, the costs TG incurred treating indigent patients exceeded reimbursement by $56.5 million. Approximately 33% of Tampa General's patients are Medicare patients and 25% commercial. Tampa General has grown in the past 10 years. It added 31 licensed acute care beds in 2004 and 82 more since SB's application was filed in 2007. In addition, the Bayshore Pavilion, a $300-million project, was recently completed. The project enlarged TG's ED, and added a new cardiovascular unit, a new neurosciences and trauma center, a new OB-GYN floor, and a new gastrointestinal unit. Facility improvements are generally ongoing. Tampa General's capital budget for 2011 is approximately $100 million. In 2010, TG's operating margin was approximately $43 million and a small operating margin in 2011. AHCA AHCA is the state agency that administers the CON law. Jeff Gregg testified that during his tenure, AHCA has never preliminarily denied a replacement hospital CON application or required consideration of alternatives to a replacement hospital. Mr. Gregg opined that the lack of alternatives or options is a relevant consideration when reviewing a replacement hospital CON application. T 468. The Agency's State Agency Action Report (SAAR) provides reasons for preliminarily approving SB's CON application. During the hearing, Mr. Gregg testified, in part, that the primary reasons for preliminary approval were issues related to quality of care "because the facility represents itself as being unable to expand or adapt significantly to the rapidly changing world of acute care. This is consistent with what [he has] heard about other replacement hospitals." T 413. Mr. Gregg also noted that SB focused on improving access "[a]nd as the years go by, it is reasonable to expect that the population outside of Sun City Center, the immediate Sun City Center area, will steadily increase and improve access for more people, and that's particularly true because this application includes both a freestanding emergency department and a shuttle service for the people in the immediate area. And that was intended to address their concerns based upon the fact that they have had this facility very conveniently located for them in the past at a time when there was little development in the general south Hillsborough area. But the applicant wants to position itself for the expected growth in the future, and we think has made an excellent effort to accommodate the immediate interests of Sun City Center residents with their promises to do the emergency, freestanding emergency department and the shuttle service so that the people will continue to have very comfortable access to the hospital." T 413-14. Mr. Gregg reiterated "that the improvements in quality outweigh any concerns that [the Agency] should have about the replacement and relocation of this facility; that if this facility were to be forced to remain where it is, over time it would be reasonable to expect that quality would diminish." T 435. For AHCA, replacement hospital applications receive the same level of scrutiny as any other acute care hospital applications. T 439-40. South Bay's existing facility and site South Bay is located on the north side of SR 674, an east-west thoroughfare in south Hillsborough County. The area around the hospital is "built out" with predominantly residential development. Sun City Center, an age-restricted (55 and older) retirement community, is located directly across SR 674 from the hospital as well as on the north side of SR 674 to the east of the hospital. Other residential development is immediately to the west of the hospital on the north side of SR 674. See FOF 3-6. Sun City Center is flanked by two north-south arterial roadways, I-75 to the west and U.S. Highway 301 to the east, both of which intersect with SR 674. The community of Ruskin is situated generally around the intersection of SR 674 and U.S. 41, west of I-75. The community of Wimauma is situated along SR 674 just east of U.S. Highway 301. South Bay is located in a three-story building that is well–maintained and in relatively good repair. The facility is well laid out in terms of design as a community hospital. Patients and staff at SB are satisfied with the quality of care and scope of acute care services provided at the hospital. Notwithstanding current space limitations, and problems in the ICU, see FOF 77-82, patients receive a high quality of care. One of the stated reasons for replacement is with respect to SB's request to have all private patient rooms in order to be more competitive with St. Joseph's Hospital South. South Bay's inpatient rooms are located within the original construction. The hospital is approximately 115,800 square feet, or a little over 1,000 square feet per inpatient bed. By comparison, small to mid-sized community hospitals built today are commonly 2,400 square feet per inpatient bed on average. All of SB's patient care units are undersized by today's standards, with the exception of the ED. ICU patients, often not ambulatory, require a higher level of care than other hospital patients. The ICU at SB is not adequate to meet the level of care required by the ICU patient. SB's ICU comprises eight rooms with one bed apiece. Eight beds are not enough. As Dr. Ksaibati put it at hearing: "Right now we have eight and we are always short . . . double . . . the number of beds, that's at least [the] minimum [t]hat I expect we are going to have if we go to a new facility." T 198-99 (emphasis added). The shortage of beds is not the only problem. The size of SB's ICU rooms is too small. (Problems with the ICU have existed at least since 2006.) Inadequate size prohibits separate, adjoining bathrooms. For patients able to leave their beds, therefore, portable bathroom equipment in the ICU room is required. Inadequate size, the presence of furniture, and the presence of equipment in the ICU room creates serious quality of care issues. When an EKG is conducted, the nurse cannot be present in the room. Otherwise, there would be no space for the EKG equipment. It is difficult to intubate a patient and, at times, "extremely dangerous." T 170. A major concern is when a life-threatening problem occurs that requires emergency treatment at the ICU patient's bedside. For example, when a cardiac arrest "code" is called, furniture and the portable bathroom equipment must be removed before emergency cardiac staff and equipment necessary to restore the function of the patient's heart can reach the patient for the commencement of treatment. Comparison to ICU rooms at other facilities underscores the inadequate size of SB's ICU rooms. Many of the ICU rooms at Brandon are much larger -- more than twice the size of SB's ICU rooms. Support spaces are inadequate in most areas, resulting in corridors (at times) being used for inappropriate storage. In addition, the hospital's general storage is inadequate, resulting in movable equipment being stored in mechanical and electrical rooms. Of the medical-surgical beds at SB, 48 are private and 64 are semi-private. The current standard in hospital design is for acute care hospitals to have private rooms exclusively. Private patient rooms are superior to semi-private rooms for infection control and patient well-being in general. The patient is spared the disruption and occasional unpleasantness that accompanies sharing a patient room –- for example, another patient's persistent cough or inability to use the toilet (many of SB's semi-private rooms have bedside commodes). Private rooms are generally recognized as promoting quality of care. South Bay's site is approximately 17.5 acres, bordered on all sides by parcels not owned by either SB or by HCA- affiliated entities. The facility is set back from SR 674 by a visitor parking lot. Proceeding clockwise around the facility from the visitor parking lot, there is a small service road on the western edge of the site; two large, adjacent ponds for stormwater retention; the rear parking lot for ED visitors and patients; and another small service road which connects the east side of the site to SR 674, and which is used by ambulances to access the ED. Dedicated parking for SB's employees is absent. A medical office building (MOB), which is not owned by SB, is located to the north of the ED parking lot. The MOB houses SB's Human Resources Department as well as medical offices. Most of SB's specialty physicians have either full or part-time offices in close proximity to SB. Employee parking is not available in the MOB parking lot. Some of SB's employees park in a hospital-owned parking lot to the north of the MOB, and then walk around the MOB to enter the hospital. South Bay's CEO and management employees park on a strip of a gravel lot, which is rented from the Methodist church to the northeast of the hospital's site. In 2007, as part of the CON application to relocate, SB commissioned a site and facility assessment (SFA) of the hospital. The SFA was prepared for the purpose of supporting SB's replacement hospital application and has not been updated since its preparation in 2007. The architects or engineers who prepared the SFA were not asked to evaluate proposed options for expansion or upgrade of SB on-site. However, the SFA concludes that the SB site has been built out to its maximum capacity. On the other hand, the SFA concluded that the existing building systems at SB met codes and standards in force when constructed and are in adequate condition and have the capacity to meet the current needs of the hospital. The report also stated that if SB wanted to substantially expand its physical plant to accommodate future growth, upgrades to some of the existing building systems likely would be required. Notwithstanding these reports and relative costs, expansion of SB at its existing site is not realistic or cost- effective as compared to a replacement hospital. Vertical expansion is complicated by two factors. First, the hospital's original construction in 1982 was done under the former Southern Standard Building Code, which did not contain the "wind-loading" requirements of the present-day Florida Building Code. Any vertical expansion of SB would not only require the new construction to meet current wind-loading requirements, but would also require the original construction to be retrofitted to meet current wind-loading requirements (assuming this was even possible as a structural matter). Second, if vertical expansion were to meet current standards for hospital square footage, the new floor or floors would "overhang" the smaller existing construction, complicating utility connections from the lower floor as well as the placement of structural columns to support the additional load. The alternative (assuming feasibility due to current wind-loading requirements) would be to vertically stack patient care units identical to SB's existing patient care units, thereby perpetuating its undersized and outdated design. Vertical expansion at SB has not been proposed by the Gould Turner Group (Gould Turner), which did a Master Facility Plan for SB in May 2010, but included a new patient bed tower, or by HBE Corporation (HBE). Horizontal expansion of SB is no less complicated. The hospital would more than double in size to meet the modern-day standard of 2,400 square feet per bed, and its site is too small for such expansion. It is apparent that such expansion would displace the visitor parking lot if located to the south of the existing building, and likely have to extend into SR 674 itself. South Bay's architectural consultant expert witness substantiated that replacing SB is justified as an architectural matter, and that the facility cannot be brought up to present-day standards at its existing location. According to Mr. Siconolfi, the overall building at SB is approximately half of the total size that would normally be in place for a new hospital meeting modern codes and industry standards. The more modest expansions offered by Gould Turner and HBE are still problematic, if feasible at all. Moreover, with either proposal, SB would ultimately remain on its existing 17.5-acre site, with few opportunities to expand further. Gould Turner's study was requested by SB's CEO in May 2010, to determine whether and to what extent SB would be able to expand on-site. (Gould Turner was involved with SB's recent ED expansion project area.) The resulting Master Facility Plan essentially proposes building a new patient tower in SB's existing visitor parking lot, to the left and right of the existing main entrance to SB. This would require construction of a new visitor parking lot in whatever space remained in between the new construction and SR 674. The Master Facility Plan contains no discussion of the new impervious area that would be added to the site and the consequential requirement of additional stormwater capacity, assuming the site can even accommodate additional stormwater capacity. This study also included a new 12-bed ICU and the existing ICU would be renovated into private patient rooms. For example, "[t]he second floor would be all telemetry beds while the third floor would be a combination of medical/surgical, PCU, and telemetry beds." In Gould Turner's drawings, the construction itself would be to the left and to the right of the hospital's existing main entrance. Two scenarios are proposed: in the first, the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 114 licensed beds (including two new beds), all private; in the second, some of the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 146 licensed beds (adding 34 beds), of which 32 would be semi-private. South Bay did not consider Gould Turner's alternative further or request additional, more detailed drawings or analysis, and instead determined to pursue the replacement hospital project, in part, because it was better not to "piecemeal" the hospital together. Mr. Miller, who is responsible for strategic decisions regarding SB, was aware of, but did not review the Master Facility Plan and believes that it is not economically feasible to expand the hospital. St. Joseph's Hospital presented testimony of an architect representing the hospital design/build firm of HBE, to evaluate SB's current condition, to provide options for expansion and upgrading on-site, and to provide a professional cost estimate for the expansion. Mr. Oliver personally inspected SB's site and facility in October 2010 and reviewed numerous reports regarding the facility and other documents. Mr. Oliver performed an analysis of SB's existing physical plant and land surrounding the hospital. HBE's analysis concluded that SB has the option to expand and upgrade on-site, including the construction of a modern surgical suite, a modern 10-bed ICU, additional elevators, and expansion and upgrading of the ancillary support spaces identified by SB as less than ideal. HBE's proposal involves the addition of 50,000 square feet of space to the hospital through the construction of a three-story patient tower at the south side of the hospital. The additional square footage included in the HBE proposal would allow the hospital to convert to an all-private bed configuration with either 126 private beds by building out both second and third floors of a new patient tower, or to 126 private beds if the hospital chose to "shell in" the third floor for future expansion. Under the HBE proposal, SB would have the option to increase its licensed bed capacity 158 beds by completing the second and third floors of the new patient tower (all private rooms) while maintaining the mix of semi-private and private patient rooms in the existing bed tower. The HBE proposal also provides for a phased renovation of the interior of SB to allow for an expanded post-anesthesia care unit, expanded laboratory, pharmacy, endoscopy, women's center, prep/hold/recovery areas, central sterile supply and distribution, expanded dining, and a new covered lobby entrance to the left side of the hospital. Phasing of the expansion would permit the hospital to remain in operation during expansion and renovation with minimal disruption. During construction the north entrance of the hospital would provide access through the waiting rooms that are currently part of the 2001 renovated area of the hospital with direct access to the circulation patterns of the hospital. The HBE proposal also provides for the addition of parking to bring the number of parking spaces on-site to 400. The HBE proposal includes additional stormwater retention/detention areas that could serve as attractive water features and, similar to the earlier civil engineering reports obtained by SB, proposes the construction of a parking garage at the rear of the facility should additional parking be needed in the future. However, HBE essentially proposes the alternative already rejected by SB: construction of a new patient tower in front of the existing hospital. Similar to Gould Turner, HBE proposes new construction to the left and right of the hospital's existing lobby entrance and the other changes described above. HBE's proposal recognizes the need for additional stormwater retention: the stand of trees that sets off the existing visitor parking lot from SR 674 would be uprooted; in their place, a retention pond would be constructed. Approval of the Southwest Florida Water Management District (SWFWMD) would be required for the proposal to be feasible. Assuming the SWFWMD approved the proposal, the retention pond would have to be enclosed by a fence. This would then be the "face" of the hospital to the public on SR 674. HBE's proposal poses significant problems. The first floor of the three-story component would be flush against the exterior wall of the hospital's administrative offices, where the CEO and others currently have windows with a vista of the front parking lot and SR 674. Since the three-story component would be constructed first in the "phased" construction, and since the hospital's administration has no other place to work in the existing facility, the CEO and other management team would have to work off-site until the new administrative offices (to the left of the existing hospital lobby entrance) were constructed. The existing main entrance to the hospital, which faces SR 674, would be relocated to the west side of the hospital once construction was completed in its entirety. In the interim, patients and visitors would have to enter the facility from the rear, as the existing main entrance would be inaccessible. This would be for a period of months, if not longer. For the second and third floors, HBE's proposal poses two scenarios. Under the first, SB would build the 24 general medical-surgical beds on the tower's second floor, but leave the third floor as "shelled" space. This would leave SB with a total of 106 licensed beds, six fewer than it has at present. Further, since HBE's proposal involves a second ICU at SB, 18 of the 106 beds are ICU beds, leaving 88 general medical-surgical beds. By comparison, SB currently has 104 general medical- surgical beds, meaning that it loses 16 general medical-surgical beds under HBE's first scenario. In the second scenario, SB would build 24 general medical-surgical beds on the third floor as well, and would have a total of 126 licensed beds. Since 18 of those beds would be ICU beds, SB would have 108 general medical-surgical beds, or only four more than it has at present. Further, the proposal does not make SB appreciably bigger. The second and third floors in HBE's proposal are designed in "elongated" fashion such that several rooms may be obscured from the nursing station's line of sight by a new elevator, which is undesirable as a matter of patient safety and security. Further, construction of the second and third floors would be against the existing second and third floors above the lobby entrance's east side. This would require 12 existing private patient rooms to be taken out of service due to loss of their vista windows. At the same time, the new second and third floors would be parallel to, but set back from, existing semi- private patient rooms and their vista windows along the southeast side of the hospital. This means that patients and visitors in the existing semi-private patient rooms and patients and visitors in the new private patient rooms on the north side of the new construction may be looking into each other's rooms. HBE's proposal also involves reorganization and renovation of SB's existing facility, and the demolition and disruption that goes with it. To accommodate patient circulation within the existing facility from the ED (at the north side of the hospital) to the new patient tower (at the south side of the hospital), two new corridors are proposed to be routed through and displace the existing departments of Data Processing and Medical Records. Thus, until the new administrative office space would be constructed, Data Processing and Medical Records (along with the management team) would have to be relocated off-site. Once the new first floor of the three-story component is completed, the hospital's four ORs and six PACU beds will be relocated there. In the existing vacated surgical space, HBE proposes to relocate SB's existing cardiology unit, thus requiring the vacated surgical space to be completely reconfigured (building a nursing station and support spaces that do not currently exist in that location). In the space vacated by the existing cardiology unit, HBE proposed expanding the hospital's clinical laboratory, meaning extensive demolition and reconfiguration in that area. The pharmacy is proposed to be relocated to where the existing PACU is located, requiring the building of a new pharmacy with a secure area for controlled substances, cabinets for other medications, and the like. The vacated existing pharmacy is in turn proposed to be dedicated to general storage, which involves still more construction and demolition, tearing out the old pharmacy to make the space suitable for general storage. HBE's proposal is described as a "substantial upgrade" of SB, but it was stated that a substantial upgrade could likewise be achieved by replacing the facility outright. This is SB's preference, which is not unreasonable. There have been documented problems with other hospital expansions, including patient infection due to construction dust. South Bay's proposal South Bay proposes to establish a 112-bed replacement hospital on a 39-acre parcel (acquired in 2005) located in the Riverview community, on the north side of Big Bend Road between I-75 and U.S. Highway 301. The hospital is designed to include 32 observation beds built to acute care occupancy standards, to be available for conversion to licensed acute care beds should the need arise. The original total project cost of $215,641,934, calculated when the application was filed in October 2007 has been revised to $192,967,399. The decrease in total project cost is largely due to the decrease in construction costs since 2007. The parties stipulated that SB's estimated construction costs are reasonable. The remainder of the project budget is likewise reasonable. The budgeted number for land, $9,400,000, is more than SB needs: the 39-acre parcel is held in its behalf by HCA Services of Florida, Inc., and was acquired in March 2005 for $7,823,100. An environmental study has been done, and the site has no environmental development issues. The original site preparation budgeted number of $5 million has been increased to $7 million to allow for possible impact fees, based on HCA's experience with similar projects. Building costs, other than construction cost, flow from the construction cost number as a matter of percentages and are reasonable. The equipment costs are reasonable. Construction period interest as revised from the original project budget is approximately $4 million less, commensurate with the revised project cost. Other smaller numbers in the budget, such as contingencies and start-up costs, were calculated in the usual and accepted manner for estimated project costs and are reasonable. South Bay's proposed service area (PSA) comprises six zip codes (33573 (Sun City Center), 33570 (Ruskin), 33569 (Riverview), 33598 (Wimauma), 33572 (Apollo Beach), and 33534 (Gibsonton)) in South Hillsborough County. These six zip codes accounted for 92.2% of SB's discharges in 2006. The first three zip codes, which include Riverview (33569), accounted for 76.1% of the discharges. Following the filing of the application in 2007, the U.S. Postal Service subdivided the former zip code 33569 into three zip codes: 33569, 33578, and 33579. (The proposed service area consists of eight zip codes.) The same geographic area comprises the three Riverview zip codes taken together as the former zip code 33569. In 2009, the three Riverview zip codes combined accounted for approximately 504 to 511/514 of SB's discharges, with 589 discharges in 2006 from the zip code 33569. Of SB's total discharges in 2009, approximately 8 to 9% originated from these three zip codes. In 2009, approximately 7,398 out of 14,424 market/service-area discharges, or approximately 51% of the total market discharges came from the three southern zip codes, 33573 (Sun City Center), 33570 (Ruskin), and 33598 (Wimauma). Also, approximately 81% of SB's discharges in 2009 originated from the same three zip codes. (The discharge numbers for SB for 2009 presented by St. Joseph's Hospital and SB are similar. See SB Ex. 9 at 11 and SJH Ex. 4 at 8-9. See also TG Ex. 4 at 3-4.) In 2009, SB and Brandon had an approximate 68% market share for the eight zip codes. See FOF 152-54 and 162-65 for additional demographic data. St. Joseph's Hospital had an approximate 5% market share within the service area and using 2009-2010 data, TG had approximately 6% market share in zip code 33573 and an overall market share in the three Riverview zip codes of approximately 19% and a market share of approximately 23% in zip code 33579. South Bay's application projects 37,292 patient days in year 1; 39,581 patient days in year 2; and 41,563 patient days in year 3 for the proposed replacement hospital. The projection was based on the January 2007 population for the service area as reflected in the application, and what was then a projected population growth rate of 20.8% for the five-year period 2007 to 2012. These projections were updated for the purposes of hearing. See FOF 246-7. The application also noted a downturn in the housing market, which began in 2007 and has continued since then. The application projected a five-year (2007-2012) change of 20.8% for the original five zip codes. At hearing, SB introduced updated utilization projections for 2010-2015, which show the service area population growing at 15.3% for that five-year period. South Bay's revised utilization projections for 2015- 2017 (projected years 1-3 of the replacement hospital) are 28,168 patient days in year 1; 28,569 patient days in year 2; and 29,582 patient days in year 3. The lesser utilization as compared with SB's original projections is partly due to slowed population growth, but predominantly due to SB's assumption that St. Joseph's Hospital will build its proposed satellite hospital in Riverview, and that SB will accordingly lose 20% of its market share. The revised utilization projections are conservative, reasonable, and achievable. With the relocation, SB will be more proximate to the entirety of its service area, and will be toward the center of population growth in south Hillsborough County. In addition, it will have a more viable and more sustainable hospital operation even with the reduced market share. Its financial projections reflect a better payor mix and profitability in the proposed location despite the projection of fewer patient days. Conversely, if SB remains in Sun City Center, it is subject to material operating losses even if its lost market share in that location is the same 20%, as compared to the 30 to 40% it estimates that it would lose in competition with St. Joseph's Hospital South. South Bay's medical staff and employees support the replacement facility, notwithstanding that their satisfaction with SB is very high. The proposal is also supported by various business organizations, including the Riverview Chamber of Commerce and Ruskin Chamber of Commerce. However, many of the residents of Sun City Center who testified opposed relocation of SB. See FOF 210-11. South Bay will accept several preconditions on approval of its CON application: (1) the location of SB on Big Bend Road in Riverview; (2) combined Medicaid and charity care equal to 7.0% of gross revenues; and (3) operating a free- standing ED at the Sun City location and providing a shuttle service between the Sun City location and the new hospital campus ("for patients and visitors"). SB Ex. 46, Schedule C. In its SAAR, the Agency preliminarily approved the application including the following: This approval includes, as a component of the proposal: the operation of a freestanding emergency department on a 24-hour, seven-day per week basis at the current Sun City location, the provision of extended hours shuttle service between the existing Sun City Center and the new campuses to transport patients and visitors between the facilities to locations; and the offering of primary care and diagnostic testing at the Sun City Center location. These components are required services to be provided by the replacement hospital as approved by the Agency. Mr. Gregg explained that the requirement for transport of patients and visitors was included based on his understanding of the concerns of the Sun City Center community for emergency as well as routine access to hospital services. Notwithstanding the Agency statement that the foregoing elements are required, the Agency did not condition approval on the described elements. See SB Ex. 12 at 39 and 67. Instead, the Agency only required SB, as a condition of approval, to provide a minimum of 7.0% of the hospital's patient days to Medicaid and charity care patients. (As noted above, SB's proposed condition says 7.0% of gross revenues.) Because conditions on approval of the CON are generally subject to modification, there would be no legal mechanism for monitoring or enforcement of the aspects of the project not made a condition of approval. If the Agency approves SB's CON application, the Agency should condition any approval based on the conditions referenced above, which SB set forth in its CON application. SB Ex. 12 at 39 and 67. See also T 450 ("[The Agency] can take any statement made in the application and turn that into a condition," although conditions may be modified.1 St. Joseph's Hospital and Tampa General are critical of SB's offer of a freestanding ED and proposed shuttle transportation services. Other than agreeing to condition its CON application by offering these services, SB has not evaluated the manner in which these services would be offered. South Bay envisions that the shuttle service (provided without charge) would be more for visitors than it would be for patients and for outpatients or patients that are ambulatory and able to ride by shuttle. Other patients would be expected to be transported by EMS or other medical transport. As of the date of hearing, Hillsborough County does not have a protocol to address the transport of patients to a freestanding ED. South Bay contacted Hillsborough County Fire Rescue prior to filing its CON application and was advised that they would support SB's establishment of a satellite hospital on Big Bend Road, but did not support the closure and relocation of SB, even with a freestanding ED left behind. See FOF 195-207. At hearing, SB representatives stated that SB would not be closed if the project is denied. Compliance with applicable statutory and rule criteria Section 408.035(1): The need for the health care facilities and health services being proposed The need for SB itself and at its current location is not an issue in this case. That need was demonstrated years ago, when SB was initially approved. For the Agency, consideration of a replacement hospital application "diminishes the concept of need in [the Agency's] weighing and balancing of criteria in this case." There is no express language in the CON law, as amended, which indicates that CON review of a replacement hospital application does not require consideration of other statutory review criteria, including "need," unless otherwise stipulated. Replacement hospital applicants, like SB, may advocate the need for replacement rather than expansion or renovation of the existing hospital, but a showing of "need" is still required. Nevertheless, institution-specific factors may be relevant when "need" is considered. The determination of "need" for SB's relocation involves an analysis of whether the relocation of the hospital as proposed will enhance access or quality of care, and whether the relocation may result in changes in the health care delivery system that may adversely impact the community, as well as options SB may have for expansion or upgrading on-site. In this case, the overall "need" for the project is resolved, in part, by considering, in conjunction with weighing and balancing other statutory criteria, including quality of care, whether the institution-specific needs of SB to replace the existing hospital are more reasonable than other alternatives, including renovation and whether, if replacement is recommended, the residents of the service area, including the Sun City Center area, will retain reasonable access to general acute care hospital services. The overall need for the project has not been proven. See COL 360-70 for ultimate conclusions of law regarding the need for this project. Section 408.035(2): The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant The "service district" in this case is acute care subdistrict 6-1, Hillsborough County. See Fla. Admin. Code R. 59C-2.100. The acute care hospital services SB proposes to relocate to Big Bend Road are available to residents of SB's service area. Except as otherwise noted herein with respect to constraints at SB, there are no capacity constraints limiting access to acute care hospital services in the subdistrict. The availability of acute care services for residents of the service area, and specifically the Riverview area, will increase with the opening of St. Joseph's Hospital South. All existing providers serving the service area provide high quality of care. Within the service district as a whole, SB proposes to relocate the existing hospital approximately 5.7 linear miles north of its current location and approximately 7.7 miles using I-75, one exit north. South Bay would remain in south Hillsborough County, as well as the southernmost existing health care facility in Hillsborough County, along with St. Joseph's Hospital South when it is constructed. The eight zip codes of SB's proposed service area occupy a large area of south Hillsborough County south of Tampa (to the northwest) and Brandon (to the northeast). Included are the communities of Gibsonton, Riverview, Apollo Beach, Ruskin, Sun City Center, and Wimauma. The service area is still growing despite the housing downturn, with a forecast of 15.3% growth for the five-year period 2010 to 2015. The service area's population is projected to be 168,344 in 2015, increasing from 145,986 in 2010. The service area is currently served primarily by SB, which is the only existing provider in the service area, and Brandon. For non-tertiary, non-specialty discharges from the service area in 2009, SB had approximately 40% market share, including market share in the three Riverview zip codes of approximately 10% (33569), 6% (33578), and 16% (33579). Brandon had approximately 28% of the market in the service area, and a market share in the three Riverview zip codes of approximately 58% (33569), 46% (33578), and 40% (33579). Thus, SB and Brandon have approximately a 61% market share in the Riverview zip codes and approximately a 68% market share service area-wide. The persuasive evidence indicates that Riverview is the center of present and future population in the service area. It is the fastest-growing part of the service area overall and the fastest-growing part of the service area for patients age 65 and over. Of the projected 168,334 residents in 2015, the three Riverview zip codes account for 80,779 or nearly half the total population. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County. At the same time, it will be between seven and eight minutes farther away from Sun City Center. In conjunction with St. Joseph's Hospital South when constructed, SB's proposed relocation will enhance the availability and accessibility of existing health care facilities and health services in south Hillsborough County, especially for the Riverview-area residents. However, it is likely that access will be reduced for the elderly residents of the Sun City Center area needing general acute care hospital services. St. Joseph's Hospital and Tampa General contend that: (1) it would be problematic to locate two hospitals in close proximity in Riverview (those being St. Joseph's Hospital South and the relocated SB hospital) and (2) SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. St. Joseph's Hospital seems to agree that the utilization projections for SB's replacement hospital are reasonable. Also, St. Joseph's Hospital expects St. Joseph's Hospital South to reach its utilization as projected in CON Application No. 9833, notwithstanding the decline in population growth and the proposed establishment of SB's proposed replacement hospital, although the achievement of projected utilization may be extended. There are examples of Florida hospitals operating successfully in close proximity. The evidence at hearing included examples where existing unaffiliated acute care hospitals in Florida operate within three miles of each another; in two of those, the two hospitals are less than one-half mile apart. These hospitals have been in operation for years. However, some or all of the examples preceded CON review. There are also demographic differences and other unique factors in the service areas in the five examples that could explain the close proximity of the hospitals. Also, in three of the five examples, at least one of the hospitals had an operating loss and most appeared underutilized. One such example, however, is pertinent in this case: Tallahassee Memorial Hospital and Capital Regional Medical Center (CRMC) in Tallahassee, which are approximately six minutes apart by car. CRMC was formerly Tallahassee Community Hospital (TCH), a struggling, older facility with a majority of semi-private patient rooms, similar to South Bay. Sharon Roush, SB's current CEO, became CEO at TCH in 1999. As she explained at hearing, HCA was able to successfully replace the facility outright on the same parcel of land. TCH was renamed CRMC and re-opened as a state-of-the-art hospital facility with all private rooms. The transformation improved the hospital's quality of care and its attractiveness to patients, better enabling it to compete with Tallahassee Memorial Hospital. St. Joseph's Hospital and Tampa General also contend that SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. When the application was filed in 2007, Sun City Center residents in zip code 33573 accounted for approximately 52% of all acute care discharges to SB and SB had a 69% market share. By 2009, Sun City Center residents accounted for approximately 57% of all SB discharges and SB had approximately 72% market share. Approximately half of the age 65-plus residents in the service area reside within the Sun City Center area. This was true in 2010 and will continue to be true in 2015. The projected percentage of the total population in the Sun City Center zip code over 65 for 2009-2010 is approximately 87%. This percentage is expected to grow to approximately 91% by 2015. Sun City Center also has a high percentage of residents who are over the age of 75. Demand for acute care hospital services is largely driven by the age of the population. The age 65-plus population utilizes acute-care hospital services at a rate that is approximately two to three times that of the age 64 and younger population. South Bay plans to relocate its hospital from the Sun City Center zip code 33573 much closer to an area (Riverview covering three zip codes) that has a less elderly population. Elderly patients are known to have more transportation difficulties than other segments of the population, particularly with respect to night driving and congested traffic in busy areas. Appropriate transportation services for individuals who are transportation disadvantaged typically require door-to- door pickup, but may vary from community to community. At the time of preliminary approval of SB's proposed relocation, the Agency was not provided and did not take into consideration data reflecting the percentage of persons in Sun City Center area who are aged 65 or older or aged 75 and older. The Agency was not provided data reflecting the number of residents within the Sun City Center area who reside in nursing homes or assisted living facilities. In general, the 2010 median household incomes and median home values for the residents of Sun City Center, Ruskin, and Gibsonton are materially less than the income and home values for the residents from the other service areas. Freedom Village is located near Sun City Center and within walking distance to SB. Freedom Village is comprises a nursing home, assisted living, and senior independent living facilities, and includes approximately 120 skilled nursing facility beds, 90 assisted living beds, and 30 Alzheimer's beds. Freedom Village is home to approximately 1,500 people. There are additional skilled nursing and assisted living facilities within one to two miles of SB comprising approximately an additional 400 to 500 skilled nursing facility beds and approximately 1,500 to 2,000 residents in assistant or independent living facilities. Residents in skilled nursing facilities and assisted living facilities generally require a substantial level of acute- care services on an ongoing basis. Many patients 65 and older requiring admission to an acute-care facility have complex medical conditions and co-morbidities such that immediate access to inpatient acute care services is of prime importance. Area patients and caregivers travel to SB via a golf cart to access outpatient health care services and to obtain post-discharge follow-up care. Although there are some crossing points along SR 674, golf carts are not allowed on SR 674 itself, and the majority of Sun City Center residents who utilize SB in its existing location do not arrive by golf cart -– rather, they travel by automobile. The Sun City Center area has a long–established culture of volunteerism. Residents of Sun City Center provide a substantial number of man-hours of volunteer services to community organizations, including SB. Among the many services provided by community volunteers is the Sun City Center Emergency Squad, an emergency medical transport service that operates three ambulances and provides EMT and basic life support transport services in Sun City Center 24-hours a day, seven days a week. The Emergency Squad provides emergency services free of charge, but charges patients for transport which is deemed a non-emergency. Most patients transported by the Emergency Squad are taken to the SB ED. It is customary for specialists to locate their offices adjacent to an acute-care hospital. Most of the specialty physicians on the medical staff of SB have full-time or part-time offices adjacent to SB. The location of physician offices adjacent to the hospital facilitates access to care by patients in the provision of care on a timely basis by physicians. The relocation of SB may result in the relocation of physician offices currently operating adjacent to SB in Sun City Center, which may cause additional access problems for local residents. In 2009, the SB ED had approximately 22,000 patient visits. Approximately 25% of the patients that visit the South Bay ED are admitted for inpatient care. South Bay recently expanded its ED to accommodate approximately 34,000 patient visits annually. The average age of patients who visit the South Bay ED is approximately 70. Patients who travel by ambulance may or may not experience undue transportation difficulties as a result of the proposed relocation of SB; however, patients also arrive at the South Bay ED by private transportation. But, most patients are transported to the ED by automobile or emergency transport. In October 2010, the Board of Directors of the Sun City Center Association adopted a resolution on behalf of its 11,000 members opposing the closure of SB. The Board of Directors and membership of Federation of Kings Point passed a similar resolution on behalf of its members. Residents of the Sun City Center area currently enjoy easy access to SB in part because the roadways are low-volume, low-speed, accessible residential streets. SR 674 is the only east-west roadway connecting residents of the Sun City Center area to I-75 and U.S. Highway 301. The section of SR 674 between I-75 and U.S. Highway 301 is a four-lane divided roadway with a speed limit of 40-45 mph. To access Big Bend Road from the Sun City Center area, residents travel east on SR 674 then north on U.S. Highway 301 or west on SR 674 then north on I-75. U.S. Highway 301 is a two-lane undivided roadway from SR 674 north to Balm Road, with a speed limit of 55 mph and a number of driveways and intersections accessing the roadway. (Two lanes from Balm Road South, then widened to six lanes from Balm Road North.) U.S. Highway 301 is a busy and congested roadway, and there is a significant backup of traffic turning left from U.S. Highway 301 onto Big Bend Road. A portion of U.S. Highway 301 is being widened to six lanes, from Balm Road to Big Bend Road. The widening of this portion of U.S. Highway 301 is not likely to alleviate the backup of traffic at Big Bend Road. I-75 is the only other north-south alternative for residents of the Sun City Center area seeking access to Big Bend Road. I-75 is a busy four-lane interstate with a 70 mph speed limit. The exchange on I-75 and Big Bend Road is problematic not only because of traffic volume, but also because of the unusual design of the interchange, which offloads all traffic on the south side of Big Bend Road, rather than divide traffic to the north and south as is typically done in freeway design. The design of the interchange at I-75 in Big Bend Road creates additional backup and delays for traffic seeking to exit onto Big Bend Road. St. Joseph's Hospital commissioned a travel (drive) time study that compared travel times to SB's existing location and to its proposed location from three intersections within Sun City Center. This showed an increase of between seven and eight minutes' average travel time to get to the proposed location as compared to the existing location of SB. The study corroborated SB's travel time analysis, included in its CON application, which shows four minutes to get to SB from the "centroid" of zip code 33573 (Sun City Center) and 11 minutes to get to SB's proposed location from that centroid, or a difference of seven minutes. The St. Joseph's Hospital travel time study also sets forth the average travel times from the three Sun City Center intersections to Big Bend Road and Simmons Loop, as follows: Intersection Using I-75 Using U.S. 301 South Pebble Beach Blvd. and Weatherford Drive 12 min. 17 secs. 14 min. 19 secs. Kings Blvd. and Manchester Woods Drive 15 min. 44 secs. 20 min. 39 secs. North Pebble Beach Blvd. and Ft. Dusquesna Drive 13 min. 15 secs. 15 min. 41 secs. The average travel time from Wimauma (Center Street and Delia Street) to Big Bend Road and Simmons Loop was 15 minutes and 16 seconds using I-75 and 13 minutes and 52 seconds using U.S. Highway 301, an increase of more than six minutes to the proposed site. The average travel time from Ruskin (7th Street and 4th Avenue SW) to Big Bend Road and Simmons Loop was 15 minutes and 22 seconds using U.S. 41 and 14 minutes and 15 seconds using I-75, an increase of more than five minutes to the proposed site. Currently, the average travel time from Sun City Center to Big Bend Road using U.S. Highway 301 is approximately to 16 minutes. The average travel time to Big Bend Road via I-75 assuming travel with the flow of traffic is approximately 13 minutes. The incremental increase in travel time to the proposed site for SB for residents of the Sun City Center area, assuming travel with the flow of traffic, ranges from nine to 11 minutes. For residents who currently access SB in approximately five to 10 minutes, travel time to Big Bend Road is approximately 15 to 20 minutes. As the area develops, traffic is likely to continue to increase. There are no funded roadway improvements beyond the current widening of U.S. Highway 301 north of Balm Road. Most of the roadways serving Sun City Center, Ruskin, and Wimauma have a county-adopted Level of Service (LOS) of "D." LOS designations range from "A" to "F", with "F" considered gridlock. Currently, Big Bend Road from Simmons Loop Road (the approximate location of SB's propose replacement hospital) to I-75 is at LOS "F" with an average travel speed of less than mph. Based on a conservative analysis of the projected growth in traffic volume, SR 674 east of U.S. Highway 301 is projected to degrade from LOS "C" to "F" by 2015. By 2020, several additional links on SR 674 will have degraded to LOS "F." The LOS of I-75 is expected to drop to "D" in the entirety of Big Bend Road between U.S. Highway 301 and I-75 is projected to degrade to LOS "F" by 2020. The Hillsborough County Fire Rescue Department (Rescue Department) opposes the relocation of SB to Big Bend Road. The Rescue Department supports SB's establishment of a satellite hospital on Big Bend Road, but does not support the closure of SB in Sun City Center. The Rescue Department anticipates that the relocation of SB will result in a reduction in access to emergency services for patients and increased incident response times for the Rescue Department. The Rescue Department would support a freestanding ED should SB relocate. David Travis, formerly (until February 2010) the rescue division chief of the Rescue Department, testified against SB's proposal. The basis of his opposition is his concern that relocating the hospital from Sun City Center to Riverview would tend to increase response times for rescue units operating out of the Sun City Center Fire Station. The term response time refers to the time from dispatch of the rescue unit to its arrival on the scene for a given call. Mr. Travis noted that rescue units responding from the Sun City Center Fire Station would make a longer drive (perhaps seven to eight minutes) to the new location in Riverview to the extent that hospital services are needed, and during the time of transportation would necessarily be unavailable to respond to another call. However, Mr. Travis had not specifically quantified increases in response times for Sun City Center's rescue units in the event that SB relocates. Further, SB is not the sole destination for the Rescue Department's Sun City Center rescue units. While a majority of the patients were transported to SB, out of the total patient transports from the greater Sun City Center area in 2009, approximately one-third went to other hospitals other than SB, including St. Joseph's Hospital, Tampa General, and Brandon. The Rescue Department is the only advanced life support (ALS) ground transport service in the unincorporated areas of Hillsborough County responding to 911 calls. The ALS vehicles provide at least one certified paramedic on the vehicle, cardiac monitors, IV medications, advanced air way equipment, and other services. The Rescue Department has two rescue units in south Hillsborough County - Station 17 in Ruskin and Station 28 in Sun City Center. (Station 22 is in Wimauma, but does not have a rescue unit.) Stations 17 and 28 run the majority of their calls in and around the Sun City Center area, with the majority of transports to the South Bay ED. The Rescue Department had 3,643 transports from the Sun City Center area in 2009, with 54.5% transports to SB. If SB is relocated to Big Bend Road, the rescue units for Stations 17 and 28 are likely to experience longer out-of- service intervals and may not be as readily available for responding to calls in their primary service area. The Rescue Department seeks to place an individual on the scene within approximately seven minutes, 90% of the time (an ALS personnel goal) in the Sun City Center area. Relocation of SB out of Sun City Center may make it difficult for the Rescue Department to meet this response time, notwithstanding the proximity of I-75. A rapid response time is critical to providing quality care. The establishment of a freestanding ED in Sun City Center would not completely alleviate the Rescue Department's concerns, including a subset of patients who may need to be transported to a general acute care facility. There are other licensed emergency medical service providers in Hillsborough County, with at least one basic life support EMS provider in Sun City Center. The shuttle service proposed by SB may not alleviate the transportation difficulties experienced by the patients and caregivers of Sun City Center. Also, SB has not provided a plan for the scope or method of the provisional shuttle services. Six residents of Sun City Center testified against SB's proposed relocation to Riverview, including Ed Barnes, president of the Sun City Center Community Association. Mr. Barnes and two other Sun City Center residents (including Donald Schings, president of the Handicapped Club, Sun City Center) spoke in favor of St. Joseph's Hospital's proposed hospital in Riverview at a public land-use meeting in July 2010, thus demonstrating their willingness to travel to Riverview for hospital services. Mr. Barnes supported St. Joseph's Hospital's proposal for a hospital in Riverview since its inception in 2005, when St. Joseph's Hospital filed CON Application No. 9833 and thought that St. Joseph's Hospital South would serve the Sun City Center area. There are no public transportation services per se available within the Sun City Center area. Volunteer transportation services are provided. In part, the door-to-door services are provided under the auspices of the Samaritan Services, a non-profit organization supported by donations and staffed by Sun City Center volunteers. It is in doubt whether these services would continue if SB is relocated. There is a volunteer emergency squad using a few vehicles that responds to emergency calls within the Sun City Center area, with SB as the most frequent destination. Approval of SB's project will not necessarily enhance financial access to acute care services. The relocation of SB is more likely than not to create some access barriers for low- income residents of the service area. The relocation would also be farther away from communities such as Ruskin and Wimauma as there are no buses or other forms of public transportation available in Ruskin, Sun City Center, or Wimauma. However, it appears that the Sun City Center residents would travel not only to Riverview, but north of Riverview for hospital services following SB's relocation, notwithstanding the fact that Sun City Center residents are transportation- disadvantaged. The Hillsborough County Board of County Commissioners recently amended the Comprehensive Land-Use Plan and adopted the Greater Sun City Center Community Plan, which, in part, lists the retention of an acute care hospital in the Sun City Center area as the highest health care planning priority. For Sun City Center residents who may not want to drive to SB's new location, SB will provide a shuttle bus, which can convey both non-emergency patients and visitors. South Bay has made the provision of the shuttle bus a condition of its CON. As noted herein, the CON's other conditions are the establishment of the replacement hospital at the site in Riverview; combined Medicaid and charity care in the amount of 7.0% of gross revenues; and maintaining a freestanding ED at SB. SB Ex. 46, Schedule C. Section 408.035(3): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care South Bay has a record of providing high quality of care at its existing hospital. It is accredited by JCAHO, and also accredited as a primary stroke center and chest pain center. In the first quarter of 2010, SB scored well on "core measures" used by the Centers for Medicare and Medicaid Services (CMS) as an indicator of the quality of patient safety. South Bay received recognition for its infection control programs and successfully implemented numerous other quality initiatives. Patient satisfaction is high at SB. AHCA's view of the need for a replacement hospital is not limited according to whether or not the existing hospital meets broad quality indicators, such as JCAHO accreditation. Rather, AHCA recognizes the degree to which quality would be improved by the proposed replacement hospital -– and largely on that basis has consistently approved CON applications for replacement hospitals since at least 1991. See FOF 64-66. South Bay would have a greater ability to provide quality of care in its proposed replacement hospital. Private patient rooms are superior in terms of infection control and the patient's general well-being. The conceptual design for the hospital, included in the CON application, is the same evidence- based design that HCA used for Methodist Stone Oak Hospital, an award-winning, state-of-the-art hospital in San Antonio, Texas. Some rooms at SB are small, but SB staff and physicians are able, for the most part, to function appropriately and provide high quality of care notwithstanding. (The ICU is the exception, although it was said that patients receive quality of care in the ICU. See FOF 77-82.) Most of the rooms in the ED "are good size." Some residents are willing to give up a private room in order to have better access of care and the convenience of care to family members at SB's existing facility. By comparison, the alternative suggested by St. Joseph's Hospital does not use evidence-based design and involves gutting and rearranging roughly one-third of SB's existing interior; depends upon erecting a new patient tower that would require parking and stormwater capacity that SB currently does not have; requires SB's administration to relocate off-site during an indeterminate construction period; and involves estimated project costs that its witnesses did not disclose the basis of, claiming that the information was proprietary. South Bay's physicians are likely to apply for privileges at St. Joseph's Hospital South. Moreover, if SB remains at its current site, it is reasonable to expect that some number of those physicians would do less business at SB or leave the medical staff. Many of SB's physicians have their primary medical offices in Brandon, or otherwise north of Sun City Center. Further, many of the specialists at SB are also on staff at Brandon. St. Joseph's Hospital South would be more convenient for those physicians, in addition to having the allure of a new, state-of-the-art hospital. South Bay is struggling with its nursing vacancy rate, which was 12.3% for 2010 at the time of the hearing and had increased from 9.9% in 2009. The jump in nursing vacancies in 2010 substantially returned the hospital to its 2008 rate, which was 12.4%. As with its physicians, SB's nurses generally do not reside in the Sun City Center area giving its age restrictions as a retirement community; instead, they live further north in south Hillsborough County. In October 2007 when the application was filed, SB had approximately 105 employees who lived in Riverview. It is reasonable to expect that SB's nurses will be attracted to St. Joseph's Hospital South, a new, state-of-the-art hospital closer to where they live. Thus, if it is denied the opportunity to replace and relocate its hospital, SB could also expect to lose nursing staff to St. Joseph's Hospital South, increasing its nursing vacancy rate. Section 408.035(4): The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation The parties stipulated that Schedule 2 of SB's CON application was complete and required no proof at hearing. South Bay will not have to recruit nursing or physician staff for its proposed replacement hospital. Its existing medical and nursing staff would not change, and would effectively "travel" with the hospital to its new location. Conversely, the replacement hospital should enhance SB's ability to recruit specialty physicians, which is currently a challenge for SB in its existing facility. The parties stipulated to the reasonableness of SB's proposed staffing for the replacement hospital as set out in Schedule 6A, but SJH and TG contend that the staffing schedule should also include full-time equivalent positions (FTEs) for the freestanding ED that SB proposes to maintain at its existing hospital. This contention is addressed in the Conclusions of Law, concerning application completeness under section 408.037, at COL 356-57. South Bay has sufficient funds for capital and operating expenditures for project accomplishment and operation. The project cost will be underwritten by HCA, which has adequate cash flow and credit opportunities. It is reasonable that SB's project will be adequately funded if the CON is approved. Section 408.035(5): The extent to which the proposed services will enhance access to health care for residents of the service district The specific area that SB primarily serves, and would continue to serve, is the service area in south Hillsborough County as identified in its application and exhibits. The discussion in section IV.B., supra, is applicable to this criterion and incorporated herein. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County; will be available to serve Sun City Center, Ruskin, and Wimauma; and will be between seven and eight minutes farther away from Sun City Center than it is at present. However, while the relocated facility will be available to the elderly residents of the Sun City Center area, access for these future patients will be reduced from current levels given the increase in transportation time, whether it be by emergency vehicle or otherwise. Section 408.035(6): The immediate and long-term financial feasibility of the proposal Immediate or "short-term" financial feasibility is the ability of the applicant to secure the funds necessary to capitalize and operate the proposed project. The project cost for SB's proposed replacement hospital is approximately $200 million. The costs associated with the establishment and operation of the freestanding ED and other services were not included in the application, but for the reasons stated herein, were not required to be projected in SB's CON application. South Bay demonstrated the short-term financial feasibility of the proposal. The estimated project cost has declined since the filing of the application in 2007, meaning that SB will require less capital than originally forecast. While Mr. Miller stated that he does not have authority to bind HCA to a $200 million capital project, HCA has indicated that it will provide full financing for the project, and that it will go forward with the project if awarded the CON. Long-term financial feasibility refers to the ability of a proposed project to generate a profit in a reasonable period of time. AHCA has previously approved hospital proposals that showed a net profit in the third year of pro forma operation or later. See generally Cent. Fla. Reg. Hosp., Inc. v. Agency for Health Care Admin. & Oviedo HMA, Inc., Case No. 05-0296CON (Fla. DOAH Aug. 23, 2006; Fla. AHCA Jan. 1, 2007), aff'd, 973 So. 2d 1127 (Fla. 1st DCA 2008). To be conservative, SB's projections, updated for purposes of hearing, take into account the slower population growth in south Hillsborough County since the application was originally filed. South Bay also assumed that St. Joseph's Hospital South will be built and operational by 2015. The net effect, as accounted for in the updated projections, is that SB's replacement hospital will have 28,168 patient days in year 1 (2015); 28,569 patient days in year 2 (2016); and 29,582 patient days in year 3 (2017). That patient volume is reasonable and achievable. With the updated utilization forecast, SB projects a net profit for the replacement hospital of $711,610 in 2015; $960,693 in 2016; and $1,658,757 in 2017. The financial forecast was done, using revenue and expense projections appropriately based upon SB's own most recent (2009) financial data. Adjustments made were to the payor mix and the degree of outpatient services, each of which would change due to the relocation to Riverview. The revenue projections for the replacement hospital were tested for reasonableness against existing hospitals in SB's peer group, using actual financial data as reported to AHCA. St. Joseph's Hospital opposed SB's financial projections. St. Joseph's Hospital's expert did not take issue with SB's forecasted market growth. Rather, it was suggested that there was insufficient market growth to support the future patient utilization projections for St. Joseph's Hospital South and SB at its new location and, as a result, they would have a difficult time achieving their volume forecasts and/or they would need to draw patients from other hospitals, such as Brandon, in order to meet utilization projections. St. Joseph's Hospital's expert criticized the increase in SB's projected revenues in its proposed new location as compared to its revenues in its existing location. However, it appears that SB's payor mix is projected to change in the new location, with a greater percentage of commercial managed care, thus generating the greater revenue. South Bay's projected revenue in the commercial indemnity insurance classification was also criticized because SB's projected commercial indemnity revenues were materially overstated. That criticism was based upon the commercial indemnity insurance revenues of St. Joseph's Hospital and Tampa General, which were used as a basis to "adjust" SB's projected revenue downward. St. Joseph's Hospital and Tampa General's fiscal-year 2009 commercial indemnity net revenue was divided by their inpatient days, added an inflation factor, and then multiplied the result by SB's year 1 (2015) inpatient days to recast SB's projected commercial indemnity net revenue. The contention is effectively that SB's commercial indemnity net revenue would be the same as that of St. Joseph's Hospital and Tampa General. There is no similarity between the three hospitals in the commercial indemnity classification. The majority of SJH's and TG's commercial indemnity net revenue comes from inpatients rather than outpatient cases; whereas the majority of SB's commercial indemnity net revenue comes from outpatient cases rather than inpatients. This may explain why SB's total commercial indemnity net revenue is higher than SJH or TG, when divided by inpatient days. The application of the lower St. Joseph's Hospital-Tampa General per-patient-day number to project SB's experience does not appear justified. It is likely that SB's project will be financially feasible in the short and long-term. Section 408.035(7): The extent to which the proposal will foster competition that promotes quality and cost-effectiveness South Bay and Brandon are the dominant providers of health care services in SB's service area. This dominance is likely to be eroded once St. Joseph's Hospital South is operational in and around 2015 (on Big Bend Road) if SB's relocation project is not approved. The proposed relocation of SB's facility will not change the geography of SB's service area. However, it will change SB's draw of patients from within the zip codes in the service area. The relocation of SB is expected to increase SB's market share in the three northern Riverview zip codes. This increase can be expected to come at the expense of other providers in the market, including TG and SJH, and St. Joseph's Hospital South when operational. The potential impact to St. Joseph's Hospital may be approximately $1.6 million based on the projected redirection of patients from St. Joseph's Hospital Main to St. Joseph's Hospital South, population growth in the area, and the relocation of SB. Economic impacts to TG are of record. Tampa General estimates a material impact of $6.4 million if relocation is approved. Notwithstanding, addressing "provider-based competition," AHCA in its SAAR noted: Considering the current location is effectively built out at 112 beds (according to the applicant), this project will allow the applicant to increase its bed size as needed along with the growth in population (the applicant's schedules begin with 144 beds in year one of the project). This will shield the applicant from a loss in market share caused by capacity issues and allow the applicant and its affiliates the opportunity to maintain and/or increase its dominant market share. SB Ex. 12 at 55. AHCA's observation that replacement and relocation of SB "will shield the applicant from a loss in market share caused by capacity issues" has taken on a new dimension since the issuance of the SAAR. At that time, St. Joseph's Hospital did not have final approval of CON No. 9833 for the establishment of St. Joseph's Hospital South. It is likely that St. Joseph's Hospital South will be operational on Big Bend Road, and as a result, SB, at its existing location, will experience a diminished market share, especially from the Riverview zip codes. In 2015 (when St. Joseph's Hospital proposes to open St. Joseph's Hospital South), SB projects losing $2,669,335 if SB remains in Sun City Center with a 20% loss in market share. The losses are projected to increase to $3,434,113 in 2016 and $4,255,573 in 2017. It follows that the losses would be commensurately more severe at the 30% to 40% loss of market share that SB expects if it remains in Sun City Center. St. Joseph's Hospital criticized SB's projections for its existing hospital if it remains in Sun City Center with a 20% loss in market share; however, the criticism was not persuasively proven. It was assumed that SB's expenses would decrease commensurately with its projected fewer patient days, thus enabling it to turn a profit in calendar year 2015 despite substantially reduced patient service revenue. However, it was also stated that expenses such as hospital administration, pharmacy administration, and nursing administration, which the analysis assumed to be variable, in fact have a substantial "fixed" component that does not vary regardless of patient census. South Bay would not, therefore, pay roughly $5 million less in "Administration and Overhead" expenses in 2015 as calculated. To the contrary, its expenses for "Administration and Overhead" would most likely remain substantially the same, as calculated by Mr. Weiner, and would have to be paid, notwithstanding SB's reduced revenue. The only expenses that were recognized as fixed by SJH's expert, and held constant, were SB's calendar year 2009 depreciation ($3,410,001) and short-term interest ($762,738), shown in the exhibit as $4,172,739 both in 2009 and 2015. Other expenses in SJH's analysis are fixed, but were inappropriately assumed to be variable: for example, "Rent, Insurance, Other," which is shown as $1,865,839 in 2009, appears to decrease to $1,462,059 in 2015. The justification offered at hearing, that such expenses can be re-negotiated by a hospital in the middle of a binding contract, is not reasonable. St. Joseph's Hospital's expert opined that SB's estimate of a 30 to 40% loss of market share (if SB remained in Sun City Center concurrent with the operation of St. Joseph's Hospital South) was "much higher than it should be," asserting that the loss would not be that great even if all of SB's Riverview discharges went to St. Joseph's Hospital South. (Mr. Richardson believes the "10 to 20 percent level is likely reasonable," although he opines that a 5 to 10% impact will likely occur.) However, this criticism assumes that a majority of the patients that currently choose SB would remain at SB at its existing location. The record reflects that Sun City Center area residents actively supported the establishment of St. Joseph's Hospital South, thus suggesting that they might use the new facility. Further, SB's physicians are likely to join the medical staff of St. Joseph's Hospital South to facilitate that utilization or to potentially lose their patients to physicians with admitting privileges at St. Joseph's Hospital South. Tampa General's expert also asserted that SB would remain profitable if it remained in its current location, notwithstanding the establishment of St. Joseph's Hospital South. It was contended that SB's net operating revenues per adjusted patient day increased at an annual rate of 5.3% from 2005 to 2009, whereas the average annual increase from 2009 to 2017 in SB's existing hospital projections amounts to 1.8%. On that basis, he opined that SB should be profitable in 2017 at its existing location, notwithstanding a loss in market share to St. Joseph's Hospital South. However, the 5.3% average annual increase from 2005 to 2009 is not necessarily predictive of SB's future performance, and the evidence indicated the opposite. Tampa General's expert did not examine SB's performance year-by-year from 2005 to 2009, but rather compared 2005 and 2009 data to calculate the 5.3% average annual increase over the five-year period. This analysis overlooks the hospital's uneven performance during that time, which included operating losses (and overall net losses) in 2005 and 2007. Further, the evidence showed that the biggest increase in SB's net revenue during that five-year period took place from 2008 to 2009, and was largely due to a significant decrease in bad debt in 2009. SB Ex. 16 at 64. (Bad debt is accounted for as a deduction from gross revenue: thus, the greater the amount of bad debt, the less net revenue all else being equal; the lesser the amount of bad debt, the greater the amount of net revenue all else being equal.) The evidence further showed that the 2009 reduction in bad debt and the hospital's profitability that year, is unlikely to be repeated. Overall, approval of the project is more likely to increase competition in the service area between the three health care providers/systems. Denial of the project is more likely to have a negative effect on competition in the service area, although it will continue to make general acute care services available and accessible to the Sun City Center area elderly (and family and volunteer support). Approval of the project is likely to improve the quality of care and cost-effectiveness of the services provided by SB, but will reduce access for the elderly residents of the Sun City Center area needing general acute care hospital services who will be required to be transported by emergency vehicle or otherwise to one of the two Big Bend Road hospitals, unless needed services, such as open heart surgery, are only available elsewhere. For example, if a patient presents to SB needing balloon angioplasty or open heart surgery, the patient is transferred to an appropriate facility such as Brandon. The presence of an ED on the current SB site may alleviate the reduction in access somewhat for some acute care services, although the precise nature and extent of the proposed services were not explained with precision. If its application is denied, SB expects to remain operational so long as it remains financially viable. Section 408.035(8): The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the costs and methods of the proposed construction, including the costs and methods of energy provision, were reasonable. St. Joseph's Hospital and Tampa General did not stipulate concerning the availability of alternative, less costly, or more effective methods of construction, and take the position that SB should renovate and expand its existing facility rather than replace and relocate the facility. Whether section 408.035(8) requires consideration (weighing and balancing with other statutory criteria) of potential renovation costs as alternatives to relocation was hotly debated in this case. For the reasons stated herein, it is determined that this subsection, in conjunction with other statutory criteria, requires consideration of potential renovation versus replacement of an existing facility. St. Joseph's Hospital offered expert opinion that SB could expand and upgrade its existing facility for approximately $25 million. These projected costs include site work; site utilities; all construction, architectural, and engineering services; chiller; air handlers; interior design; retention basins; and required movable equipment. This cost is substantially less than the approximate $200 million cost of the proposed relocation. It was proven that there are alternatives to replacing SB. There is testimony that if SB were to undertake renovation and expansion as proposed by SJH, such upgrades would improve SB's competitive and financial position. But, the alternatives proposed by SJH and TG are disfavored by SB and are determined, on this record, not to be reasonable based on the institutional- specific needs of SB. Section 408.035(9): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Approval of SB's application will not significantly enhance access to Medicaid, charity, or underserved population groups. South Bay currently provides approximately 4% of its patient days to Medicaid beneficiaries and about 1% to charity care. South Bay's historic provision of services to Medicaid patients and the medically indigent is reasonable in view of its location in Sun City Center, which results in a disproportionate share of Medicare in its current payor mix. South Bay also does not offer obstetrics, a service which accounts for a significant degree of Medicaid patient days. South Bay proposes to provide 7% of its "gross patient revenue" to Medicaid and charity patients as part of its relocation. South Bay's proposed service percentage is reasonable. Section 408.035(10): The applicant's designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility The parties stipulated that this criterion is not applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying CON Application No. 9992. DONE AND ENTERED this 8th day of August, 2011, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 2011.
The Issue Whether the Certificate of Need application of the South Broward Hospital District (CON 9459) to establish a 100-bed hospital in Health Planning District 10, Broward County, should be granted by the Agency for Health Care Administration?
Findings Of Fact The Parties AHCA The Agency for Health Care Administration is the state agency with the authority to review and issue Certificates of Need in Florida. SBHD, the Applicant The applicant in this proceeding is South Broward Hospital District ("SBHD" or the "District"). Created by the Legislature in 1947 "at the request of voters to meet the healthcare needs of the South Broward community" (District No. 2, Vol. 1, pg. 7), SBHD is a special taxing district. The District receives tax revenues in order to support SBHD as the health care provider of last resort in South Broward County with a long demonstrated history of serving medically indigent patients. Id. From its inception in 1947 to today with the support of local tax revenue, the mission of SBHD has remained unchanged: to provide health care to all residents of the community regardless of ability to pay. There are three acute care hospitals in the "Memorial Health Care System" operated by SBHD: Memorial Regional, Memorial Pembroke Pines and Memorial West. These three hospitals make the District the dominant provider of health services in south Broward County. The District's market share of admissions to hospitals located in south Broward County is 85%. The other 15% of hospital admissions are to Hollywood Medical Center. (These percentages do not account for admissions of South Broward County residents to hospitals outside of the borders of SBHD.) Memorial Regional Hospital, a Medicaid disproportionate provider, is located 13.6 miles from the proposed Miramar hospital site. Without question, the predominant provider of care to indigent patients in south Broward County, Memorial Regional is licensed for 489 acute care beds. Memorial Regional had an acute care occupancy rate of 76.5% in 2000. From time-to-time in recent years, it has experienced unacceptably high occupancies particularly within individual units. It presently has patient care units that often operate above capacity, resulting in patient flow problems within the hospital. Memorial West Hospital, located 5.7 miles from the proposed Miramar site, is currently licensed for 164 acute care beds. It had an acute care occupancy rate of 88.9% in 2000. Memorial West currently operates 14 "labor-delivery- recovery" observation beds ("LDR" beds) that are not among the hospital's licensed beds. The hospital has recently received a CON for 36 additional beds to be utilized for acute care and further authorization via a CON exemption to add another 16 beds licensed for acute care provided certain occupancy levels are achieved. These additional 52 licensed beds are projected to become operational in 2002. Furthermore, Memorial West is adding 36 additional LDR beds and 20 acute care observation beds and doubling the size of its emergency room. When the expansion is complete, Memorial West will have 216 acute care beds, 20 acute care observation beds and 50 LDR beds. As matters stood at the time of hearing, peak occupancies in some departments at Memorial West such as obstetrics, routinely exceeded 100%. With the additional beds slated for opening in 2002, demand for acute care services in southwest Broward County will continue to produce high occupancy rates at Memorial West. It is reasonably projected that the growth in demand for acute care services in southwest Broward County with the additional beds will cause Memorial West to operate at 87% occupancy in 2005 and 99% occupancy in 2010 unless the hospital proposed by SBHD for Miramar is built. Memorial West opened in 1992 as a 100-bed hospital, in part fulfilling SBHD's vision to expand services into what was then projected to be a rapidly growing southwest part of the county, a suburban area more affluent than the District as a whole. Approved by AHCA's predecessor, SBHD's strategy in opening Memorial West was to gain access to this more affluent suburban market in order to help off-set the rising care of indigent care. The strategy has worked. Memorial West has made a profound contribution to the financial success and viability of the District. In 2001, Memorial Hospital West accounted for almost half of the District's bottom line profit. The profitability of Memorial West has allowed the District to continue to provide growing levels of indigent care, while at the same time decreasing tax millage rates. In fact, the millage rates levied by the District have decreased three times since Memorial West opened. During this same period of decreasing millage rates, the District has been able to increase its ratio of uncompensated care to tax revenues from 3-1 to 5-1. The District's third hospital, Memorial Hospital Pembroke was leased by the District for the first time in 1995. Now leased until June 2005 from HCA, Inc., HCA announced its intention at hearing to re-take the facility so that the District will lose Memorial Pembroke as one of its hospitals at the expiration of the lease. Licensed for 301 beds, Memorial Pembroke is located 10.6 miles from the proposed Miramar site. Memorial Pembroke's occupancy rate from July 1999 to June 2000 was 26.2%. This low rate of occupancy is due, at least in part, to significant physical plant constraints and deficiencies. Although licensed for 301 beds, the physical plant can only reasonably support 149 beds. When its daily census reaches 140 patients, the hospital's operational and support systems begin to fail. Prior to 1995, Memorial Pembroke was operated by a series of for-profit owners. Just as it does now, Memorial Pembroke suffered from chronically low utilization under all prior management. Before the District leased the facility from Columbia-HCA, the hospital had become stigmatized in the community; many patients and physicians were reluctant to use it. Due to a number of factors (some tangible, such as an out-of-date physical plant - others intangible) that stigma continues today. The District has invested considerable management and financial resources to improve the quality of care, the condition of the facility and the community reputation of Memorial Hospital Pembroke. Because the hospital serves as a "safety valve" for the high utilization at the District's other hospitals, especially Memorial West, Memorial Pembroke's census between 1995 and 2000 has been on the rise. Nonetheless, the facility continues to be regarded as a "second tier" hospital and to suffer a stigma within the community. Whatever the source of the stigma afflicting Memorial Pembroke, it is unlikely that occupancy rates at Memorial Pembroke will dramatically improve unless significant and substantial investment is made in the hospital. It does not make sense for SBHD to make such an investment since it will lose the facility in three years. Whether HCA will make the investment required to cure the facilities utilization woes remains an open question. (See paragraphs 103 and 104, below.) Through the three hospitals in the Memorial Healthcare system, Regional, West and Pembroke, and a number of clinics that are off-campus, the District provides a full range of health care services to residents of south Broward County. These include: general acute care; tertiary care; adult and pediatric trauma care under trauma center designation; a specialty children's hospital designated by the state as a Children's Medical Services provider for children with special needs for cardiac care, hematology and oncology, and craniofacial services; outpatient services; and primary care services. The District is the only provider, moreover, of many health care services within the boundaries of the South Broward Hospital District, all of Broward County south of SW 36th Street. (The North Broward Hospital District includes all of Broward County north of SW 36th Street.) These services include obstetrics, pediatrics, neonatal intensive care, adult and pediatric trauma at a Level I trauma center, and teen pregnancy prevention and education. Consistent with its mission, the District also operates the only system of primary care clinics for the indigent in the South Broward Hospital District. The District is clearly the safety net provider of acute care hospital and other services for south Broward residents. In 1999, the District provided 5.9% of its total revenue or approximately $63 million in charity care and 5.4% or approximately $58 million to Medicaid recipients. During the same time period, Cleveland Clinic in terms of total revenue provided 1% charity care and 1.8% to Medicaid recipients while Westside provided 0.6% charity and 2.3% Medicaid. In dollars worth of care devoted to indigent and Medicaid patients, SBHD provides over ten times more Medicaid and indigent care than Cleveland Clinic and Westside combined. Tax revenues, although supportive of the District's ability to maintain its mission, do not come close to compensating the District in full for the care it provides to charity and indigent patients. In fact, the District expends five dollars in uncompensated care for every dollar of tax revenue it receives. Still, as a significant source of income to the District, these tax dollars contribute to SBHD's robust financial health. Cleveland Clinic Cleveland Clinic Hospital is owned by TCC Partners, a partnership between the Cleveland Clinic Foundation and Tenet Healthcare Systems. Originally located in northeast Broward County in Pompano Beach, Cleveland Clinic obtained approval in 1997 to relocate its 150 beds to Weston near the intersection of I-75 and Arvida Parkway. Operation at the site of the relocation began in July of 2001. The new site is within one of the ten-zip codes SBHD has chosen as the proposed primary service area for its new hospital in Miramar, but it is outside the South Broward Hospital District. The new site of Cleveland Clinic is in the North Broward Hospital District, 1.5 miles to the north of the boundary line between the two hospital districts that divides Broward County into two distinct health care markets. Cleveland Clinic has an established history as a regional and national tertiary referral center. It is also an advanced research and education facility that benefits from the outstanding reputation of the Cleveland Clinic Foundation and the hospitals under its umbrella. Cleveland Clinic is not a typical community hospital. It follows a distinctive model of medicine based on a multi- disciplinary approach and a closed medical specialty staff. The medical staff is open to community primary care physicians but not to community specialists or sub-specialists. All of the specialists on its staff are salaried employees of the Cleveland Clinic. This means that physician specialists who are not employees of the Clinic do not have privileges to admit or treat patients at the Cleveland Clinic Hospital. The Cleveland Clinic offers tertiary acute care services, such as kidney transplantation and open-heart surgery. It also provides specialty services in colorectal surgery, voiding dysfunction and limb reattachment. Among its specialty programs are an adult spine program, an acute stroke program, an epilepsy clinic, and an orthopedic center of excellence in sports medicine. At the time of hearing and since opening, Cleveland Clinic's average daily census has been approximately 44 patients. Westside Founded 26 or so years ago in what was then considered western Broward Count from the standpoint of population (hence its name), Westside is a 204-bed acute care hospital. Slightly less than nineteen miles from the proposed Miramar site, the site of the hospital is "now somewhat central [to Broward County]" (Westside No. 39, p. 8), given the location of the population today and the growth that has occurred to the west of Westside. Westside, like Cleveland Clinic, is in the North Broward Hospital District. It is located in the City of Plantation on West Broward Boulevard. Among the variety of acute care services offered by Westside is open heart surgery ("OHS"). The OHS program, implemented two years ago has increased the hospital's occupancy rate to a near 70%. (In 2000, the hospital had an acute care occupancy rate of 69.3%). The occupancy rate is expected to increase as the open heart surgery program expands and matures. Recent capacity constraints in the ICU, for example, led to a capital project to expand the unit "about a year and a half ago." (Id. at 13). With regard to questions about whether the hospital had experienced capacity constraints or "bottlenecks" in units, Michael Joseph, the chief executive officer of Westside, answered this way: We did in tele, and that's when we did the overflow on the fifth floor. So at this time we are -- in the peak season of March, from time to time, sure. But on the annualized basis, we are in the 75 percent occupancy level. And sometimes there [are other issues] that all hospitals go through. (Id., at 14). At the time of Mr. Joseph's deposition, October 23, 2001, for the most recent year the average daily census has been "in the 175 range." (Id.) At present, therefore, Westside's occupancy is close to ideal. Westside is financially strong. It had strong financial performance in 2000 and at the time of hearing was expected to perform strongly in 2001. Replication of West Faced with both the potential loss in 2005 of Memorial Pembroke and the high occupancies at Memorial Regional and Memorial West, SBHD began investigating the opportunity to replicate the Memorial West model of success. During the investigation, the District came to believe what it suspected from obvious signs: there is a large and growing population to be served in the Miramar area. Although land was limited, the District was able to purchase within the City of Miramar a 138-acre parcel. The parcel is the site of the subject under consideration in this proceeding as detailed in CON Application 9459: SBHD's proposed project. SBHD's Proposed Project The District proposes to construct a 100-bed acute care hospital at the intersection of SW 172nd Avenue and Pembroke Road. The site is a large one. It has sufficient land available to serve ultimately as a "health park" with medical office buildings, outpatient facilities, and additional health care related facilities typical of a modern medical campus. If, on the other hand, the District decides it is in its best interest to "sell off balances" (tr. 486) of the property, it retains that option. The hospital will provide basic acute care services and be composed of 80 adult medical/surgical, 8 pediatric, and 12 obstetric beds. On the third floor, the hospital will have 28 observation status beds, in addition to its 100 licensed beds. The design of the hospital is cost efficient. It meets all license and life safety code requirements. All patient rooms are private and meet the square footage requirements of AHCA's license standards. The hospital design, costs, and methods of construction are reasonable. The project has several goals. First, it is intended to provide increased access to affordable and quality health care for the residents of southwestern Broward County. Second, the project will allow Memorial Regional and Memorial West the opportunity to decompress and operate at reasonable and efficient occupancies into the foreseeable future without the operational problems caused by the current over-utilization. Third, the project will replace the loss of Memorial Pembroke. Finally, the project will give the District a second financial "engine that drives the train" (tr. 141) in the manner of Memorial West. The project will enable the District to maintain its financial strength and viability and continue to serve so effectively as the safety net provider for the indigent in South Broward County. Stipulated Facts In their prehearing stipulation, filed on October 31, 2001, the parties stipulated to the following: On January 26, 2001, AHCA published a fixed need pool for zero additional acute care beds in District 10, Broward County, for the January 2001 batching cycle. The South Broward Hospital District ("SBHD" or "District") timely and properly filed a Letter of Intent, initial CON Application, and Omissions Response in the batching cycle. On May 16, 2001, AHCA filed a Notice of Intent to issue the CON together with a State Agency Action Report ("SAAR") recommending approval of the CON for the proposed hospital. AHCA's Notice of Intent to approve the CON for the proposed hospital was challenged by Cleveland Clinic and Westside. Hollywood Medical Center ("HMC") also filed a petition challenging the preliminary approval but later withdrew as a party from these proceedings. Broward County has been divided by the Florida Legislature into two hospital taxing districts. The SBHD includes all areas of the county south of SW 36th Street, and the North Broward Hospital District ("NBHD") includes all areas north of the demarcation line. SBHD, Cleveland Clinic, and Westside each have a history of providing high quality of care. All of SBHD's hospital facilities are JCAHO accredited. Accordingly, the quality of care provided by these parties is not at issue in this proceeding except as it may be impacted by staffing issues. The proposed staffing and salary projections included on Schedule 6 of CON Application No. 9459 are reasonable and are not in dispute, although the parties specifically preserved the right to present evidence concerning the SBHD's ability to recruit the staff projected, and whether the projected salaries will cause or accelerate the loss of staff at existing hospitals. The parties agree that the SBHD has available management personnel and funds for capital and operating expenditures. However, Petitioners assert that the District's use of such resources for this project is neither wise nor prudent and is not in keeping with appropriate health planning principles. The parties agree that the SBHD has a history of providing health care services to Medicaid patients and the medically indigent. (Section 408.035(11), Florida Statutes.) However, Petitioners do not agree that proposed Miramar Hospital can meet the levels of charity care proposed in the application for the Miramar Hospital. With regard to Schedule 1 of the Application, the parties stipulate that the Land Costs (lines 1-11) are reasonable and are not disputed; and the Project Development Costs (lines 26-31) are reasonable and not disputed. The parties agree that Schedule 3 of the Application (sources of funds) is reasonable and not disputed. The SBHD does not contest Petitioners standing in this proceeding. At hearing, the parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital. The parties also stipulated that the SBHD has in place the staff recruitment and retention programs described at pages 132-139 of the CON application. The stipulation at hearing did not preclude either Westside or Cleveland Clinic from presenting evidence with respect to the impact of the SBHD's recruitment on other programs and other hospitals. No Numeric Need As indicated by the AHCA Bed Utilization Data for CY 2000, the occupancy rate in Broward County was 48.42%. There is, moreover, a surplus of 1,786 beds. This surplus has been increasing over time and has grown by nearly 60 beds between the January 2001 and July 2001 planning horizons. The hospitals within the District's proposed primary service area had an occupancy rate of 53% in the July 2001 planning horizon and a surplus of 456 beds, a number "somewhat proportionate to the distribution of patient days as well as licensed beds within the district." (Tr. 1639.) If the 152 non- functional beds at Memorial Pembroke are deducted from the surplus then the surplus is 304 beds. Not surprisingly therefore, the Agency's fixed need formula for acute care beds produced a fixed need of zero beds in Health Planning District 10 for the January 2001 batching cycle. (Broward County composes all of Health Planning District 10). The fixed need pool of zero was published by the Agency in January of 2001. Again in July 2001, AHCA published a fixed need for zero acute care beds in Health Planning District 10. In light of the zero fixed need pool, SBHD bases its application for the proposed Memorial Hospital Miramar on "not normal circumstances." Not Normal Circumstances "Not normal circumstances" are not defined or limited by statute or rule. Nonetheless, a number of "not normal" circumstances have been recognized repeatedly by AHCA . These recognized "not normal circumstances" are generally grouped into categories of access, quality and cost-effectiveness. None of them are present in this case. "There [are] no financial access, geographic access or clinical access circumstances [in this case] that rise to the level of not-normal circumstances." (Tr. 1633). Nor are there any quality or cost-effectiveness deficiencies claimed by the District in its application. The District bases its claim of "normal circumstances" on eight factors. They are: 1) explosive population growth; 2) a mal-distribution of beds within the health planning district; the effects of not having a hospital facility in the area proposed; 4) continued and projected high occupancies at nearby hospitals; 5) inability to expand inpatient capacity at the nearby hospitals with high occupancy rates; 6) the limited functionality and uncertain future of one of the hospitals that might serve the area where the new hospital is proposed to be located; 7) the increasing retraction of access for residents to other hospitals; and, 8) the need to assure that the applicant will remain a strong competitor able to fulfill its unique role and mission that would be served by granting the application. Population Growth Broward County is one of the fastest growing counties in the United States. "According to the census 2000 data, [over the last decade] it was the fastest growing county in all of the United States based on total population gain . . . ." (Tr. 617.) The population growth was spurred in the latter part of the previous decade by the devastation wreaked by Hurricane Andrew in 1992. The hurricane's south Dade County victims used insurance proceeds to move to southwest Broward County. This migration helped to produce growth in southwest Broward County at a faster rate than the county as whole in the decade of the nineties. Growth in pockets of southwest Broward during this period of time has been phenomenal. For example, Pembroke Pines population increased 109 percent between 1990 and 2000. For the same time period, the population of Miramar (now the second fastest growing municipality in Florida) increased 78 percent. This growth was more than just steady during the 10 years before 2000; as the decade proceeded, the growth rate accelerated. In short, it is not a misnomer to describe the population increase in southwest Broward County and the Miramar area during the last decade as "explosive." (Tr. 626) With its attendant residential and commercial development, it has transformed southwest Broward County from a rural community into a suburban one. Population growth in southwest Broward County is expected to continue into the future. Substantial land in the area is under development or is available for residential development. By 2006, the population is projected to grow to 337,000, from the 2000 population of 289,000. This rate, while not comparable to the explosive rate in some pockets of the county in the last decade, is not insignificant. By way of contrast, the projected growth rate of 16.7% over the next five years in southwest Broward compares to a projected rate for the county as a whole of 8.4% and for Florida of 7.1%. In and of itself, the projected population growth in southwest Broward County is not a "not normal" circumstance. However one might characterize the projected growth rate in southwest Broward County, moreover, the acute care hospital bed need rule takes population into account in its calculations and projections. But, the bed need formula does not take into account the significant number of beds at Memorial Pembroke that are not functional. Nor does it take into account that Cleveland Clinic is not a typical community hospital. Nor does it take into account other factors such as that Memorial West and Memorial Regional are experiencing capacity problems or the division of the health planning district into two hospital taxing districts recognized as distinct medical markets, a recognition out of the ordinary for health planning districts in Florida. A geographical fact pertinent to arguments made by Cleveland Clinic and Westside with regard to the location of the population is that Memorial Miramar's proposed primary service area is divided by Interstate 75, a north-south primary travel corridor. On a percentage basis, there is faster population growth projected for areas west of I-75. But for the foreseeable future, the actual number of people populating the area west of I-75 will remain less than the number east of I-75. The area west of I-75, with the exception of one zip code in which a retirement center has been built, has a younger projected population that should produce lower use rates and average lengths of stay in hospitals than the area east of I-75. The support these facts lend to the District's opponent's arguments that bed need is greater east of I-75 than west is diminished by the absence of any hospitals west of I-75 in the South Broward Hospital District and the presence of four hospitals in the hospital district east of the interstate. Distribution of Beds Consistent with the recognition by the Legislature, AHCA, and its predecessor state agency, north and south Broward County are two distinct medical markets demarcated by the division of the county into two hospital districts. There are 3.52 beds per 1000 population in the North Broward Hospital District, 2.35 in the south. A greater number of under-utilized acute care beds are located in the northern half; a greater percentage of highly utilized hospitals are located in the southern half. Of the four hospitals located in south Broward County, both Memorial Regional and Memorial West had average annual occupancies in excess of 80% in the calendar year 2000. By contrast, of the 13 hospitals located in the northern half of the County, none had occupancy in excess of 80%, and only one had an average annual occupancy in excess of 70%. These statistics point toward an over-distribution within the health planning district of beds in the north and an under-distribution in the south. At the same time, beds are distributed between the two hospital districts in approximate proportion to the number of patient days experienced by each. In 2000, NBHD had 71% of the patient days for District 10 and 73% of the acute care beds. As one might expect, therefore, the relationship between patient days and acute care beds during the same period was similar for the SBHD: 28.9% of the patient days for District 10 and 27% of the beds. An analysis of bed to population ratio is only meaningful when occupancy rates are also considered. Occupancy rates are mixed in the south part of the county: very high for some, especially Memorial West, and very low for Memorial Pembroke. This breadth of this disparity is unusual. Effects of No Hospital in Miramar Thirty to 60 minutes to reach an acute care hospital is a reasonable driving time in an urban area. There are five existing acute care facilities within 30 minutes of southwest Broward County. In fact, most of the residents in Memorial Miramar's proposed service area are within 15 minutes or less of an existing acute care facility. Nonetheless, without a hospital in Miramar, residents must leave their immediate community to gain access to acute care services. As a matter of sound health planning, "[n]ot every city, town or hamlet can or should have its 'own' hospital." So correctly posit Cleveland Clinic and Westside. See pgs. 13-14, Cleveland Clinic and Westside PRO. But as the City Manager of Miramar wrote, "[t]he addition of a new hospital is one of the last missing links in the City [of Miramar]'s master plan . . . The city is looking to build the best possible future for its residents." District Ex. 2, Attachment G. A new hospital in Miramar would not only be a featured complement of the City of Miramar's plans for the future, it would also enhance access to acute care services and address access concerns caused by skewed utilization among the SBHD hospitals due to the unusual state of affairs at Memorial Pembroke and the high demand at West. Of great concern is that residents of southwest Broward County in need of emergency services are sometimes not able to gain access to those services at Memorial West, the closest available hospital. Memorial West operates the third busiest Emergency Department in Broward County with 65,000 visits in 2001. In Calendar Year 2000, Memorial West's emergency room went on diversion 123 times, averaging 7.7 hours per diversion. In the first months of 2001, the hospital went on diversion 89 times, with an average diversion time of 16.3 hours. These diversions have a dual effect. They mean that patients wait longer for beds. They also mean that providers of emergency medical services in ambulances are forced out of the community for extended periods of time unable to render services within the community that may be needed during that time. Diversions at Memorial West are becoming more and more problematic. Wait times are getting longer; the total time on diversion is growing. At first blush, the problems appear to be less significant at Memorial West than they might be elsewhere in District 10 because of its low "emergency room visits to hospital admissions" ratio. The Health Planning District average shows that about 20% of emergency room patients are admitted to the hospital. At Memorial West, the ratio is 8.7%, the lowest in the County. While normally this might reflect that patients visiting Memorial West have a lower acuity than patients visiting emergency rooms district-wide, the lower ratio for Memorial West is due, at least in part, to the high volume of pediatric patients seen at West who are transferred to Joe DiMaggio's Children's Hospital. The pediatric transfers, in the words of Frederick Michael Keroff, M.D., a Board-certified emergency physician who has worked in hospital emergency departments in South Florida for 24 years, create a false sense of what is actually being seen on the adult side of the emergency room department. On the adult side . . . [the ratio] varies somewhere between 12 and 16 and a half percent which is comparable with any other facility. . . . [W]hen you mix in such a large pediatric population into the adult population, obviously it dilutes out the number and drops [the ratio] down . . . . (Tr. 2568.) A solution to emergency room diversion at Memorial West and an alternative to the construction of Memorial Miramar proposed by Cleveland Clinic and Westside is more SBHD urgent care centers in the Miramar area. SBHD operates seven urgent care centers. Of these seven, the proposed Miramar PSA has only one. Additional urgent care centers more readily accessible in the 10 zip code area that comprises Memorial Miramar's PSA might reduce the number of visits to the ER at Memorial West. But they might not. Patients don't self-triage when they are presented with a problem. They go to the hospital. [Triage is a medical decision.] Patients usually come to the hospital, even [with] urgent care centers down the block, because they don't know what the problem is and they allow the hospital to make the decision about what the problem is. (Tr. 2571.) Additional urgent care centers would not solve the problem created when diversion is a result of the lack of acute care beds for Memorial West ER patients who need to be admitted to the hospital for treatment beyond that provided in the ER. Cleveland Clinic hospital is not likely to offer much of an alternative. Because of the closed nature of the Cleveland Clinic specialty staff, it will not be a hospital of choice for community physicians in the South Broward Hospital District. Nor will it be a hospital of choice for patients able to elect the hospital at which to seek emergency services. It is apparent from the demand on Memorial West, despite the number of beds and other emergency departments within acceptable reach, that a Memorial West-type facility is what the residents of southwest Broward County prefer and opt for even if it means they have will have to wait for emergency services. In cases of patients transported from southwest Broward County via ambulances forced to go to Cleveland Clinic in Weston to deliver patients in need of emergency services, the transport presents difficulties of their own. It is not efficient management of emergency services due to their very nature to require ambulances to leave their service areas. There are no clear solutions to the problems emergency room diversions present for patients, their families, physicians, and the emergency medical system in general in southwest Broward County other than construction of new acute care hospital in Miramar. Construction of a new acute care hospital in Miramar will help to alleviate the high occupancies and emergency room diversions currently experienced at Memorial West. It will reduce disruptions to Miramar residents and will provide an easily accessible alternative to southwest Broward County residents, thereby enhancing access to emergency services. High Occupancy Rates at West and Regional The current and reasonably-projected high occupancies at Memorial West and Memorial Regional are extraordinary circumstances for a health planning district with as many excess beds as District 10. The calculation under AHCA's formula for hospital bed need for the January 2001 batching cycle yielded an excess of 1,717 beds. Calculation by the Agency using the same formula for the July 2001 batching cycle showed an excess of 1,786 beds or 59 more excess beds than just six months earlier. The import of these results was described at hearing by Scott Hopes, Westside's expert health planner: Obviously when you have a situation like this, the default is a zero published fixed need which is what was published. But the importance here is that there are so many excess beds. And if you look also on the line [of Westside Ex. 23] that deals with occupancy rate, the occupancy rate is about 48 percent, and it hasn't varied much between the six-month period. In fact, the occupancy rate in Broward County has been under 50 percent for some quite sometime. (Tr. 2076-7). It is extraordinary that a health planning district with so many excess beds would also have two hospitals, Memorial West and Memorial Regional, with capacity problems. Memorial West, by any standard, is a successful hospital. Since it opened in 1992, the inpatient volume there has tripled. Opening as a 100-bed facility, Memorial West now has 184 licensed beds, an expansion aimed to meet the demand for its services. As alluded to elsewhere in this order, because there are often not enough available acute care beds at Memorial West, some patients have to wait in the ER six hours or more. It is not unusual for more than 40 patients to wait at one time. Despite these conditions, patients, when offered the opportunity for a transfer to another hospital, rarely accept the offer. More often than not the patients do not wish to go. The reputation of Memorial Hospital West, the loyalty factor, if you will, to Memorial, to the medical staff, the patients want to remain at the facility. (Testimony of Memorial West Administrator Ross, Tr. 152-3.) Memorial West plans expansion but even with its current planned bed expansion, it is reasonable to expect it to reach unacceptably high occupancy rates by 2006 if Memorial Miramar is not built. Furthermore, the only obstetric programs in south Broward are at Memorial West and Memorial Regional. Memorial West performed 4,400 births last year, and its obstetrics unit often operates in excess of 100% occupancy. The only constraint on additional births at West is the limited physical capacity of the facility. Memorial Regional experienced even more births last year than West with about 5,000 deliveries. Memorial Regional is operating at or exceeding its functional capacity in other departments. The current medical/surgical occupancy at Memorial Regional is approximately 80% year round. Some units experience much higher occupancies. The intensive care unit's occupancy frequently exceed 100%, as does the cardiac telemetry unit. In certain medical/surgical units, peak occupancy is as high as 125%. Memorial Regional's capacity to handle its high patient volume is limited by certain factors. Semi-private rooms are limited to use by members of the same sex. As a tertiary facility, there are specialty patients who must be served by nurses trained in that patient's specialty, with appropriate monitoring equipment. Without approval of Memorial Hospital Miramar, Memorial Regional will reach 85% occupancy by 2008 and 88% occupancy by 2010. These occupancy rates create an inefficient and untenable environment in which to deliver the mix of specialized and tertiary services offered by Memorial Regional. The overcrowding at Memorial West and Memorial Regional is dramatic and continuing. There are simply more patients seeking care at these hospitals than the hospitals can serve appropriately. This overcrowding exists despite the excess of acute care beds within the health planning district. In sum, despite the plentiful nature of the number of acute care beds in the health planning district, a need exists to either decompress Memorial Regional and Memorial West by some means such as the proposed new hospital in Miramar or to expand one or both of the two hospitals by way of new construction or conversion of LDR and observation beds. A decompression alternative to the new hospital is to transfer beds from existing hospitals to create a satellite hospital. Because of high occupancy rates at West and Regional and because Pembroke's lease will expire in 2005, transfer of existing beds is not a feasible option. That leaves expansion, as the only alternative to a new hospital in Miramar. Cleveland Clinic and Westside argue there are ample opportunities at the two hospitals for expansion. Expansion New Construction In pre-CON application evaluation, SBHD commissioned a study from Gresham, Smith and Partners, an architecture firm. The firm studied the three Memorial facilities to determine whether expansion of the acute care bed complement at any of them was feasible. In a "Memorial Health System Facility Expandability and Master Plan Review Report" the firm concluded that it was clearly not feasible to expand either Memorial Pembroke or Memorial Regional and there were problems with expanding Memorial West. With significant problems including its aged plant and its uncertain future, expansion at Memorial Pembroke would not be cost-effective. It would cost $31 million in capital improvements to maintain Pembroke's functional capacity at 149 beds. If the present location of nursing administration, hospice and other necessary services were moved out of the hospital, the hospital's function could be expanded to 215 beds. No evidence was presented with regard to the advisability of moving those services or the additional costs associated with this alternative. HCA's willingness to make the investment necessary to renovate the facility at Pembroke was not supported by any specifics. HCA's announced its intention, "to take the hospital back at the end of the lease and run it," (tr. 1511-2) but, in fact, the company has not taken any action to evaluate the potential for assuming operation of the hospital in 2005. Nor has it even begun the process it must go through before final decisions are made. The overarching intention to "re-take the hospital and run it," at this point in time, does not mean HCA will be willing to make the investment necessary to renovate the facility either during the term of SBHD's lease or afterward. It still needs to "do a very detailed discounted cash flow analysis to make a final decision on the investment needed and the return on that investment." (Tr. 1514.) Memorial Pembroke's uncertain future makes it an unlikely candidate for expansion. However unlikely such a result, with the problems that afflict Memorial Pembroke, there is, moreover, no guarantee that HCA's intended analysis will convince it even to continue operation of the hospital. Memorial Regional has different problems from Memorial Pembroke. It takes up an entire block surrounded by residential property and parking garages. There is almost no opportunity for growth on the site. Of the few areas that could be expanded vertically, only one would be conducive to bed addition. "[I]t is so remote, it doesn't tie back to the main nursing care areas." (Tr. 482.) Expansion at Regional would also be plagued with concurrency problems and zoning issues. Of the three hospitals, Memorial West presents the best option for expansion. A facility master plan for Memorial West provides for the addition of a patient tower on the north side of the facility ("the north tower"). The addition of the north tower could add as many as 50 beds to Memorial West at a cost substantially less than the construction of Memorial Miramar. Still, SBHD's architects, Smith and Gresham, concluded that expansion of the size necessary to alleviate the overcrowding at West was not cost-effective. The force of the Smith and Gresham opinion is tempered by the firm's standing to benefit financially to a much more significant degree if Memorial Miramar is built than if the planned-for tower is constructed to add 50 beds to Memorial West. But the opinion is not groundless. Put simply, construction of an additional tower at West is no simple solution to its capacity problems. The tower was planned for maternal services but like the minimal opportunity for expansion at Regional, it would be "remote from the rest of the nursing function . . . [it would, moreover] trigger huge upgrades to the infrastructure." (Tr. 480.) The hospital site is constricted already because of additions that have almost completely built out the campus. A new north tower would add inefficiencies in hospital operations because of the increase in travel distance for materials delivery and meeting the dietary needs of patients. Despite the master plan for growth, an improvement the size of the north tower would begin to turn West into another Memorial Regional: a huge hospital, overdeveloped for its site. The improvement, like every improvement thereafter, would require patient shuffles and disruptions in patient care. Like Memorial Regional, expansion at West, too, would have concurrency issues and could create a land use dispute with neighbors, the outcome of which is uncertain. In light of these obstacles, SBHD prefers the option of constructing the new hospital in Miramar over expansion at West. There is, however, in the view of SBHD's opponents, another option for expansion of existing facilities: conversion of LDR and observation beds. Expansion through conversion of LDR and Observation Beds Cleveland Clinic and Westside contend that another option to relieve overcrowding is conversion of observation and LDR beds to acute care hospital beds. But these beds are used to meet the need of observation and maternity service patients. There are patients who need closely supervised medical care but whose care has not been determined to require admission to the hospital. Observation patients, sometimes referred to as "23 hour" patients, may suffer from various conditions, including chest pain, fever, abdominal pain, rectal bleeding or nausea. Given the high number of births at Memorial West, many obstetrical patients present at the hospital in "false labor" or for antipartum testing, complications of pregnancy, or symptoms that should be treated as observation or on an inpatient basis. It would be impractical for Memorial West to convert observation and maternity service beds, whether existing or still planned for, to inpatient acute care beds. If these beds were converted, Memorial West would find itself once again in its present straits of not enough beds for observation purposes particularly for obstetrical patients for whom there is little choice where to obtain obstetrical services in the South Broward Hospital District. Limited Functionality and Uncertain Future of Memorial Pembroke Memorial Pembroke has undergone seven ownership changes since it first opened. Perceived as a hospital where neither patients nor physicians want to go, it has suffered from a stigma within the community. Even with recent gains in utilization, it achieved an occupancy rate of only 24% in calendar year 2000. Pembroke suffers from physical and infrastructure limitations that reduce its functional bed capacity to 149 beds. Its mechanical and heating, ventilation and air conditioning systems are outdated and inadequate. For example, a primary generator is vented to the outside by a 6-foot hole in the ceiling. The electrical panels are at absolute capacity. The first floor has an outdated, plenum air return with no ducts in the ceiling. The generators have transfer switches that require them to be turned on manually. Facilities management personnel are reluctant to do so for safety reasons. The semi-private patient rooms at Pembroke are too small for modern care and do not have adequate space for the monitors, IV equipment, pumps and other technology required by today's health care delivery system. Many rooms do not have showers. The hospital has a number of three bed wards woefully outdated by the standards of modern care. It would cost $31 million in capital improvements to simply maintain Pembroke's functional capacity at 149 beds, to upgrade the facility to bring it into compliance with existing code and to otherwise modernize inadequacies. Whether Pembroke will continue to operate after 2004 is unknown. While HCA stated its intention to do so, it has not made a final decision to assume operations. It still needs to conduct a financial analysis sufficiently detailed to determine whether the necessary expenditures to bring the hospital up to par are practical. Any capital investment by HCA in excess of $1 million requires the approval of HCA's national office, approval that has not yet been provided. The level of capital investment required at Memorial Pembroke is significant and it cannot be assumed that HCA will make this investment. (See paragraph 89, above.) Increasing Retraction for Access in SW Broward Of the three hospitals located within the ten zip codes that constitute southwest Broward County: Memorial West, Memorial Pembroke and Cleveland Clinic, each poses some manner of access impediment for the residents of the area. Memorial West is overcrowded. Memorial Pembroke's future is uncertain, its present clouded by significant physical plant problems and stigma that keeps its occupancy low. Cleveland Clinic's distinctive character, its closed specialty staff and its regional, national and international draw discourages utilization by southwest Broward residents seeking routine acute care hospital services at a community hospital. The Cleveland Clinic medical staff is open to community primary care physicians. "[W]ith the qualification that if there's a specialty for some reason that is not adequately manned, the clinic can go out and contract with community physicians to provide the services" (District No. 55, p. 39), the Cleveland Clinic medical staff is not open to community specialists or sub-specialists. Its specialty and sub- specialty staff, therefore, is closed. The medical staff building, moreover, located on the campus is also closed to community practitioners even to those primary care physicians with privileges at the hospital to manage their patients care. Like the specialty medical staff, the building is restricted to Cleveland Clinic salaried specialists. Due to the closed nature of the specialty staff at Cleveland Clinic, any patient admitted to the Cleveland Clinic hospital will be seen by a Cleveland Clinic physician. This sets up reluctance on the part of community physicians to use the Cleveland Clinic hospital. As expressed by the hospital's CEO, "it's sometimes difficult to convince a primary care physician that he needs to change his referral patients, so yes, there is some concern [about the willingness of community physicians to utilize the hospital]." Id., p. 40. In multiple prior CON applications approved by AHCA, Cleveland Clinic projected that up to 30% of its patients would come from outside Broward County and that it would draw patients from throughout Broward County, rather than having a more traditional, limited service area typical of a community hospital. Patient origin data for Cleveland Clinic when at its old location in Pompano Beach shows the hospital, unique among Broward County hospitals, has a broad county-wide, regional and national draw. While all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 75% of patient admissions in 1999, 60 zip codes generated the first 75% of Cleveland Clinic's admissions. Similarly, while all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 90% of their patient admissions in 1999, the first 90% of patient admissions at Cleveland Clinic's hospital were generated by no less than 287 zip codes. Cleveland Clinic presented evidence of its intention to be available to the local community. It has marketed in Broward County by means of newspaper and television advertisements and various community programs. It has also conducted outreach and training programs with the emergency medical service providers in the Broward County area, not only to improve the quality of care for the patients of Broward County but also to educate the emergency medical service providers about Cleveland Clinic. The patient origin data for Cleveland Clinic's first three months of operation in Weston, however, verifies its continued broad draw. This data shows that within Broward County, only 30% of patients originated within the 9 southwest Broward zip codes that Cleveland Clinic identifies as its "immediate service area"; the other 70% of its patients come from outside the immediate service area. Cleveland Clinic is not a typical community hospital. Its previous CON applications have been granted in part on its unique characteristics. Whether its image or persona will change with the move to Weston to attract more patients from southwest Broward County is an open question. Given its nature and the focus of the health care it is likely to deliver, however, it is not likely that it will be utilized regularly by residents of southwest Broward County seeking routine hospital care either because not their hospital of choice or because of community physician referral patterns. h. Assurance that SBHD Can Fulfill its Mission The final "not normal" circumstance relied on by SBHD relates to the affluence of the patients in southwest Broward County and the profits that are reasonably expected to be generated by virtue of the proposed hospital's location in this affluent area. The expected profits will both subsidize SBHD's charity care and support its ability to be competitive. The importance of SBHD remaining competitive and able to serve the indigent in Broward County was explained at hearing by Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation: [A]s a major indigent care provider for the State of Florida, [SBHD is] providing a service that extends far and wide that benefits everyone. In our state we have indigent care concentrated in relatively few facilities … [I]t is a very important resource that needs to be nurtured and protected to the greatest extent possible because it is fragile and vulnerable. We have many uninsured people in the state, somewhere between two and three million. It is reasonable to expect now with the economic downturn that we are going to be seeing an increase in uninsured people, so the value of hospitals that function as safety net providers is . . . very important. (Tr. 1240-1). This rationale supported the District's CON application for Memorial West. Because of SBHD's financial success to which Memorial West has been a major contributor, SBHD has achieved a significant degree of financial stability in this day of decreasing reimbursements, managed care, and increased health care costs. It is not contested that its financial position is sound. For fiscal year 2002, SBHD was running ahead of revenue and profit projections at the time of hearing. Nonetheless, if hospitals are constrained and the payor mix becomes less favorable, financial conditions can change quickly. Only three years ago, the District posted an $18 million debt. The capacity constraints at Memorial West will limit its ability to generate additional profits. At the same time, the District must accept all charity care patients. This requirement coupled with capacity constraints has the potential for an unfavorable payor mix for the District. The addition of Memorial Miramar will help to ensure that the District maintains its strong market position and will sustain a favorable payor mix. The profits expected to be generated by Memorial Miramar will ensure that the District can continue to provide care to the indigent without raising, and perhaps by lowering, the tax rate for the tax payers of Broward County. The Proposed Primary Service Area The District's proposed primary service area ("PSA") is a 10 zip code area in southwest Broward County. It excludes zip codes in Dade County that might have been included as well as the eight easternmost zip codes in south Broward County. Usually a set of contiguous towns or minor subdivisions or zip codes that represent a substantial majority of a hospital's patients, there is no single way of defining a hospital's primary service area. Some health planners use a region from which 75% of the patients come but a range of 60 to 80 percent is not unreasonable. There are other approaches to defining primary service areas: zip codes, for example, in which a threshold level of market share was achieved or that account for a minimum percentage of the hospital's patients. While one method may be more usual than another, any of a number of ways of defining a PSA may be reasonable. Cleveland Clinic's health planner, Ms. Patricia Greenberg sees Dr. Finarelli's PSA for the Miramar hospital as not rational from the perspective of health planning. The zip codes Dr. Finarelli chose include a number that are to the east of Memorial West. Ms. Greenberg asserts that it is unlikely that patients will drive from the east past Memorial West in order to reach Memorial Miramar. It would have made much more sense, in her view, for the PSA to have included three zip codes to the north of the PSA in western Broward County: zip codes 33327, 33326 and 33325. But these zip codes, entirely within North Broward Hospital District, are not South Broward Hospital District zip codes. Nor are three other zip codes that Ms. Greenberg sees for the Miramar PSA as more rational choices than zip codes east of Memorial West that Dr. Finarelli chose. Ms. Greenberg's other choices outside Dr. Finarelli's PSA are not only not in the hospital district, they are not in AHCA Health Planning District 10. They are in Dade County. Determinations of bed need do not always rise and fall on the selection of the primary service area. To the contrary, as Dr. Finarelli stated at hearing, "[h]ow and where the boundaries are drawn between the primary and secondary service area is less important [than] making sure that any analysis of bed need and demand incorporates both the primary and secondary service areas." (Tr. 724). This statement loses its potency, however, and the import of the choice of the primary service area is raised in light of the population-based bed need projections made by Dr. Finarelli within the PSA in support of the application. Population Based Bed Need Projections within the PSA Dr. Finarelli conducted a standard population based bed need analysis to determine the gross bed need within the PSA selected for the proposed hospital. His bed need calculations were computed separately for adult medical, surgical, pediatric and obstetric beds. The assumptions used by Dr. Finarelli were reasonable and appropriate. The level of detail in Dr. Finarelli's model was described by another of SBHD's expert health planners who testified in this case, Mr. Balsano and who has been qualified as an expert in health planning and health care financial feasibility approximately 20 times over the last decade, as the most detailed model he had ever seen. Dr. Finarelli's analysis accounted for the current and projected population as well as the current and projected hospital discharge rate per 1000 population within the PSA. Multiplying the population (in thousands) by the discharge rate yields the total number of current and projected hospital discharges by PSA residents for the planning horizon. The total number of hospital discharges was then multiplied by an appropriate average length of stay ("ALOS") to determine the total number of current and projected patient days by PSA residents. The total patient days were divided by 365 (days in the year) to arrive at the current and projected hospital average daily census ("ADC"). Finally, the ADC was divided by the desired 75% occupancy rate to arrive at a gross bed need for the PSA. The calculations result in a projected need in the 2006 planning horizon for a total of 457 acute care beds; including 386 adult medical surgical, 25 pediatric, and 46 obstetric beds. Based only on projected population growth within the PSA, there will be an incremental gross bed need for 75 acute care beds; 67 medical/surgical, 3 pediatric and 5 obstetric. Existing Inventory and Bed Supply The three hospitals located within the 10 zip code PSA have a total of 667 licensed acute care beds, existing or approved. Including the 36 approved and 16 conditionally approved beds at West, Memorial West has 216 beds. Memorial Pembroke has 301 and there are 150 licensed beds at Cleveland Clinic. This total, however, is "simply not a reasonable or realistic measure of how many beds in those three hospitals are truly available to the residents of Southwest Broward County . . . ." (Tr. 837-8.) Patient origin statistics and representations made by Cleveland Clinic in its certificate of need applications bear out that it is not a typical community hospital. Appropriate to its mix of tertiary services and its focus on education and research, it has a broad service area reaching far beyond Broward County. Consistent with the nature of the hospital, in its first three months of operation at Weston, 35% of its patients came from outside Broward County and only 16% have come from southwest Broward County or the 10 zip code PSA used by SBHD in its application for the Miramar hospital. Based on available data and information, it is reasonable to project that Cleveland Clinic will draw approximately 26% of its patients from within Memorial Miramar's PSA. It is reasonable, therefore, to allocate 26% of Cleveland Clinic's 150 beds to meet the population based demand for adult medical surgical beds in the PSA, for a net contribution of approximately 40 beds. With its functional capacity of 149 beds, it is not reasonable to consider all of the 301 beds at Memorial Pembroke. Fifty-four percent of its patients come from within the Memorial Pembroke PSA. The product of 149 beds multiplied by 54% is approximately 80 beds available to meet the population-based demand of the residents of southwest Broward County. There is, moreover, some doubt about whether any beds will be available at Memorial Pembroke after the expiration of SBHD's lease with HCA. Given the stigma Memorial Pembroke suffers and its uncertain future, an estimate of 80 beds is a reasonable projection for the number of beds at the hospital available to meet the needs of the residents of southwest Broward County. With 65% of its patients coming from within the proposed PSA for the Miramar Hospital, Memorial West is the hospital of choice for the residents of the proposed PSA. With 186 adult medical surgical beds, 120 meet the needs of patients coming from Miramar's PSA. Thus, there are approximately 240 adult medical surgical beds (120 at West, 80 at Pembroke and 40 at Cleveland Clinic) available to meet the projected need of 386 adult medical surgical beds in the 2006 planning horizon. Subtracting the 240 beds from the 386 needed yields a net need of 146 beds to serve residents of the Miramar PSA. Although some patients will continue to seek services outside the PSA, Dr. Finarelli's projection that there is a sufficient net need to support the 80 adult medical surgical beds proposed at Memorial Miramar is reasonable. Building Memorial Miramar will help reduce the percentage of people who leave the area for acute inpatient adult medical surgical services from its current level of about 50% to approximately 25%. This will improve access to health care for the residents of southwest Broward County. Memorial West is the only provider of obstetrical services in southwest Broward County, and only one of two in all of south Broward (the other being Memorial Regional). Both Memorial West and Memorial Regional are operating above capacity in their obstetrical units. In calendar year 2000, Memorial West's 24-bed obstetric unit operated at 130% occupancy. Hollywood Medical Center recently closed its obstetric unit thereby increasing the pressure on Memorial Regional and Memorial West to provide services to area patients. With a projected gross need for 46 obstetric beds in the planning horizon, there is a net need for at least 22 more obstetric beds. The proposed 12-bed unit at Memorial Miramar will help to meet that need. Memorial Hospital West's 6-bed pediatric unit is the only unit of its kind in southwest Broward County. The only other provider of pediatric services in all of south Broward is Memorial Regional's Joe DiMaggio Children's Hospital. Dr. Finarelli reasonably projects that one-half of the pediatric patient beds needed in southwest Broward would continue to be filled by Joe DiMaggio's Children Hospital. This leaves a net need for at least 7 pediatric beds in southwest Broward; the proposed 8-bed unit at Memorial Miramar will fill that need. Patient Days, Utilization and Market Share Projections To project utilization and market shares for the proposed hospital, Dr. Finarelli used a geographic area comprised of 28 zip codes that represent the primary and secondary service areas of the proposed hospital. The areas are expected to account for 90% of the hospital's admissions. The 28 zip codes were divided by Dr. Finarelli into four geographic clusters: the 10 zip code PSA or "Southwest Broward", 9 zip codes in "Other South Broward", 3 zip codes in "North Broward" and 6 zip codes in north Dade County or "Select North Dade." Based on historical and current data and market trends, Dr. Finarelli assigned current and projected inpatient market shares in each zip code cluster to each hospital in south Broward County and to select hospitals in north Broward County and north Dade County, with and without the existence of Memorial Hospital Miramar. He also assigned market shares and projected patient days separately by service category for adult medical/surgical, obstetric and pediatric services. Dr. Finarelli's market share assumptions for the proposed hospital were as follows: for Southwest Broward County in the Adult Service Category, 6% and 18%, in OB, 7% and 20%, in Pediatrics, 7% and 20%, all for the years 2005 and 2010, respectively; for Other South Broward County, in the Adult Service Category, 0.3% and 1%, for OB, 0.3% and 1%, for pediatrics, 0% and 0%, all for the years 2005 and 2010, respectively; for North Broward in the Adult Service Category, 0.6% and 2%, for OB, 0.8% and 3% and for pediatrics, 0.8% and 3%, all for the years 2005 and 2010, respectively; and for Select North Dade, in the Adult Service Category, 0.8% and 2.5%, for OB, 1% and 3%, and for pediatrics, 0.8% and 2.5%, all for the years 2005 and 2010, respectively. Taking into account available data and projected trends in each of the zip code clusters, these market share projections are reasonable. Dr. Finarelli applied his market share assumptions to overall projections of hospital discharges for each zip code cluster to arrive at the projected number of discharges for the proposed hospital in its first and second year of operation. He included an additional 9% to 10% in projected discharges to account for patients admitted from outside the 28 zip codes, such as patients from areas elsewhere in Broward, Dade, other parts of Florida and out of state. It is typical for hospitals in Broward County to receive approximately 10% of patients from outside of their primary and secondary service areas. By multiplying the projected number of hospital discharges by a reasonable length of stay for each category of service, Dr. Finarelli arrived at his projections of patient days. His "average length of stay" assumption was less than the District average. These calculations demonstrate that Memorial Miramar will have total acute care utilization of 19,958 patient days in its first full year of operation, and 25,503 patient days in its second full year of operation. Dr. Finarelli's projections of market shares, admissions and patient days for the new hospital appear to be reasonable. The Statutory Criteria Section 408.035, Florida Statutes, provides the review criteria for CON applications. The parties agree that subsections (3) and (4) are not in dispute. Section 408.035(1) concerns whether the proposed project is supported by and consistent with the applicable district health plan (the "Plan"). The Plan contains recommendations, preferences and priorities. The majority of the preferences and priorities contained in the Plan are not applicable to this application. The Plan recommends that there should be a reduction of licensed beds in Broward County until a ratio of 4.0 beds per 1,000 population is less than 4.0 beds per thousand and/or an overall occupancy rate of 85% is achieved. Although the bed population ratio is less than 4.0 beds per thousand, the annual occupancy rate is below 50%. This criterion, quite obviously, is not met by SBHD. But its importance diminishes in light of the "not normal" circumstances in support of the application, particularly the overcrowding at Memorial West and Regional. The Plan states that "priority consideration for initiation of new acute care services or capital expenditures shall be given to applicants with a documented history of providing services to medically indigent patients or a commitment to do so." SBHD promises to provide 3.21% of gross revenue for charity care and 4.14% of its patient days for Medicaid patients at Memorial Pembroke. These figures are not unattainable. Memorial West provided 3.2% of its revenues toward charity care in the most recent year. The effect of the expiration of SBHD' lease without renewal at Memorial Pembroke may increase pressure on Memorial Miramar's charity care services. On the other hand, in light of Memorial West's history in meeting its charity care commitment and the relative affluence of the Miramar's PSA, there is some question as to whether Memorial Miramar can meet the commitment contained in the application. West has fallen far short of its 7.0% commitment. Less than 1% of its admissions were charity care admissions between 1997 and 2000 and only 2.6% of its gross revenues were for charity care in 1999, for example. Whatever West's experience bodes for Miramar's future, it is clear that SBHD has a documented history of providing services to the medically indigent. It is committed, moreover, to do so throughout the hospital district whether it achieves its commitment at Memorial Miramar or not. The preferences of the Plan related to the provision of care for the indigent is clearly met by SBHD. Section 408.035(2) addresses the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the service district of the applicant. There is no problem with quality of care in the district. The extent of utilization of all the facilities in the district is not high. Nonetheless, there is an access problem that constitutes not normal circumstances. Memorial West, in particular, is overcrowded. A new hospital in Miramar will enhance access for the residents of the hospital district who want to access one of the District's hospitals and so directly meets the criterion in Section 408.035(7), the "extent to which the proposed services will enhance access to health care for residents of the service district." Section 408.035(5) addresses the needs of research and educational facilities including facilities with institutional training programs and community training programs for health care practitioners at the student, internship and residency training levels. The District's affiliation with medical schools provides some satisfaction with this criterion but on balance, SBHD receives little credit under this criterion. Section 408.035(6), Florida Statutes is "[t]he availability, of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation." The parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital. Cleveland Clinic and Westside argue that SBHD's recruitment of staff will have a detrimental impact on existing providers. A shortage of skilled nurses and other allied professionals exists nationally, in Florida and in Dade and Broward Counties. The nursing shortage has intensified in recent years due to the decline in the number of licensed nurses further compounded by a drop in the number of nurses enrolled in nursing schools. As a result it has become increasingly difficult for hospitals to fill nursing vacancies. In order to ensure adequate staffing in the midst of the nursing shortage, especially during the peak season of late fall and the winter months, Westside and Cleveland Clinic are forced to utilize "agency" or "pool" nursing personnel. These nurses command higher wages than non-agency nursing personnel. The District's application projects a need for 128 registered nurses who will be full-time employees ("FTE"s). This need increases to 167. New hospitals are usually able to attract staff from other facilities who prefer to work with new equipment in a new setting. Recruitment of personnel to staff the Miramar Hospital will come at the expense of existing providers such as Cleveland Clinic and Westside. Subsection (8) of the Review Criteria is "[t]he immediate and long-term financial feasibility of the proposal." The District has the financial resources to construct the hospital and meet start-up costs. There was no challenge to SBHD's demonstration of short-term financial feasibility. Projections of revenues and expenses were based on SBHD experience at Memorial West and its other hospitals. These projections are reasonable. Based on Dr. Finarelli's patient day projections, showing a net profit of $1.6 million in year 2, the project is feasible in the long-term. Subsection (9) of the Review Criteria is "[t]he extent to which the proposal will foster competition that promotes quality and cost-effectiveness." Aside from the impact the new facility will have on Cleveland Clinic and Westside's ability to recruit and retain staff, the evidence failed to show that either Cleveland Clinic or Westside would suffer significant impact if SBHD's application is approved. No matter which experts projections of lost case volume are accepted, both Cleveland Clinic and Westside should generate substantial net profits. The future of Memorial Pembroke, after the expiration of the current lease, is too speculative to factor into the impact to HCA. Subsection (10) of the Review Criteria relates to the costs and methods of the proposed construction. The District satisfies this criterion. (See paragraph 34, above). Subsection (11) addresses the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. As stated above, while there is legitimate doubt whether or not SBHD can meet the conditions it proposes in its application, there is no question about its past provisions of services to Medicaid patients and the medically indigent. Rule Criteria There are two rule criteria that relate to the application. Rule 59C-1.038, acute care bed priority considerations and Rule 59C-1030, additional review criteria. Under the Rule 59C-1.038 there are two priorities, only the first of which (documented history of providing services to medically indigent patients or a commitment to do so) is applicable. Stated in the disjunctive, just as its corollary statutory criterion, SBHD clearly meets the criterion based on its documented history regardless of the case Cleveland Clinic and Westside present relative to doubts based on the history of condition compliance at Memorial West. The criteria in Rule 59C-1.030 generally address the extent to which there is a need for a particular service and the extent to which the service will be accessible to underserved members of the population. The application did not identify an underserved segment of the population that is in need of the services proposed for Memorial Miramar. As for the remainder of the criteria under the rule, there is a need for the proposed project as concluded below in this order's conclusions of law.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration grant South Broward Hospital District's CON Application 9459 to establish a 100-bed acute care hospital in southwest Broward County. DONE AND ENTERED this 3rd day of July, 2002, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of July, 2002. COPIES FURNISHED: C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 F. Philip Blank, Esquire Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 George N. Meros, Jr., Esquire Michael E. Riley, Esquire Gray, Harris & Robinson, P.A. Post Office Box 11189 Tallahassee, Florida 32302 Gerald L. Pickett, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Virginia A. Daire, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building Three, Suite 3431 Tallahassee, Florida 32308-5403
Conclusions THE PARTIES resolved all disputed issues and executed a Settlement Agreement. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. DONE and ORDERED on this the L x. of , 2014, in Tallahassee, Florida. Be At yf. yor’ ABETH DUIEK, SECRETARY Agency for Health Care Administration 1 AHCA vs. Roberto Uriel, M.D., South Florida Pediatrics, C.}. 13-0344-000 Final Order Filed May 8, 2014 1:44 PM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: Beverly H. Smith Assistant General Counsel Agency for Health Care Administration Office of the General Counsel (Interoffice Mail) Christopher A. Parrella, J.D., CHC, CPC, CPCO The Health Law Offices of Anthony C. Vitale, P.A. Law Center of Brickell Bay 2333 Brickell Avenue, Suite A-1 Miami, FL 33129 (U.S. Mail) Richard Zenuch, Chief, Medicaid Program Integrity Finance and Accounting Health Quality Assurance Florida Department of Health 2 AHCA vs. Roberto Uriel, M.D., South Florida Pediatrics, C.I. 13-0344-000 Final Order CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addressees by U.S. Mail or other designated method on this the Bas of 45 , 2014, Richard Shoop, Esquire Agency Clerk State of Florida Agency for Health Care Administration 2727 Mahan Drive, MS #3 Tallahassee, Florida 32308-5403 (850) 412-3630/FAX (850) 921-0158 3 AHCA vs. Roberto Uriel, M.D., South Florida Pediatrics, C.1. 13-0344-000 Final Order
Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
Findings Of Fact The Intervenor, South Broward Hospital District, is a public tax- supported hospital district which serves residents of southern Broward County. The District owns and operates Memorial Hospital in Hollywood, Florida, and a walk-in medical center in Pembroke Pines, Florida. Intervenor filed an application with the Office of Community Medical Facilities of the Department of Health and Rehabilitative Services and with the local health services agency in Broward County for a Certificate of Need to acquire land in southwest Broward County. The Intervenor proposes to spend between $500,000 and $1,000,000 for approximately thirty acres of land in an area bounded by Dykes Road, Sterling Road, Flamingo Road and Hollywood Boulevard. The Broward County health services agency, the Health Planning and Development Council for Broward County, Inc., held a public hearing on the application. Representatives of the Petitioner, Gateway Hospital Corporation East, appeared at the hearing and presented argument in opposition to the application. The health services agency voted to approve the application by a vote of twenty to zero. The Office of Community Medical Facilities reviewed the application and issued its Certificate of Need No. 1623. Gateway Hospital thereafter filed its petition for hearing, and this proceeding ensued. The Intervenor exists in order to serve health care needs in southern Broward County. Intervenor has a master plan and has adopted ten-year plans. These plans call for the Intervenor to acquire land in southwestern Broward County for the ultimate construction of a new acute care hospital. The southwestern portion of Broward County has been experiencing rapid growth, and rapid growth can reasonably be expected to continue. It is anticipated in Intervenor's plans that there will be a need for a new acute care hospital in that area in the future. Whether a facility is needed now, or will be needed in five years or ten years cannot be determined from the evidence, but it is reasonably anticipated that such a need will exist in the foreseeable future. In order to accommodate this future need, Intervenor is seeking to purchase land in the area. Such a purchase at the present time to accommodate a future need offers advantages to Intervenor. The cost of land in southwestern Broward County has increased dramatically, and it is anticipated that property values will continue to increase. Land can therefore be purchased more cheaply now than would be possible in the future. Furthermore, larger blocks of land are available now than will be available in the future. By purchasing land now the Intervenor has more options for desirable properties available to it. Thus, the best possible future site location and a cheaper price can be obtained. Intervenor does intend to ultimately construct a new acute care hospital on the property that it purchases. At the time that the Certificate of Need application was filed, the Intervenor did not have any specific timetable in mind for that construction. Since that date, however, plans have crystallized, and Intervenor has filed a Certificate of Need application to construct such a facility. The application is one of several that have been filed with the Department for similar facilities in Broward County, Florida. The applications are being considered by the Department in a "batching cycle" so that mutually exclusive applications can be reviewed in the same proceeding. Whether the Intervenor is granted a Certificate of Need to construct a new acute care hospital on the property that it seeks to purchase at this time or not, the property acquisition serves the appropriate long-range plans that have been adopted by Intervenor. Intervenor has, through its taxing authority, the economic means to purchase the property as it proposes. The Intervenor has recently increased its health care charges; however, this land acquisition would have no effect upon those charges since it would be accomplished through Intervenor's taxing authority rather then from revenues generated by Intervenor's facilities. The amount of money that Intervenor proposes to spend for the property is a reasonable allowance for the purchase of thirty acres of land in the area proposed. Petitioner operates an acute care hospital in Pembroke Pines, Florida, and provides health care services to residents of southwestern Broward County. Petitioner is a private corporation which operates for profit. If the Intervenor ultimately constructs an acute care hospital on the property that it proposes to purchase, that facility and the Petitioner's facility would serve the same geographic area and would, in all probability, compete for business.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, hereby, RECOMMENDED: That a final order be entered by the Office of Community Medical Facilities of the Department of Health and Rehabilitative Services dismissing the petition for hearing filed by Gateway Hospital Corporation East and issuing a Certificate of Need approving the application of South Broward Hospital District to acquire property in southwestern Broward County. RECOMMENDED this 23rd day of December, 1981, in Tallahassee, Florida. G. STEVEN PFEIFFER Assistant Director Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 1981. COPIES FURNISHED: Byron B. Mathews, Jr., Esquire Michael Anthony, Esquire McDermott, Will & Emery 700 Brickell Avenue Miami, Florida 33131 James M. Barclay, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building Two, Room 220 Tallahassee, Florida 32301 Loyd M. Starrett, Esquire Walden, Walden & McCauley 255 Dania Beech Boulevard Dania, Florida 33004 Martha B. Sosmen, Esquire Foley, Hoag & Eliot Ten Post Office Square Boston, Massachusetts 02109 Mr. Thomas J. Konrad, Administrator Office of Community Medical Facilities Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building Two, Room 220 Tallahassee, Florida 32301 Mr. David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32381
Conclusions THE PARTIES resolved all disputed issues and executed a settlement agreement, which is attached and incorporated by reference. The parties are directed to comply with the terms of the attached settlement agreement. Based on the foregoing, this file is CLOSED. DONE AND ORDERED on this the Ov. O* say ot Ascateh 2013, in Tallahassee, Leon County, Florida. Agency for Health Care Administration Filed August 23, 2013 10:42 AM Division of Administrative Hearings A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies Furnished to: Joseph S. Speicher, CEO South County Mental Health Center, Inc. 16158 South Military Trail Delray Beach, Florida 33484 Jeffries H. Duvall, Assistant General Counsel Agency for Health Care Administration Eric W. Miller, Inspector General Agency for Health Care Administration Richard Zenuch, Bureau Chief Medicaid Program Integrity Finance & Accounting HQA (via email) CERTIFICATE OF SERVICE | HEREBY CERTIFY that a true and correct copy of the foregoing was served to the above nd 1, named addresses by mail or interoffice mail this Z Z day of 2013. 2727 Mahan Drive, Bldg. 3, MS #3 Tallahassee, Florida 32308-5403 (850) 412-3630
