The Issue Whether the certificate of need (CON) applications filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey (Community Hospital) (CON No. 9539), and Morton Plant Hospital Association, Inc., d/b/a North Bay Hospital (North Bay) (CON No. 9538), each seeking to replace and relocate their respective general acute care hospital, satisfy, on balance, the applicable statutory and rule criteria.
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of the CON program in Florida pursuant to Chapter 408, Florida Statutes (2000). The agency separately reviewed and preliminarily approved both applications. Community Hospital Community Hospital is a 300,000 square feet, accredited hospital with 345 licensed acute care beds and 56 licensed adult psychiatric beds, located in southern New Port Richey, Florida, within Sub-District 5-1. Community Hospital is seeking to construct a replacement facility approximately five miles to the southeast within a rapidly developing suburb known as "Trinity." Community Hospital currently provides a wide array of comprehensive inpatient and outpatient services and is the only provider of obstetrical and adult psychiatric services in Sub-District 5-1. It is the largest provider of emergency services in Pasco County with approximately 35,000 visits annually. It is also the largest provider of Medicaid and indigent patient days in Sub-District 5-1. Community Hospital was originally built in 1969 and is an aging facility. Although it has been renovated over time, the hospital is in poor condition. Community Hospital's average daily census is below 50 percent. North Bay North Bay is a 122-bed facility containing 102 licensed acute care beds and 20 licensed comprehensive medical rehabilitation beds, located approximately one mile north of Community Hospital in Sub-District 5-1. It serves a large elderly population and does not provide pediatric or obstetrical care. North Bay is also an aging facility and proposes to construct a replacement facility in the Trinity area. Notably, however, North Bay has spent approximately 12 million dollars over the past three years for physical improvements and is in reasonable physical condition. Helen Ellis Helen Ellis is an accredited hospital with 150 licensed acute care beds and 18 licensed skilled nursing unit beds. It is located in northern Pinellas County, approximately eight miles south of Community Hospital and nine miles south of North Bay. Helen Ellis provides a full array of acute care services including obstetrics and cardiac catheterization. Its daily census average has fluctuated over the years but is approximately 45 percent. Mease Mease operates two acute care hospitals in Pinellas County including Mease Dunedin Hospital, located approximately 18 to 20 miles south of the applicants and Mease Countryside Hospital, located approximately 16 to 18 miles south of Community and North Bay. Each hospital operates 189 licensed beds. The Mease hospitals are located in the adjacent acute care sub-district but compete with the applicants. The Health Planning District AHCA's Health Planning District 5 consists of Pinellas and Pasco Counties. U.S. Highway 41 runs north and south through the District and splits Pasco County into Sub- District 5-1 and Sub-District 5-2. Sub-District 5-1, where Community Hospital and North Bay are located, extends from U.S. 41 west to the Gulf Coast. Sub-District 5-2 extends from U.S. 41 to the eastern edge of Pasco County. Pinellas County is the most densely populated county in Florida and steadily grows at 5.52 percent per year. On the other hand, its neighbor to the north, Pasco County, has been experiencing over 15 percent annual growth in population. The evidence demonstrates that the area known as Trinity, located four to five miles southeast of New Port Richey, is largely responsible for the growth. With its large, single- owner land tracts, Trinity has become the area's fuel for growth, while New Port Richey, the older coastal anchor which houses the applicants' facilities, remains static. In addition to the available land in Trinity, roadway development in the southwest section of Pasco County is further fueling growth. For example, the Suncoast Highway, a major highway, was recently extended north from Hillsborough County through Sub-District 5-1, west of U.S. 41. It intersects with several large east-west thoroughfares including State Road 54, providing easy highway access to the Tampa area. The General Proposals Community Hospital's Proposal Community Hospital's CON application proposes to replace its existing, 401-bed hospital with a 376-bed state- of-the-art facility and relocate it approximately five miles to the southeast in the Trinity area. Community Hospital intends to construct a large medical office adjacent to its new facility and provide all of its current services including obstetrical care. It does not intend to change its primary service area. North Bay's Proposal North Bay's CON application proposes to replace its existing hospital with a 122-bed state-of-the-art facility and also plans to relocate it approximately eight miles to the southeast in the Trinity area of southwestern Pasco County. North Bay intends to provide the same array of services it currently offers its patients and will not provide pediatric and obstetrical care in the proposed facility. The proposed relocation site is adjacent to the Trinity Outpatient Center which is owned by North Bay's parent company, Morton Plant. The Outpatient Center offers a full range of diagnostic imaging services including nuclear medicine, cardiac nuclear stress testing, bone density scanning, CAT scanning, mammography, ultrasound, as well as many others. It also offers general and specialty ambulatory surgical services including urology; ear, nose and throat; ophthalmology; gastroenterology; endoscopy; and pain management. Approximately 14 physician offices are currently located at the Trinity Outpatient Center. The Condition of Community Hospital Facility Community Hospital's core facilities were constructed between 1969 and 1971. Additions to the hospital were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and 1999. With an area of approximately 294,000 square feet and 401 licensed beds, or 733 square feet per bed, Community Hospital's gross area-to-bed ratio is approximately half of current hospital planning standards of 1,600 square feet per bed. With the exception of the "E" wing which was completed in 1999, all of the clinical and support departments are undersized. Medical-Surgical Beds And Intensive Care Units Community Hospital's "D" wing, constructed in 1975, is made up of two general medical-surgical unit floors which are grossly undersized. Each floor operates 47 general medical-surgical beds, 24 of which are in three-bed wards and 23 in semi-private rooms. None of the patient rooms in the "D" wing have showers or tubs so the patients bathe in a single facility located at the center of the wing on each floor. Community Hospital's "A" wing, added in 1973, is situated at the west end of the second floor and is also undersized. It too has a combination of semi-private rooms and three-bed wards without showers or tubs. Community Hospital's "F" wing, added in 1979, includes a medical-surgical unit on the second and third floor, each with semi-private and private rooms. The second floor unit is centrally located between a 56-bed adult psychiatric unit and the Surgical Intensive Care Unit (SICU) which creates security and privacy issues. The third floor unit is adjacent to the Medical Intensive Care Unit (MICU) which must be accessed through the medical-surgical unit. Neither intensive care unit (ICU) possesses an isolation area. Although the three-bed wards are generally restricted to in-season use, and not always full, they pose significant privacy, security, safety, and health concerns. They fail to meet minimum space requirements and are a serious health risk. The evidence demonstrates that reconfiguring the wards would be extremely costly and impractical due to code compliance issues. The wards hinder the hospital's acute care utilization, and impair its ability to effectively compete with other hospitals. Surgical Department and Recovery Community Hospital's surgical department is separated into two locations including the main surgical suite on the second floor and the Endoscopy/Pain Management unit located on the first floor of "C" wing. Consequently, the department cannot share support staff and space such as preparation and recovery. The main surgical suite, adjacent recovery room, and central sterile processing are 25 years old. This unit's operating rooms, cystoscopy rooms, storage areas, work- stations, central sterile, and recovery rooms are undersized and antiquated. The 12-bay Recovery Room has no patient toilet and is lacking storage. The soiled utility room is deficient. In addition, the patient bays are extremely narrow and separated by curtains. There is no direct connection to the sterile corridor, and staff must break the sterile field to transport patients from surgery to recovery. Moreover, surgery outpatients must pass through a major public lobby going to and returning from surgery. The Emergency Department Community Hospital's existing emergency department was constructed in 1992 and is the largest provider of hospital emergency services in Pasco County, handling approximately 35,000 visits per year. The hospital is also designated a "Baker Act" receiving facility under Chapter 394, Florida Statutes, and utilizes two secure examination rooms for emergent psychiatric patients. At less than 8,000 total square feet, the emergency department is severely undersized to meet the needs of its patients. The emergency department is currently undergoing renovation which will connect the triage area to the main emergency department. The renovation will not enlarge the entrance, waiting area, storage, nursing station, nor add privacy to the patient care areas in the emergency department. The renovation will not increase the total size of the emergency department, but in fact, the department's total bed availability will decrease by five beds. Similar to other departments, a more meaningful renovation cannot occur within the emergency department without triggering costly building code compliance measures. In addition to its space limitations, the emergency department is awkwardly located. In 1992, the emergency department was relocated to the front of the hospital and is completely separated from the diagnostic imaging department which remained in the original 1971 building. Consequently, emergency patients are routinely transported across the hospital for imaging and CT scans. Issues Relating to Replacement of Community Hospital Although physically possible, renovating and expanding Community Hospital's existing facility is unreasonable. First, it is cost prohibitive. Any significant renovation to the 1971, 1975, 1977, and 1979 structures would require asbestos abatement prior to construction, at an estimated cost of $1,000,000. In addition, as previously noted, the hospital will be saddled with the major expense of complying with all current building code requirements in the 40-year-old facility. Merely installing showers in patient rooms would immediately trigger a host of expensive, albeit necessary, code requirements involving access, wiring, square footage, fireproofing columns and beams, as well as floor/ceiling and roof/ceiling assemblies. Concurrent with the significant demolition and construction costs, the hospital will experience the incalculable expense and loss of revenue related to closing major portions, if not all, of the hospital. Second, renovation and expansion to the existing facility is an unreasonable option due to its physical restrictions. The 12'4" height of the hospital's first floor limits its ability to accommodate HVAC ductwork large enough to meet current ventilation requirements. In addition, there is inadequate space to expand any department within the confines of the existing hospital without cannibalizing adjacent areas, and vertical expansion is not an option. Community Hospital's application includes a lengthy Facility Condition Assessment which factually details the architectural, mechanical, and electrical deficiencies of the hospital's existing physical plant. The assessment is accurate and reasonable. Community Hospital's Proposed Replacement Community Hospital proposes to construct a six- story, 320 licensed beds, acute care replacement facility. The hospital will consist of 548,995 gross square feet and include a 56-bed adult psychiatric unit connected by a hallway to the first floor of the main hospital building. The proposal also includes the construction of an adjacent medical office building to centralize the outpatient offices and staff physicians. The evidence establishes that the deficiencies inherent in Community Hospital's existing hospital will be cured by its replacement hospital. All patients will be provided large private rooms. The emergency department will double in size, and contain private examination rooms. All building code requirements will be met or exceeded. Patients and staff will have separate elevators from the public. In addition, the surgical department will have large operating rooms, and adequate storage. The MICU and SICU will be adjacent to each other on the second floor to avoid unnecessary traffic within the hospital. Surgical patients will be transported to the ICU via a private elevator dedicated to that purpose. Medical-surgical patient rooms will be efficiently located on the third through sixth floors, in "double-T" configuration. Community Hospital's Existing and Proposed Sites Community Hospital is currently located on a 23-acre site inside the southern boundary of New Port Richey. Single- family homes and offices occupy the two-lane residential streets that surround the site on all sides. The hospital buildings are situated on the northern half of the site, with the main parking lot located to the south, in front of the main entrance to the hospital. Marine Parkway cuts through the southern half of the site from the west, and enters the main parking lot. A private medical mall sits immediately to the west of the main parking lot and a one-acre storm-water retention pond sits to the west of the mall. A private medical office building occupies the south end of the main parking lot and a four-acre drainage easement is located in the southwest corner of the site. Community Hospital's administration has actively analyzed its existing site, aging facility, and adjacent areas. It has commissioned studies by civil engineers, health care consultants, and architects. The collective evidence demonstrates that, although on-site relocation is potentially an option, on balance, it is not a reasonable option. Replacing Community Hospital on its existing site is not practical for several reasons. First, the hospital will experience significant disruption and may be required to completely close down for a period of time. Second, the site's southwestern large four-acre parcel is necessary for storm-water retention and is unavailable for expansion. Third, a reliable cost differential is unknown given Community Hospital's inability to successfully negotiate with the city and owners of the adjacent medical office complexes to acquire additional parcels. Fourth, acquiring other adjacent properties is not a viable option since they consist of individually owned residential lots. In addition to the site's physical restrictions, the site is hindered by its location. The hospital is situated in a neighborhood between small streets and a local school. From the north and south, motorists utilize either U.S. 19, a congested corridor that accommodates approximately 50,000 vehicles per day, or Grand and Madison Streets, two-lane streets within a school zone. From the east and west, motorists utilize similar two-lane neighborhood streets including Marine Parkway, which often floods in heavy rains. Community Hospital's proposed site, on the other hand, is a 53-acre tract positioned five miles from its current facility, at the intersection of two major thoroughfares in southwestern Pasco County. The proposed site offers ample space for all facilities, parking, outpatient care, and future expansion. In addition, Community Hospital's proposed site provides reasonable access to all patients within its existing primary service area made up of zip codes 34652, 34653, 34668, 34655, 34690, and 34691. For example, the average drive times from the population centers of each zip code to the existing site of the hospital and the proposed site are as follows: Zip code Difference Existing site Proposed site 34652 3 minutes 14 minutes 11 minutes 34653 8 minutes 11 minutes 3 minutes 34668 15 minutes 21 minutes 6 minutes 34655 11 minutes 4 minutes -7 minutes 34690 11 minutes 13 minutes 2 minutes 34691 11 minutes 17 minutes 6 minutes While the average drive time from the population centroids of zip codes 34653, 34668, 34690, and 34691 to the proposed site slightly increases, it decreases from the Trinity area, where population growth has been most significant in southwestern Pasco County. In addition, a motorist's average drive time from Community Hospital's existing location to its proposed site is only 10 to 11 minutes, and patients utilizing public transportation will be able to access the new hospital via a bus stop located adjacent to the proposed site. The Condition of North Bay Facility North Bay Hospital is also an aging facility. Its original structure and portions of its physical plant are approximately 30 years old. Portions of its major mechanical systems will soon require replacement including its boilers, air handlers, and chillers. In addition, the hospital is undersized and awkwardly configured. Despite its shortcomings, however, North Bay is generally in good condition. The hospital has been consistently renovated and updated over time and is aesthetically pleasing. Moreover, its second and third floors were added in 1986, are in good shape, and structurally capable of vertical expansion. Medical Surgical Beds and ICU Units By-in-large, North Bay is comprised of undersized, semi-private rooms containing toilet and shower facilities. The hospital does not have any three-bed wards. North Bay's first floor houses all ancillary and support services including lab, radiology, pharmacy, surgery, pre-op, post-anesthesia recovery, central sterile processing and supply, kitchen and cafeteria, housekeeping and administration, as well as the mechanical, electrical, and facilities maintenance and engineering. The first floor also contains a 20-bed CMR unit and a 15-bed acute care unit. North Bay's second and third floors are mostly comprised of semi-private rooms and supporting nursing stations. Although the rooms and stations are not ideally sized, they are in relatively good shape. North Bay utilizes a single ICU with ten critical care beds. The ICU rooms and nursing stations are also undersized. A four-bed ICU ward and former nursery are routinely used to serve overflow patients. Surgery Department and Recovery North Bay utilizes a single pre-operative surgical room for all of its surgery patients. The room accommodates up to five patient beds, but has limited space for storage and pre-operative procedures. Its operating rooms are sufficiently sized. While carts and large equipment are routinely stored in hallways throughout the surgical suite, North Bay has converted the former obstetrics recovery room to surgical storage and has made efficient use of other available space. North Bay operates a small six-bed Post Anesthesia Care Unit. Nurses routinely prepare patient medications in the unit which is often crowded with staff and patients. The Emergency Department North Bay has recently expanded its emergency department. The evidence demonstrates that this department is sufficient and meets current and future expected patient volumes. Replacement Issues Relating to North Bay While it is clear that areas of North Bay's physical plant are aging, the facility is in relatively good condition. It is apparent that North Bay must soon replace significant equipment, including cast-iron sewer pipes, plumbing, boilers, and chillers which will cause some interruption to hospital operations. However, North Bay's four-page written assessment of the facility and its argument citing the need for total replacement is, on balance, not persuasive. North Bay's Proposed Replacement North Bay proposes to construct a new, state-of-the- art, hospital approximately eight miles southeast of its existing facility and intends to offer the identical array of services the hospital currently provides. North Bay's Existing and Proposed Sites North Bay's existing hospital is located on an eight-acre site with limited storm-water drainage capacity. Consequently, much of its parking area is covered by deep, porous, gravel instead of asphalt. North Bay's existing site is generally surrounded by residential properties. While the city has committed, in writing, it willingness to assist both applicants with on-site expansion, it is unknown whether North Bay can acquire additional adjacent property. North Bay's proposed site is located at the intersection of Trinity Oaks Boulevard and Mitchell Boulevard, south of Community Hospital's proposed site, and is quite spacious. It contains sufficient land for the facilities, parking, and future growth, and has all necessary infrastructure in place, including utility systems, storm- water structures, and roadways. Currently however, there is no public transportation service available to North Bay's proposed site. Projected Utilization by Applicants The evidence presented at hearing indicates that, statewide, replacement hospitals often increase a provider's acute care bed utilization. For example, Bartow Memorial Hospital, Heart of Florida Regional Medical Center, Lake City Medical Center, Florida Hospital Heartland Medical Center, South Lake Hospital, and Florida Hospital-Fish Memorial each experienced significant increases in utilization following the opening of their new hospital. The applicants in this case each project an increase in utilization following the construction of their new facility. Specifically, Community Hospital's application projects 82,685 total hospital patient days (64,427 acute care patient days) in year one (2006) of the operation of its proposed replacement facility, and 86,201 total hospital patient days (67,648 acute care patient days) in year two (2007). Using projected 2006 and 2007 population estimates, applying 2002 acute care hospital use rates which are below 50 percent, and keeping Community Hospital's acute care market share constant at its 2002 level, it is reasonably estimated that Community Hospital's existing hospital will experience 52,623 acute care patient days in 2006, and 53,451 acute care patient days in 2007. Consequently, Community Hospital's proposed facility must attain 11,804 additional acute care patient days in 2006, and 14,197 more acute care patient days in 2007, in order to achieve its projected acute care utilization. Although Community Hospital lost eight percent of the acute care market in its service area between 1995 and 2002, two-thirds of that loss was due to residents of Sub- District 5-1 acquiring services in another area. While Community Hospital experienced 78,444 acute care patient days in 1995, it projects only 64,427 acute care patient days in year one. Given the new facility and population factors, it is reasonable that the hospital will recapture half of its lost acute care market share and achieve its projections. With respect to its psychiatric unit, Community Hospital projects 16,615 adult psychiatric inpatient days in year one (2006) and 17,069 adult inpatient days in year two (2007) of the proposed replacement hospital. The evidence indicates that these projections are reasonable. Similarly, North Bay's acute care utilization rate has been consistently below 50 percent. Since 1999, the hospital has experienced declining utilization. In its application, North Bay states that it achieved total actual acute care patient days of 21,925 in 2000 and 19,824 in 2001 and the evidence at hearing indicates that North Bay experienced 17,693 total acute care patient days in 2002. North Bay projects 25,909 acute care patient days in the first year of operation of its proposed replacement hospital, and 27,334 acute care patient days in the second year of operation. Despite each applicant's current facility utilization rate, Community Hospital must increase its current acute care patient days by 20 percent to reach its projected utilization, and North Bay must increase its patient days by at least 50 percent. Given the population trends, service mix and existing competition, the evidence demonstrates that it is not possible for both applicants to simultaneously achieve their projections. In fact, it is strongly noted that the applicants' own projections are predicated upon only one applicant being approved and cannot be supported with the approval of two facilities. Local Health Plan Preferences In its local health plan for District 5, the Suncoast Health Council, Inc., adopted acute care preferences in October, 2000. The replacement of an existing hospital is not specifically addressed by any of the preferences. However, certain acute care preferences and specialty care preferences are applicable. The first applicable preference provides that preference "shall be given to an applicant who proposes to locate a new facility in an area that will improve access for Medicaid and indigent patients." It is clear that the majority of Medicaid and indigent patients live closer to the existing hospitals. However, Community Hospital proposes to move 5.5 miles from its current location, whereas North Bay proposes to move eight miles from its current location. While the short distances alone are less than significant, North Bay's proposed location is further removed from New Port Richey, is not located on a major highway or bus-route, and would therefore be less accessible to the medically indigent residents. Community Hospital's proposed site will be accessible using public transportation. Furthermore, Community Hospital has consistently provided excellent service to the medically indigent and its proposal would better serve that population. In 2000, Community Hospital provided 7.4 percent of its total patient days to Medicaid patients and 0.8 percent of its total patient days to charity patients. Community Hospital provided the highest percentage and greatest number of Medicaid patient days in Sub-District 5-1. By comparison, North Bay provided 5.8 percent of its total patient days to Medicaid patients and 0.9 percent of its total patient days to charity patients. In 2002, North Bay's Medicaid patients days declined to 3.56 percent. Finally, given the closeness and available bed space of the existing providers and the increasing population in the Trinity area, access will be improved by Community Hospital's relocation. The second local health plan preference provides that "[i]n cases where an applicant is a corporation with previously awarded certificates of need, preference shall be given to those which follow through in a timely manner to construct and operate the additional facilities or beds and do not use them for later negotiations with other organizations seeking to enter or expand the number of beds they own or control." Both applicants meet this preference. The third local health plan preference recognizes "Certificate of Need applications that provide AHCA with documentation that they provide, or propose to provide, the largest percentage of Medicaid and charity care patient days in relation to other hospitals in the sub-district." Community Hospital provides the largest percentage of Medicaid and charity care patient days in relation to other hospitals in Sub-District 5-1, and therefore meets this preference. The fourth local health plan preference applies to "Certificate of Need applications that demonstrate intent to serve HIV/AIDS infected persons." Both applicants accept and treat HIV/AIDS infected persons, and would continue to do so in their proposed replacement hospitals. The fifth local health plan preference recognizes "Certificate of Need applications that commit to provide a full array of acute care services including medical-surgical, intensive care, pediatric, and obstetrical services within the sub-district for which they are applying." Community Hospital qualifies since it will continue to provide its current services, including obstetrical care and psychiatric care, in its proposed replacement hospital. North Bay discontinued its pediatric and obstetrical programs in 2001, does not intend to provide them in its proposed replacement hospital, and will not provide psychiatric care. Agency Rule Preferences Florida Administrative Code Rule 59C-1.038(6) provides an applicable preference to a facility proposing "new acute care services and capital expenditures" that has "a documented history of providing services to medically indigent patients or a commitment to do so." As the largest Medicaid provider in Sub-District 5-1, Community Hospital meets this preference better than does North Bay. North Bay's history demonstrates a declining rate of service to the medically indigent. Statutory Review Criteria Section 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed in relation to the applicable district health plan District 5 includes Pasco and Pinellas County. Pasco County is rapidly developing, whereas Pinellas County is the most densely populated county in Florida. Given the population trends, service mix, and utilization rates of the existing providers, on balance, there is a need for a replacement hospital in the Trinity area. Section 408.035(2), Florida Statutes: 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 Community Hospital and North Bay are both located in Sub-District 5-1. Each proposes to relocate to an area of southwestern Pasco County which is experiencing explosive population growth. The other general acute care hospital located in Sub-District 5-1 is Regional Medical Center Bayonet Point, which is located further north, in the Hudson area of western Pasco County. The only other acute care hospitals in Pasco County are East Pasco Medical Center, in Zephyrhills, and Pasco Community Hospital, in Dade City. Those hospitals are located in Sub-District 5-2, east Pasco County, far from the area proposed to be served by either Community Hospital or North Bay. District 5 includes Pinellas County as well as Pasco County. Helen Ellis and Mease are existing hospital providers located in Pinellas County. Helen Ellis has 168 licensed beds, consisting of 150 acute care beds and an 18-bed skilled nursing unit, and is located 7.9 miles from Community Hospital's existing location and 10.8 miles from Community Hospital's proposed location. Access to Helen Ellis for patients originating from southwestern Pasco County requires those patients to travel congested U.S. 19 south to Tarpon Springs. As a result, the average drive time from Community Hospital's existing and proposed site to Helen Ellis is approximately 22 minutes. Helen Ellis is not a reasonable alternative to Community Hospital's proposal. The applicants' proposals are specifically designed for the current and future health care needs of southwestern Pasco County. Given its financial history, it is unknown whether Helen Ellis will be financially capable of providing the necessary care to the residents of southwestern Pasco. Mease Countryside Hospital has 189 licensed acute care beds. It is located 16.0 miles from Community Hospital's existing location and 13.8 miles from Community Hospital's proposed location. The average drive time to Mease Countryside is 32 minutes from Community Hospital's existing site and 24 minutes from its proposed site. In addition, Mease Countryside Hospital has experienced extremely high utilization over the past several years, in excess of 90 percent for calendar years 2000 and 2001. Utilization at Mease Countryside Hospital has remained over 80 percent despite the addition of 45 acute care beds in April 2002. Given the growth and demand, it is unknown whether Mease can accommodate the residents in southwest Pasco County. Mease Dunedin Hospital has 189 licensed beds, consisting of 149 acute care beds, a 30-bed skilled nursing unit, five Level 2 neonatal intensive care beds, and five Level 3 neonatal intensive care beds. Its former 15-bed adult psychiatric unit has been converted into acute care beds. It is transferring its entire obstetrics program at Mease Dunedin Hospital to Mease Countryside Hospital. Mease Dunedin Hospital is located approximately 18 to 20 miles from the applicants' existing and proposed locations with an average drive time of 35-38 minutes. With their remote location, and the exceedingly high utilization at Mease Countryside Hospital, neither of the two Mease hospitals is a viable alternative to the applicants' proposals. In addition, the construction of a replacement hospital would positively impact economic development and further attract medical professionals to Sub-District 5-1. On balance, given the proximity, utilization, service array, and accessibility of the existing providers, including the applicants, the relocation of Community Hospital will enhance access to health care to the residents. Section 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care As stipulated, both applicants provide excellent quality of care. However, Community Hospital's proposal will better enhance its ability to provide quality care. Community is currently undersized, non-compliant with today's standards, and located on a site that does not allow for reasonable expansion. Its emergency department is inadequate for patient volume, and the configuration of the first floor leads to inefficiencies in the diagnosis and treatment of emergency patients. Again, most inpatients are placed in semi-private rooms and three-bed wards, with no showers or tubs, little privacy, and an increased risk of infection. The hospital's waiting areas for families of patients are antiquated and undersized, its nursing stations are small and cramped and the operating rooms and storage facilities are undersized. Community Hospital's deficiencies will be effectively eliminated by its proposed replacement hospital. As a result, patients will experience qualitatively better care by the staff who serve them. Conversely, North Bay is in better physical condition and not in need of replacement. It has more reasonable options to expand or relocate its facility on site. Quality of care at North Bay will not be markedly enhanced by the construction of a new hospital. Sections 408.035(4)and(5), Florida Statutes, have been stipulated as not applicable in this case. Section 408.035(6), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds available for capital and operating expenditures, for project accomplishment and operation The parties stipulated that both Community Hospital and North Bay have available health personnel and management personnel for project accomplishment and operation. In addition, the evidence proves that both applicants have sufficient funds for capital and operating expenditures. Community Hospital proposes to rely on its parent company to finance the project. Keith Giger, Vice-President of Finance for HCA, Inc., Community Hospital's parent organization, provided credible deposition testimony that HCA, Inc., will finance 100 percent of the total project cost by an inter-company loan at eight percent interest. Moreover, it is noted that the amount to be financed is actually $20 million less than the $196,849,328 stated in the CON Application, since Community Hospital previously purchased the proposed site in June 2003 with existing funds and does not need to finance the land acquisition. Community Hospital has sufficient working capital for operating expenditures of the proposed replacement hospital. North Bay, on the other hand, proposes to acquire financing from BayCare Obligated Group which includes Morton Plant Hospital Association, Inc.; Mease; and several other hospital entities. Its proposal, while feasible, is less certain since member hospitals must approve the indebtedness, thereby providing Mease with the ability to derail North Bay's proposed bond financing. Section 408.035(7), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The evidence proves that either proposal will enhance geographical access to the growing population in the service district. However, with its provision of obstetrical services, Community Hospital is better suited to address the needs of the younger community. With respect to financial access, both proposed relocation sites are slightly farther away from the higher elderly and indigent population centers. Since the evidence demonstrates that it is unreasonable to relocate both facilities away from the down-town area, Community Hospital's proposal, on balance, provides better access to poor patients. First, public transportation will be available to Community Hospital's site. Second, Community Hospital has an excellent record of providing care to the poor and indigent and has accepted the agency's condition to provide ten percent of its total annual patient days to Medicaid recipients To the contrary, North Bay's site will not be accessible by public transportation. In addition, North Bay has a less impressive record of providing care to the poor and indigent. Although AHCA conditioned North Bay's approval upon it providing 9.7 percent of total annual patient days to Medicaid and charity patients, instead of the 9.7 percent of gross annual revenue proposed in its application, North Bay has consistently provided Medicaid and charity patients less than seven percent of its total annual patient days. Section 408.035(8), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate financial feasibility refers to the availability of funds to capitalize and operate the proposal. See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital Jacksonville vs. AHCA et al., Case No. 02-0447 et seq. Community Hospital has acquired reliable financing for the project and has sufficiently demonstrated that its project is immediately financially feasible. North Bay's short-term financial proposal is less secure. As noted, North Bay intends to acquire financing from BayCare Obligated Group. As a member of the group, Mease, the parent company of two hospitals that oppose North Bay's application, must approve the plan. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice, Inc., Case No. 02-0455. Although CON pro forma financial schedules typically show profitability within two to three years of operation, it is not a requirement. In fact, in some circumstances, such as the case of a replacement hospital, it may be unrealistic for the proposal to project profitability before the third or fourth year of operation. In this case, Community Hospital's utilization projections, gross and net revenues, and expense figures are reasonable. The evidence reliably demonstrates that its replacement hospital will be profitable by the fourth year of operation. The hospital's financial projections are further supported by credible evidence, including the fact that the hospital experienced financial improvement in 2002 despite its poor physical condition, declining utilization, and lost market share to providers outside of its district. In addition, the development and population trends in the Trinity area support the need for a replacement hospital in the area. Also, Community Hospital has benefited from increases in its Medicaid per diem and renegotiated managed care contracts. North Bay's long-term financial feasibility of its proposal is less certain. In calendar year 2001, North Bay incurred an operating loss of $306,000. In calendar year 2002, it incurred a loss of $1,160,000. In its CON application, however, North Bay projects operating income of $1,538,827 in 2007, yet omitted the ongoing expenses of interest ($1,600,000) and depreciation ($3,000,000) from its existing facility that North Bay intends to continue operating. Since North Bay's proposal does not project beyond year two, it is less certain whether it is financially feasible in the third or fourth year. In addition to the interest and depreciation issues, North Bay's utilization projections are less reasonable than Community Hospital's proposal. While possible, North Bay will have a difficult task achieving its projected 55 percent increase in acute care patient days in its second year of operation given its declining utilization, loss of obstetric/pediatric services and termination of two exclusive managed care contracts. Section 408.035(9), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Both applicants have substantial unused capacity. However, Community Hospital's existing facility is at a distinct competitive disadvantage in the market place. In fact, from 1994 to 1998, Community Hospital's overall market share in its service area declined from 40.3 percent to 35.3 percent. During that same period, Helen Ellis' overall market share in Community Hospital's service area increased from 7.2 percent to 9.2 percent. From 1995 to the 12-month period ending June 30, 2002, Community Hospital's acute care market share in its service area declined from 34.0 percent to 25.9 percent. During that same period, Helen Ellis' acute care market share in Community Hospital's service area increased from 11.7 percent to 12.0 percent. In addition, acute care average occupancy rates at Mease Dunedin Hospital increased each year from 1999 through 2002. Acute care average occupancy at Mease Countryside Hospital exceeded 90 percent in 2000 and 2001, and was approximately 85 percent for the period ending June 30, 2002. Some of the loss in Community Hospital's market share is due to an out-migration of patients from its service area to hospitals in northern Pinellas and Hillsborough Counties. Market share in Community's service area by out-of- market providers increased from 33 percent in 1995 to 40 percent in 2002. Community Hospital's outdated hospital has hampered its ability to compete for patients in its service area. Mease is increasing its efforts to attract patients and currently completing a $92 million expansion of Mease Countryside Hospital. The project includes the development of 1,134 parking spaces on 30 acres of raw land north of the Mease Countryside Hospital campus and the addition of two floors to the hospital. It also involves the relocation of 51 acute care beds, the obstetrics program and the Neonatal Intensive Care Units from Mease Dunedin Hosptial to Mease Countryside Hospital. Mease is also seeking to more than double the size of the Countryside emergency department to handle its 62,000 emergency visits. With the transfer of licensed beds from Mease Dunedin Hospital to Mease Countryside Hospital, Mease will also convert formerly semi-private patient rooms to private rooms at Mease Dunedin Hospital. The approval of Community Hospital's relocated facility will enable it to better compete with the hospitals in the area and promote quality and cost- effectiveness. North Bay, on the other hand, is not operating at a distinct disadvantage, yet is still experiencing declining utilization. North Bay is the only community-owned, not-for- profit provider in western Pasco County and is a valuable asset to the city. Section 408.035(10), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods or energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the project costs in both applications are reasonable to construct the replacement hospitals. Community Hospital's proposed construction cost per square foot is $175, and slightly less than North Bay's $178 proposal. The costs and methods of proposed construction for each proposal is reasonable. Given Community Hospital's severe site and facility problems, the evidence demonstrates that there is no reasonable, less costly, or more effective methods of construction available for its proposed replacement hospital. Additional "band-aide" approaches are not financially reasonable and will not enable Community Hospital to effectively compete. The facility is currently licensed for 401 beds, operates approximately 311 beds and is still undersized. The proposed replacement hospital will meet the standards in Florida Administrative Code Rule 59A-3.081, and will meet current building codes, including the Americans with Disabilities Act and the Guidelines for Design and Construction of Hospitals and Health Care Facilities, developed by the American Institute of Architects. The opponents' argue that Community Hospital will not utilize the 320 acute care beds proposed in its CON application, and therefore, a smaller facility is a less- costly alternative. In addition, Helen Ellis' architectural expert witness provided schematic design alternatives for Community Hospital to be expanded and replaced on-site, without providing a detailed and credible cost accounting of the alternatives. Given the evidence and the law, their arguments are not persuasive. While North Bay's replacement cost figures are reasonable, given the aforementioned reasons, including the fact that the facility is in reasonably good condition and can expand vertically, on balance, it is unreasonable for North Bay to construct a replacement facility in the Trinity area. Section 408.035(11), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Community Hospital has consistently provided the most health care services to Medicaid patients and the medically indigent in Sub-District 5-1. Community Hospital agreed to provide at least ten percent of its patient days to Medicaid recipients. Similarly, North Bay agreed to provide 9.7 percent of its total annual patient days to Medicaid and charity patients combined. North Bay, by contrast, provided only 3.56 percent of its total patient days to Medicaid patients in 2002, and would have to significantly reverse a declining trend in its Medicaid provision to comply with the imposed condition. Community Hospital better satisfies the criterion. Section 408.035(12) has been stipulated as not applicable in this case. Adverse Impact on Existing Providers Historical figures demonstrate that hospital market shares are not static, but fluctuate with competition. No hospital is entitled to a specific or historic market share free from competition. While the applicants are located in health planning Sub-District 5-1 and Helen Ellis and the two Mease hospitals are located in health planning Sub-District 5- 2, they compete for business. None of the opponents is a disproportionate share, safety net, Medicaid provider. As a result, AHCA gives less consideration to any potential adverse financial impact upon them resulting from the approval of either application as a low priority. The opponents, however, argue that the approval of either replacement hospital would severely affect each of them. While the precise distance from the existing facilities to the relocation sites is relevant, it is clear that neither applicants' proposed site is unreasonably close to any of the existing providers. In fact, Community Hospital intends to locate its replacement facility three miles farther away from Helen Ellis and 1.5 miles farther away from Mease Dunedin Hospital. While Helen Ellis' primary service area is seemingly fluid, as noted by its chief operating officer's hearing and deposition testimony, and the Mease hospitals are located 15 to 20 miles south, they overlap parts of the applicants' primary service areas. Accordingly, each applicant concedes that the proposed increase in their patient volume would be derived from the growing population as well as existing providers. Although it is clear that the existing providers may be more affected by the approval of Community Hosptial's proposal, the exact degree to which they will be adversely impacted by either applicant is unknown. All parties agree, however, that the existing providers will experience less adverse affects by the approval of only one applicant, as opposed to two. Furthermore, Mease concedes that its hospitals will continue to aggressively compete and will remain profitable. In fact, Mease's adverse impact analysis does not show any credible reduction in loss of acute care admissions at Mease Countryside Hospital or Mease Dunedin Hospital until 2010. Even then, the reliable evidence demonstrates that the impact is negligible. Helen Ellis, on the other hand, will likely experience a greater loss of patient volume. To achieve its utilization projections, Community Hospital will aggressively compete for and increase market share in Pinellas County zip code 34689, which borders Pasco County. While that increase does not facially prove that Helen Ellis will be materially affected by Community Hospital's replacement hospital, Helen Ellis will confront targeted competition. To minimize the potential adverse affect, Helen Ellis will aggressively compete to expand its market share in the Pinellas County zip codes south of 34689, which is experiencing population growth. In addition, Helen Ellis is targeting broader service markets, and has filed an application to establish an open- heart surgery program. While Helen Ellis will experience greater competition and financial loss, there is insufficient evidence to conclude that it will experience material financial adverse impact as a result of Community Hospital's proposed relocation. In fact, Helen Ellis' impact analysis is less than reliable. In its contribution-margin analysis, Helen Ellis utilized its actual hospital financial data as filed with AHCA for the fiscal year October 1, 2001, to September 30, 2002. The analysis included total inpatient and total outpatient service revenues found in the filed financial data, including ambulatory services and ancillary services, yet it did not include the expenses incurred in generating ambulatory or ancillary services revenue. As a result, the overstated net revenue per patient day was applied to its speculative lost number of patient days which resulted in an inflated loss of net patient service revenue. Moreover, the evidence indicates that Helen Ellis' analysis incorrectly included operational revenue and excluded expenses related to its 18-bed skilled nursing unit since neither applicant intends to operate a skilled nursing unit. While including the skilled nursing unit revenues, the analysis failed to include the sub-acute inpatient days that produced those revenues, and thereby over inflated the projected total lost net patient service revenue by over one million dollars.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Community Hospital's CON Application No. 9539, to establish a 376-bed replacement hospital in Pasco County, Sub- District 5-1, be granted; and North Bay's CON Application No. 9538, to establish a 122-bed replacement hospital in Pasco County, Sub-District 5- 1, be denied. DONE AND ENTERED this 19th day of March, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2004. COPIES FURNISHED: James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Richard J. Saliba, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street, Suite 600 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
Findings Of Fact Respondent, Randall B. Whitney, is a licensed medical doctor having been issued license number ME 000 8859 by petitioner, Department of Professional Regulation, Board of Medical Examiners. He presently resides in Port Orange, Florida and operates a family planning center in Daytona Beach. Respondent is a 1959 graduate of Tulane University Medical College. After interning at a Jacksonville hospital, he served three years in the U.S. Air Force as a flight medical officer and flight surgeon. He then took a two- year general residency in California. He began private practice in Mount Dora, Florida in 1965, the same year he received his license to practice in Florida. Although he was once board certified in family practice, he is not presently board certified in any specialty. He is not a member of the Florida or American Medical Associations and he does not hold privileges on the staff of any hospital. Prior to the initiation of this proceeding he did apply for emergency room privileges at a hospital in Daytona Beach but his application was denied. Therefore, he cannot admit patients to hospitals. When the events herein occurred, respondent had a financial interest in and was medical advisor to the Childbirth Center (CBC) in Daytona Beach. He also provided medical services on a contract basis to the Woman's Health Center (WHC) in Orlando and Holly Hill and the Aware Woman Clinic, Inc. (AWC) in Cocoa Beach. All four are birthing centers where women receive care and treatment during pregnancy and where the actual labor and delivery occur. Additionally, the facilities provide annual check-ups, IUD services, abortions, and advice for birth control. He divided his time between the four clinics, visiting each place one day of the week except the Orlando clinic, which he visited two days per week. In the spring of 1981, respondent became acquainted with one Eric Niederschmidt, an enlisted man stationed at Patrick Air Force Base who also worked weekends or nights at Aware Woman Clinic as an "assistant". Eric complained of pain in his knee from an internal knee derangement caused by stress and requested a pain medication to ease the pain. Whitney wrote several prescriptions for percocet between March and September, 1981. He also permitted Eric on several occasions to fill out the prescription pad, then bring it to him for review, and then sign the prescription. The evidence is conflicting as to whether respondent kept pre-signed blank prescription forms at the Aware Woman Clinic, which were later used by Niederschmidt to obtain drugs. Although respondent admitted he pre-signed such forms to a Department investigator during an interview in November, 1981, he denied he did so during the final hearing, and it is found the greater weight of credible evidence supports a finding that he did not. The CBC is not equipped to handle emergency situations or to care for "high-risk" pregnancies. Instead, it is designed to handle the routine low-risk pregnancy which has no complications. Indeed, the CBC has no internal monitoring devices, x-ray equipment or cesarean section devices, all of which are needed when complications in preqnancy set in. Its medical equipment consisted primarily of nitrous oxide and oxygen in large H-cylinder tanks with a nasal applicator mask, a fetal Doptone monitor to monitor for fetal heart tones, an Isolette to provide a controlled environment for babies distressed prior to transfer, outlet forceps, intracoths, emergency suction apparatus and the like. A supply of various kinds of medicine, including adrenalyn, ephedrine and pitocin were kept on hand. In 1979, one Joyce Ann Geeson became a patient of respondent at CBC. She was cared and treated for during her pregnancy in the months of June through a part of December, 1979. Around 3:30 a.m. on Saturday, December 8, 1979, Geeson awoke with ruptured membranes. She did not begin labor until almost 22 hours later. After labor pains commenced that night and early Sunday morning, Geeson reported to the CBC at noon on Sunday. After 38 hours of labor with little progress, Whitney ordered that pitocin be administered to Geeson. That drug serves to stimulate contractions of the uterus. However, this drug should only be used in a hospital setting since it can cause a tetanic contraction of the uterus and cut off the blood supply to the baby. It can also cause a rupture of the uterus. Therefore, it was inappropriate for Whitney to use pitocin in his facility. This is confirmed by instructions in the Physicians Desk Reference, 1979 edition, as to the use of the drug as well as uncontradicted expert testimony presented by petitioner. In Geeson's case the pitocin was continued for some 18 hours until a decision was made to transfer the patient to a hospital after the patient had made very little progress. Geeson was finally admitted to the emergency room at Halifax General Hospital around 11:10 p.m. on December 10, 1979. Whitney accompanied her to the hospital. When Geeson's temperature rose to 102.3 around 6:00 a.m. on December 11, she was immediately sent to the operating room where a C-section was performed. An examination of Geeson indicated her membranes had been ruptured for approximately 68 hours prior to admission to the hospital, that the patient had given signs of such a rupture by the excretion of a green tinged fluid (meconium), and that Geeson had stopped progress in delivering the baby some 24 hours prior to the hospital admission. Whitney's failure to recognize and properly handle premature rupture of the membranes, to promptly repond to meconium staining (which is a sign of possible fetal distress), and the use of pitocin in a non-hospitaL setting were deviations from the level of care, skill and treatment that would be recognized by a reasonably similar prudent physician as being acceptable under similar conditions and circumstances. Sandra Vigue was a 33 year old patient of the CBC in the fall of 1979. She first visited the clinic in her third trimester in September, 1979. Vigue told CBC personnel that her last menstrual period was mid-December, 1978 which would have indicated an expected date of confinement (EDC) of mid or late September, 1979. The clinic initially noted her EDC as being late September or early October. A nurse later noted in the records that on September 19 the patient was approximately 35 weeks gestation, or 5 weeks before the due date. When the baby had not come after weekly visits to the clinic in October, a nurse simply placed a question mark next to Vigue's EDC. By this time (42 weeks), according to expert medical testimony the fetus comes at high risk because of post-maturity syndrome. On October 21, 1979, Vigue began labor around 7:00 p.m. Around 8:30 p.m. a nurse noted the presence of a greenish substance being discharged in the vaginal area while performing an examination at Vigue's home. She noted in the patient records that it had the appearance of meconium. The nurse immediately telephoned respondent to report this finding. After a discussion, Whitney discounted the fluid as being cervical and not meconium. Meconium is, of course, an indication of fetal distress and that a membrane has prematurely ruptured. This in turn leads to a high-risk situation in terms of the delivery of the baby. Vigue remained at her home overnight and had no apparent progress in contractions. At approximately 1:00 p.m. the next day (October 22) Whitney requested she come to the clinic. She did so and was evaluated by him at 4:00 p.m. Whitney noted the passing of copious malodorous meconium and asked "why" in the charts. He then sent her to a local hospital where she was admitted at 7:50 p.m. the same day. Upon examination by hospital personnel, they noted premature rupture of the membranes and a discharge of meconium. Before further tests could be run, Vigue's condition deteriorated and she was given an emergency cesarean section. A stillborn infant was delivered. Respondent performed no post-maturity syndrome tests on Vigue that are normally given when a woman reaches an age of 42 weeks pregnancy. These tests are essential since a baby at that age may be under stress from lack of nutrients and oxygen. In this regard, he failed to conform to prevailing community standards for physicians. Vigue was apparently quite firm in not wanting her baby delivered in a hospital setting. However, a physician should advise the patient when high risks set in of the potential danger in not doing so, and if the patient refuses, document his records accordingly. Here, Vigue apparently held off until the last possible moment, but Whitney did not adequately document his records to show that he advised her of the potential dangers. Again, he failed to meet acceptable standards of skill, care and treatment that would be recognized by a reasonably similar prudent physician as being acceptable under similar conditions and circumstances. But since this was not a charge within the complaint, it is irrelevant. Finally, Whitney was negligent in the same respect by failing to recognize the meconium staining that occurred on October 21 and asking the patient for a history of rupture of membranes. In July, 1979, Lida Papa became a patient of CBC. Her estimated date of delivery had been established by CBC personnel as December 11, 1979. Papa suffered a ruptured membrane at 3:00 a.m. on December 22, 1979 or three full days prior to being admitted to a hospital. Her labor commenced on December 23. Because of slow progress, Whitney began administering pitocin to Papa around 7:25 p.m. on December 23 at a rate of 8 drops per minute, or a rate of 2 to 3 times that used initially in a hospital setting. The administering of the drug continued in larger dosages until the afternoon of December 24 when he allowed her to rest. It was restarted at 9:30 p.m. that evening and continued until 11:30 p.m. At the same time, the patient records of Papa reflect signs that the baby may have been in distress. She was also given ampicillin, presumably to counteract chills and fever being experienced around 1:30 a.m. on December 25. When her temperature reached 101 degrees Papa was sent to Halifax Memorial Medical Center, a Daytona Beach hospital. It was noted there that Papa had been at 9 or 10 centimeters dilation for some 18 to 19 hours prior to being transported to the hosptial. This is equivalent to complete dilation, and babies are normally delivered within two hours after complete or near complete dilation. Prudent medical care would have dictated that Whitney transfer Papa to the hospital no later than 24 hours after the membranes were ruptured if delivery had not occurred or was not imminent. This would have required admission to the hospital on December 23 rather than December 25. Whitney was also negligent in using pitocin in a non-hospital setting, and in dosages higher than is normally used. But this conduct was not described within the complaint and accordingly is irrelevant. Whitney failed to recognize that the patient was at high risk in a non-hospital setting because of the use of pitocin and the prolonged rupture of the membranes. In these respects, he deviated from the level of care, skill and treatment that would be recognized by a reasonably similar prudent physician as being acceptable under similar conditions and circumstances. Whitney was employed by the Women's Health Center, Inc. (WHC) in Orlando, Florida on a contract basis in 1978. He generally visited the Center either on Tuesday and Thursdays of each week, or Thursday only, depending on his schedule at other clinics. Whitney did not represent himself to the Center as being a urologist although he routinely performed vasectomy procedures. Daniel Hallman wished to have a vasectomy performed, and after searching through the Yellow Pages, selected the WHC. He talked by telephone with an unidentified lady at the Center and asked if the physician who would perform the vasectomy was a "licensed urologist." He was assured that Whitney was. Hallman then made an appointment to have the procedure performed on Thursday, November 16, 1978. On that afternoon, he visited the Center where he first saw a film on vasectomies which briefly touched on complications, procedures and care of patients. He had some preliminary work performed by a nurse and then met with Whitney. He was never advised by Whitney of the risks associated with the operation or complications that could result from the procedure. Whitney testified that although he normally counseled patients, he thought Hallman had "waived counseling in effect" because he was intelligent and seemed to be well-read on the subject. Whitney was not asked nor did he represent to Hallman that he was a "licensed urologist." After the procedure was performed, Whitney told Hallman he could not ride a bicycle to work for awhile and to avoid intercourse for several days. He did not tell him that swelling, bleeding and fever could occur. Hallman left, went home, slept and then awoke later that night with pain, swelling and bleeding. He called the Center and a nurse advised him to apply ice to stop the bleeding. He did so and went back to sleep. Later on, he awoke in extreme pain and noticed his scrotum had swollen to the size of a grapefruit. He again called the clinic asking for Whitney but was told Whitney lived in Cocoa Beach and was unavailable. The nurse told him to keep applying ice and he would be okay. When Hallman called a third time on Friday morning, the clinic then contacted Whitney who returned Hallman's call later that morning. Whitney told him he could see him if Hallman would drive to Cocoa. Whitney did not recommend he see another physician since he had no "back-up" in the area. Whitney advised Hallman to continue to apply ice and to see him when he visited the Center the following Tuesday. The following Tuesday, the two met and Whitney prescribed a pain killer (darvon), clipped a stitch and squeezed some dry blood out of the area. He noted it was the worst case of swelling he had ever seen. He also advised Hallman to take warm baths. The two never met again. When the pain killer became ineffective, Hallman contacted a urologist the following Saturday who treated him at the emergency room of an Orlando hospital. The physician found Hallman to have a low-grade fever and prescribed an antibiotic and pain killer. When the procedure was performed, Whitney had no local hospital privileges or a "back-up" physician to handle emergencies. Whitney testified he had no post-operative information to give to Hallman to read. He attributed the problem to a "nicked" varicose vein and stated that he has performed approximately 1,000 such operations routinely since 1965 without a patient ever being hospitalized. Had he considered there to be a danger of infection, he would have referred Hallman to an emergency room. Because Whitney had no back-up physician for Hallman to see should post-operative complications have arisen, he failed to meet the standard of care practiced by similarly prudent physicians in the community. The administrative complaint does not allege, and indeed there is no evidence, that the procedure was improperly performed. Respondent has safely delivered at least 1,000 babies during his medical career. He believed that Vigue, Papa and Geeson were carefully monitored and treated, and were timely transported to the hospital once their risk factors had escalated. In the case of Hallman, Whitney stated he would have seen the patient had he realized an emergency existed, and admitted him to an emergency room if necessary. He justified the use of pitocin on the grounds it was safely administered and the Physicians Desk Reference is not binding on physicians in all cases. Whitney no longer performs childbirths and is not associated with any of the clinics in question. Instead, he now confines his practice exclusively to family planning.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Subsection 458.331(t), Florida Statutes, on four occasions as more specifically set out above, and that his medical license be suspended for thirty days, a $2,500 administrative fine imposed, and that he be restricted from performing childbirths except in a hospital setting. All other charges should be dismissed. DONE and entered this 20th day of April, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 1984. COPIES FURNISHED: Douglas P. Jones, Esquire John M. Bringardner, Esquire P.O. Box 2174 Tallahassee, Florida 32316 Jack R. Leonard, Esquire 800 North Highland Avenue Suite 202 Orlando, Florida 32803 Frederick M. Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Dorothy Faircloth, Executive Director Board of Medical Examiners 130 North Monroe Street Tallahassee, Florida 32301
The Issue The issue is whether the Agency should approve the Certificate of Need applications filed by Bethesda and/or JFK, each of which proposes to establish an 80-bed satellite hospital in the West Boynton area of Acute Care Subdistrict 9-5.
Findings Of Fact The Parties (1) Bethesda Bethesda operates Bethesda Memorial, which is a 362-bed not-for-profit hospital in Boynton Beach. Bethesda also operates Bethesda Health City, which is a “medical mall” located in the West Boynton area of South Palm Beach County. As a not-for-profit community-based health care organization, Bethesda’s mission is to provide quality health care services to the residents of South Palm Beach County that it serves regardless of their ability to pay. Bethesda Memorial opened in 1959 as a public hospital under the ownership of Palm Beach County’s former hospital taxing district. Bethesda Memorial was reorganized in 1984 as a private not-for-profit hospital owned by Bethesda. Bethesda Memorial provides tertiary-level care. Bethesda Memorial’s 362 licensed beds include 347 general medical-surgical (med-surg) acute care beds and a 15-bed Level II and Level III neonatal intensive care unit (NICU). A 28-bed comprehensive medical rehabilitation (CMR) unit will open at Bethesda Memorial in 2005, increasing the hospital’s licensed capacity to 390 beds. Not all of Bethesda Memorial’s licensed beds are available for general patient use; 14 of the beds are leased to a hospice program and 14 of the beds are operated under contract as a special care unit (SCU). The hospice lease and the SCU contract run through 2005. Even though the hospice lease and SCU contract have been profitable ventures for Bethesda, several Bethesda witnesses testified that those agreements would not be renewed if Bethesda Memorial needs those 28 beds to accommodate its general patients after its capacity is reduced through the transfer of 80 beds to its proposed satellite hospital; however, as of the date of the hearing, Bethesda had not taken any formal steps to terminate those agreements. It is unclear how the patients that are currently being served in the hospice unit and SCU would be served in the community if Bethesda terminates the agreements. Bethesda Memorial also has a 10-bed “VIP” unit that is generally available only to patients that have contributed at least $50,000 to Bethesda’s charitable foundation and are willing to pay an up-front $750.00 per day charge for the room; however, the beds in the VIP unit can be and have been utilized by other patients when all of the other beds in the hospital are full. Bethesda Memorial has a high-volume obstetrics (OB) program and an active emergency department (ED). Bethesda Memorial also offers a number of specialized programs including a comprehensive cancer program, a pediatrics program, a diagnostic cardiac catheterization program, and a wide variety of outpatient services. Bethesda Memorial is a well-utilized facility; its overall occupancy rate was 73.25 percent from July 2001 though June 2002. Bethesda Memorial does not currently offer interventional cardiology services or open heart surgery, but it has been attempting to get CON or legislative approval to offer those services for the past several years because of their profitable nature. Bethesda Memorial has designated, shelled-in space in its hospital for those services if it ever gets the necessary approvals. The evidence was not persuasive that there are physical or other constraints that would preclude further incremental bed expansions at Bethesda Memorial or that would make such expansions cost-prohibitive. Bethesda recently purchased property adjacent to Bethesda Memorial and was able to get that property rezoned from residential to hospital use. It is unclear how large that property is and what use, if any, Bethesda has planned for that property. Bethesda also owns 1.4 acres of vacant property that is several blocks from Bethesda Memorial. The property is not currently zoned for hospital use, and because it is somewhat isolated from Bethesda Memorial, Bethesda intends to sell the property rather than develop it. Bethesda Memorial is accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Bethesda Health City is a 135,000 square foot “medical mall” or “hospital without beds” that opened in 1995. The facility is located in the West Boynton area at the intersection of Hagan Ranch Road and Boynton Beach Boulevard, just east of the Florida Turnpike. Bethesda Health City offers services such as diagnostic imaging, outpatient rehabilitation, radiation therapy, and a woman’s center. The facility has offices for approximately 20 physician groups, and it also provides community outreach services targeted to the large senior population in the West Boynton area. Bethesda Health City was established to help Bethesda Memorial capture patients from the growing West Boynton area, and it has done so. There is capacity to add an additional 30,000 to 40,000 square feet of space to Bethesda Health City, and Bethesda intends to expand the facility whether or not its proposed satellite hospital is approved. Bethesda Health City provides Bethesda a significant physical presence in the West Boynton area. The facility has contributed to Bethesda Memorial’s significant and stable market share in the West Boynton area. In addition to Bethesda Memorial and Bethesda Health City, Bethesda administers a charitable foundation whose primary purpose is to fund Bethesda Memorial’s capital acquisitions and improvements. The foundation has considerable assets and is in the midst of a $100 million capital campaign through which it has already raised approximately $37 million. Bethesda Memorial experienced considerable and constant growth in its admissions and patient days between 1997 and 2003; its admissions grew by 45 percent and its patients days grew by 44 percent over that period. Bethesda Memorial is financially sound. It has substantial cash reserves and it is well-rated by the financial markets. The evidence was not persuasive that Bethesda’s current or long-term financial situation is distressed. Unlike other not-for-profit hospitals in District 9, Bethesda Memorial is a profitable hospital. Between 1997 and 2002, Bethesda Memorial’s operating income averaged approximately $5.5 million and in 2003, its operating income was approximately $7 million. In each of those years, the hospital also had significant non-operating revenues such that its total revenues over expenses during that period averaged approximately $10 million. The Bethesda system as a whole is also profitable. It had operating income of $2.4 million in 2002 and $2.1 million in 2001. Bethesda Memorial and the Bethesda system did not perform as well financially as JFK, Delray, or Wellington between 1997 and 2002; each of those hospitals had higher returns on assets, returns on equity, and total margin over that period than did Bethesda Memorial and Bethesda, and JFK and Delray had considerably more operating income over that period than did Bethesda Memorial. Bethesda Memorial’s CMR unit is projected to have a positive financial impact on Bethesda starting in 2005, and if approved, Bethesda Memorial’s open heart surgery program is also projected to have a positive impact on Bethesda’s long-term financial condition. (2) JFK JFK is owned by HCA, Inc. (HCA). HCA is nationwide, for-profit hospital chain. JFK is a 424-bed for-profit hospital in Atlantis, which is a small municipality in the Lake Worth area. JFK provides tertiary-level care. JFK is the most highly utilized hospital in District 9, and one of the most highly utilized hospitals in the state. JFK’s annual occupancy rate was 89.96 percent between July 2001 and June 2002, JFK is one of thee HCA hospitals in Palm Beach County. The others are Columbia and Palms West, both of which are in North Palm Beach County, Subdistrict 9-4. JFK operated as a not-for-profit hospital for approximately 30 years until it was purchased by HCA in 1996. Approximately $120 million of the purchase price paid by HCA was used to establish a charitable foundation, the Quantum Foundation, which funds a variety of health-related projects in the South Palm Beach County area. The services provided at JFK include orthopedics, cancer services, interventional cardiology and open heart surgery, neurologic services, and internal medicine. JFK does not offer pediatric or OB services. HCA has made significant capital improvements at JFK since it acquired the hospital. The community image of the hospital and the morale of its employees has significantly improved since the acquisition by HCA. JFK is accredited by JCAHO. JFK recently received a CON to add 36 beds, which will increase its licensed capacity to 460 beds. The beds will be located in shelled-in space on the fifth floor of JFK’s south tower, but they have not yet been brought on-line. JFK’s recently-constructed northwest tower was engineered so that an additional two floors can be added to that tower in the future, which would allow JFK to add 36 more beds. The evidence was not persuasive that there are physical or other constraints that would preclude further incremental bed expansions at JFK beyond the 72 beds identified above. JFK is attempting to acquire a long-term lease for 19 acres across the street from its hospital that would be used for parking and medical office buildings. If that property is leased and developed, JFK may be able to free-up additional space for future bed expansions; however, the record does not establish the likelihood of the lease being consummated, the amount of space that might be freed-up if that property was developed, or any of the costs associated therewith. JFK recently constructed a medical office building in the West Boynton area that includes a wound care center and a diabetes center. That facility is on Jog Road, north of Boynton Beach Boulevard. Aside from the medical office building, JFK had not formally targeted the West Boynton area for expansion; its most recent strategic plan did not mention the prospect of locating a satellite hospital in that area. (3) Delray Delray is owned by Tenet Healthcare Corporation (Tenet). Tenet is a nationwide, for-profit hospital chain. Tenet operates four hospitals in Palm Beach County in addition to Delray, including West Boca Medical Center (West Boca) in South Palm Beach County, and Good Samaritan, St. Mary’s, and Palm Beach Gardens in North Palm Beach County. Delray is a 372-bed for-profit hospital in Delray Beach. Delray is located approximately 2.5 miles south of Atlantic Boulevard. Delray is in zip code 33484, but it is near the eastern boundary of zip code 33446. Delray opened in 1982, and is accredited by JACHO. Delray provides tertiary-level care. Delray is located on a “campus” that includes the hospital building, a 53-bed in-patient psychiatric facility known as Fair Oaks Pavillion (Fair Oaks), and a 90-bed CMR facility known as Pinecrest Rehabilitation Hospital. There is a separately-licensed 120-bed nursing home located adjacent to the campus. Delray’s 372 licensed beds include the 53 in-patient psychiatric beds at Fair Oaks, which is approximately 200 yards from Delray’s main hospital. Delray has added 108 beds to its hospital since 1996. Even with those bed additions, Delray remains a very highly utilized facility; its annual occupancy rate between July 2001 and June 2002 was 82.32 percent. Delray shelled-in space for an additional 31 beds as part of a recent expansion of its ED and ambulatory care unit. Delray intends to put those beds into service as soon as it can. Delray has the ability to further expand its hospital beyond the 31 beds planned for the shelled-in space. It already has local government approval for a total of 616 beds on its campus. The services provided at Delray include general medical and surgery services, trauma, interventional cardiology, open heart surgery, in-patient psychiatric services, orthopedics, and neurosurgery, with a special focus on chronically-ill elderly patients. Delray does not provide OB services. Delray has been the only provider of in-patient psychiatric services in South Palm Beach County since October 2001 when Bethesda Memorial discontinued its program. Delray has been a state-designated Level II trauma center since 1991, which requires it to have a neurosurgeon, trauma surgeon, and other specialists and specialized equipment available at all times. Delray receives funding from the local health district to help offset a large portion of the costs associated with providing its trauma services. Delray leases space in a medical office building in the West Boynton area where it provides diagnostic imaging, mammography, and laboratory services. Delray’s service area includes zip codes 33437, 33446, and 33467, which are being targeted by Bethesda and JFK with their proposed satellite hospitals. Delray is currently, and historically has been a very profitable hospital. It reported a “total margin” of approximately $32.9 million on its May 2002 “Prior Year Report” filed with the Agency,4 and it reported operating income of $40.5 million in its audited financial statements for fiscal year 2003. (4) Wellington Wellington is owned by Universal Health System (Universal). Universal is a nationwide, for-profit hospital chain. Wellington is a 121-bed for-profit hospital in the northwestern portion of South Palm Beach County. Wellington is located in zip code 33414, approximately 2.5 miles south of Southern Boulevard at the intersection of State Road 7 (also known as U.S. Highway 441) and Forest Hill Boulevard. Wellington opened in 1986 as an osteopathic hospital, and approximately 25 percent of its current medical staff is osteopathic physicians. Wellington is accredited by JCAHO and the American Osteopathic Association. Wellington provides tertiary-level care. Wellington is easily accessible from Forest Hill Boulevard and State Road 7, and the hospital is served by the Palm Beach County bus system, which has a stop in Wellington’s parking lot. Wellington has made substantial capital improvements to its hospital over the past five years. Those improvements were designed to enhance the hospital’s efficiency in serving its current patients and also to anticipate future patient demand. Wellington owns 29 acres of property adjacent to the 26-acre site on which the hospital is located. The adjacent property is currently undeveloped and it is available for future expansions of Wellington. Wellington’s chief executive officer (CEO) testified that Wellington has a site plan approved for its undeveloped property and that it has “vested concurrency” for the future development of that property; however, that testimony was not corroborated (as was the case with Delray’s approved master plan) and therefore is not persuasive. The services at Wellington include an ED, an OB program, general medical and surgical care, an orthopedic unit, a comprehensive cancer center, a wound care center, a cardiology program with a dedicated cardiovascular intensive care unit, and an outpatient diagnostic center. Wellington’s OB program includes 18 labor rooms, 19 post-partum rooms and a 10-bed Level II NICU. Wellington delivers approximately six babies per day and has the capacity to deliver up to 15 babies per day. Wellington’s utilization has steadily grown over the years, but it is still one of the lowest utilized facilities in South Palm Beach County; its annual occupancy rate was 64.27 percent between July 2001 and June 2002. Wellington derives approximately 90 percent of its patients from a geographic area bounded by Military Trail on the east, the Loxahatchee National Wildlife Refuge on the west, Okeechobee Boulevard to the north, and Boynton Beach Boulevard to the south. That area includes zip codes 33414, 33437, 33463, and 33467, which are being targeted by Bethesda and JFK with their proposed satellite hospitals. Wellington has teaching and training programs for physician assistants and certified nurse anesthetists under contracts with Florida International University and Florida Atlantic University. Wellington also has a family practice residency/internship teaching program for osteopathic doctors that is affiliated with Lake Erie School of Osteopathic Medicine, and a three-year dermatology teaching program. When Wellington was established in 1986, there was very little population in the western portion of South Palm Beach County to support the hospital. As a result, the hospital was unprofitable in its early years, and by 2000, it had accumulated a deficit of $22 million. Wellington’s financial performance has improved significantly in the past several years, but it still has a large accumulated deficit. Wellington is relying on its ability to retain or increase its market share in the growing West Boynton area in order to remain profitable and eliminate its accumulated deficit. (5) Agency The Agency is the state agency responsible for administering the CON program and licensing hospitals and other health care facilities. Application Submittal and Review and Preliminary Agency Action Bethesda and JFK each filed CON applications with the Agency in the first “hospital beds and facilities” batching cycle of 2003. Each application sought to establish a new 80- bed satellite hospital in the West Boynton area of South Palm Beach County, Subdistrict 9-5. The fixed need pool published by the Agency for the applicable batching cycle identified a need for zero acute care beds in Subdistrict 9-5. There were no challenges to the published fixed need pool. The letters of intent and CON applications filed by Bethesda and JFK for their respective satellite hospitals were timely filed and complied with all of the technical submittal requirements in the governing statutes and rules. JFK’s letter of intent was filed within the “grace period” (see Florida Administrative Code Rule 59C-1.008(1)(d)2.) in direct response to Bethesda’s earlier-filed letter of intent. There is nothing inherently improper about a “grace period” letter of intent, and very little significance has been given to the responsive nature of JFK’s proposal in the comparative evaluation of the CON applications. A public hearing was held on the applications by the local health council on April 24, 2003.5 Presentations were made at the public hearing in support of and in opposition to the applications. The opposition came primarily from a representative of Delray; the support came from representatives of Bethesda and JFK and several residents of the West Boynton area. The reasons offered by the speakers for their opposition or support of the applications were essentially the same as those presented at the hearing, and no independent significance has been given to the testimony and “evidence” presented at the public hearing. Bethesda’s and JFK’s applications were comparatively reviewed by the Agency in accordance with the Agency’s rules and standard procedures. On June 13, 2003, the Agency issued its State Agency Action Report (SAAR) based upon its comparative review of the applications. The SAAR recommended approval of Bethesda’s application and denial of JFK’s application. The Agency’s published notice of intent to approve Bethesda’s application and to deny JFK’s application in the June 27, 2003, edition of the Florida Administrative Weekly as required by statute and Agency rule. The Agency reaffirmed its preliminary decisions on the applications through the hearing testimony of Jeffrey Gregg, the Bureau Chief of the Agency’s CON program. The petitions for administrative hearing challenging the Agency’s preliminary decisions on the CON applications at issue in this proceeding were all timely filed. Acute Care Subdistricts 9-4 and 9-5 The Agency calculates the inventory of acute care beds on a subdistrict basis, and it considers CON applications for additional acute care beds on a subdistrict basis. Palm Beach County is in District 9, which is divided into five subdistricts. Only two of the subdistricts, 9-4 and 9-5, are relevant in this case. Subdistrict 9-4 is North Palm Beach County, and Subdistrict 9-5 is South Palm Beach County. The dividing line between the two subdistricts is Southern Boulevard. There are six existing acute care hospitals in Subdistrict 9-5: Bethesda Memorial, JFK, Delray, Wellington, West Boca, and Boca Raton Community Hospital (Boca Community). Boca Community and Bethesda are the only not-for- profit hospitals in Subdistrict 9-5; the others are for-profit hospitals. The service area of Palms West, which is located on Southern Boulevard in Subdistrict 9-4, includes portions of Subdistrict 9-5 and the West Boynton area. The utilization of hospital services in Subdistrict 9- 5 has historically been higher than the utilization of hospital services in Subdistrict 9-4. In calendar year 2002, for example, the average occupancy rate of the Subdistrict 9-5 hospitals was 78.2 percent as compared to 55.6 percent for the Subdistrict 9-4 hospitals; and during the “peak season” of January through March 2002, the average occupancy rates were 88.4 percent in Subdistrict 9-5 and 62 percent in Subdistrict 9-4. The West Boynton Area The West Boynton area is an unincorporated area of South Palm Beach County. Its approximate boundaries are Congress avenue on the east, the Loxahatchee National Wildlife Reserve on the west, the L-30 canal (which is several miles north of Atlantic Avenue) on the south, and Hypoluxo Road on the north. The West Boynton area roughly corresponds to the geographic area that is included in zip codes 33436, 33437, 33463, and 33467. The Florida Turnpike, which runs north-south, roughly bisects the West Boynton area. The Turnpike is not a geographic barrier between the east and west portions of the West Boynton area, but it served as the de facto boundary of the urban service area until approximately 10 years ago when significant amounts of development began to “jump” the Turnpike. Boynton Beach Boulevard is the primary east-west road in the West Boynton area, although there are several other east- west arterial roads within the area including Lantana Road and Hypoluxo Road. Other major east-west roads in close proximity to the West Boynton area are Forest Hill Boulevard, Lake Worth Road, and Atlantic Avenue. There are several major north-south roads in the West Boynton area in addition to the Turnpike, including Jog Road, Hagen Ranch Road, and State Road 7. State Road 7 is the westernmost major north-south road in South Palm Beach County. As a result of local zoning restrictions, very little development in the West Boynton area is or will be west of State Road 7. The 2002 population of the West Boynton area, as defined by the four zip codes identified above, was approximately 156,000. There are seasonal variations in the population, but they are not as significant as the seasonal variations in the population of the more easterly portions of Palm Beach County. The population of the West Boynton area is projected to grow to approximately 181,000 by 2007, which corresponds to an annual growth rate of approximately 3.1 percent per year. That growth rate is higher than the annual growth rate projected over that period for the state as a whole (1.6 percent), Palm Beach County (two percent), and District 9 (1.9 percent). Approximately 89 percent of the 2003 population of the West Boynton area was located to the east of the Turnpike. The portion of the West Boynton area to the west of the Turnpike is projected to grow at a considerably faster rate through 2008 than the area to the east of the Turnpike, which is consistent with the extensive amount of residential development that is underway or approved in the West Boynton area west of the Turnpike. In 2002, approximately 28.6 percent of the residents of the West Boynton area were in the age 65 and older (“65+”) age cohort. That percentage is higher than the percentages in that age cohort for the state as a whole (17.5 percent), Palm Beach County (22.5 percent), or District 9 (22.5 percent). The 65+ age cohort is projected to remain the largest segment of the West Boynton area population through 2008. A large number of the existing residential communities and the communities under development in the West Boynton area are retirement communities that are deed-restricted to persons over the age of 55, which contributes to the higher percentage of the population in the 65+ age cohort currently and projected in the future. The West Boynton area is more affluent than and offers a better payer-mix than the existing service areas of Bethesda Memorial and JFK. As compared to the existing service areas of those hospitals, the West Boynton area has a lower percentage of uninsured residents, a higher percentage of Medicare and insured residents, a lower percentage of households with annual incomes below $20,000, and a higher percentage of households with annual incomes above $60,000. There is currently healthy competition in the West Boynton area for acute care services. That competition includes each of the four hospital parties in this case as well as several other hospitals. JFK, Bethesda, Wellington, and Delray, collectively accounted for approximately 72 percent of the discharges from the West Boynton area in calendar years 2000, 2001, and 2002. The percentage of the West Boynton area discharges attributable to each of those hospitals or, stated another way, the hospitals' market shares in the West Boynton area over that period are as follows6: JFK Bethesda Delray Wellington 2000 31.7% 23.2% 10.6% 6.1% 2001 30.1% 24.0% 11.2% 6.9% 2002 28.8% 23.9% 11.4% 7.7% There is no credible evidence that there will be any significant changes in those relative market shares over the five-year planning horizon applicable to the applications at issue in this case if a new hospital is not approved in the West Boynton area. Stated another way, the competitive balance that currently exists in the West Boynton market is expected to continue unless something disrupts that balance, such as the approval of a new hospital in the area. As discussed below, if either of the proposed satellite hospitals are approved, the market share of the approved hospital will increase to the detriment of the other hospitals. There is considerable community support for a new hospital in the West Boynton area from the residents of that area, as reflected in the letters of support included in the CON applications, the testimony at the local public hearing on the applications, and the deposition testimony from area residents and the related exhibits introduced at the hearing. The community support is not, on balance, directed to the approval of Bethesda's proposed satellite hospital over JFK’s proposed satellite hospital, or vice versa; it is simply for the expeditious approval of a hospital. Need for OB Services in the South Palm Beach County and/or the West Boynton Area There are currently four OB programs in Subdistrict 9-5. The programs are at Bethesda Memorial, Wellington, West Boca, and Boca Community. The evidence is not persuasive that an additional OB program is needed in Subdistrict 9-5. Indeed, Dr. Samuel Kaufman, an OB/GYN who has practiced in the area for many years, testified credibly that the four existing OB programs in the subdistrict are just now beginning to do enough deliveries to be efficient. There was no persuasive evidence that there are accessibility problems at the existing OB programs because of their utilization rates. Indeed, the OB unit at Wellington has the capacity to handle up to an additional nine deliveries per day. Each of the existing OB programs offers Level II and/or Level III NICU services, which is typically referred to as “NICU backup.” It is not feasible to provide NICU backup at a low-volume OB program such as the 10-bed OB unit proposed in JFK’s satellite hospital. It is important to have NICU backup because it is not uncommon for high-risk OB patients to unexpectedly present to the hospital and, in such circumstances, it is better for the child to have NICU services at the hospital where he or she is delivered rather than having to be transferred to another hospital. The standard of care in South Palm Beach County requires NICU backup and, based upon malpractice liability concerns, some OB/GYNs will not deliver babies at a hospital that does not have NICU backup. OB is among the top ten discharges in the proposed service area of JFK’s satellite hospital, which is not uncommon around the state; however, because of the lower average length of stay (ALOS) associated with an OB admission, the high number of discharges does not correlate to a large number of patient days in the service area. The population group that is most likely to utilize OB services is females between the ages of 15 and 44 (hereafter “the Female 15-44 age cohort”). Only 16 percent of the 2002 population of the West Boynton area was in the Female 15-44 age cohort, and that cohort is projected to grow at a slower annual rate (2.3 percent) than the population of the West Boynton area as a whole (3.1 percent) through 2007.7 The relatively small portion of the population in the Female 15-44 age cohort is consistent with the data showing the highest percentage of the population in the West Boynton area in the 65+ age cohort. It is also consistent with the testimony and evidence regarding the number of existing and planned deed- restricted retirement communities in the West Boynton area. The logic of including an OB unit in the proposed JFK satellite hospital is undercut by the recent closure of the OB unit at Columbia. According to Columbia’s CEO, Columbia’s OB unit was closed in 2002 because it “was a small unit” with a low volume, because the service area from which Columbia was drawing its patients was predominately elderly, and because there were several other hospitals within close proximity to Columbia that had larger OB units with NICU backup. Based upon those factors, Columbia’s CEO concluded that “there was no real community need to do OB” and that “it just didn’t make sense” to do OB. The same factors exist in the West Boynton area and, as a result, the comments of Columbia’s CEO are equally applicable to the inclusion of an OB unit in the proposed JFK satellite hospital. The Proposed Satellite Hospitals (1) Bethesda West Bethesda’s application, CON 9659, proposes to establish an 80-bed satellite hospital in the West Boynton area by de-licensing 80 beds at Bethesda Memorial and then transferring those beds to the proposed satellite hospital. The transfer of beds proposed in Bethesda’s application will not increase the inventory of acute care beds in either District 9 or Subdistrict 9-5. The 80-bed increase at Bethesda West will be offset by the 80-bed decrease at Bethesda Memorial, both of which are in Subdistrict 9-5. The beds transferred to Bethesda West will come from double-occupancy rooms, thereby allowing Bethesda Memorial to convert those rooms to private rooms. The conversion to private rooms will create efficiencies at Bethesda Memorial by eliminating gender-based or disease-based conflicts between patients that often arise with double-occupancy rooms. The transfer of 80 beds to Bethesda West will reduce Bethesda Memorial’s licensed capacity to 282 beds. That figure includes the 15 NICU beds, the 14 hospice beds, and the 14-bed SCU; therefore, after the bed transfer, Bethesda Memorial will have only 239 beds available for general patient use. Bethesda Memorial is projected to have 80,630 patient days (excluding NICU and CMR patient days) in Bethesda West’s second year of operation.8 That equates to an ADC of 221 patients and an occupancy rate of 92.4 percent for the 239 beds available for general patient use. If the hospice lease and the SCU contract are not renewed in 2005, then Bethesda Memorial would have 267 beds available for general patient use and its occupancy rate would be 82.7 percent. The non-renewal of the hospice lease and the SCU contract would not add new acute care beds to Subdistrict 9- 5 because those beds are still considered to be acute care beds for purposes of the Agency's bed inventory for the subdistrict, even though they are currently designated for specific purposes. With an annual occupancy rate of 92.4 percent or even 82.7 percent, there would likely be days on which Bethesda Memorial’s occupancy rate would exceed 100 percent. This is not an uncommon occurrence at the hospitals in Subdistrict 9-5, particularly during the “peak season” of January through March. Bethesda Memorial could operate efficiently and provide high quality care with an occupancy rate of 82.7 percent or 92.4 percent without adding new beds. Indeed, JFK and Delray each have similar occupancy rates (and even higher occupancy rates during the “peak season”), and it is undisputed that they provide high quality care. Because the addition of new acute care beds at an existing hospital is no longer linked to the hospital’s occupancy rate, Bethesda Memorial (like any other existing hospital) is free to add new acute care beds whenever it chooses to do so; however, the evidence was not persuasive that Bethesda will, in fact, add new beds at Bethesda Memorial after the bed transfer to Bethesda West notwithstanding the resulting high utilization rate at Bethesda Memorial.9 Bethesda West will include 68 general med-surg beds, 12 critical care beds, a full service ED, and related ambulatory and outpatient services. All of the beds at Bethesda West will be in private rooms. Bethesda West will not offer OB services or dedicated pediatric services, and it will not include a cardiac catheterization lab. Bethesda West will be in a new 190,130 square foot building. The space plan for Bethesda West is reasonable, and its design complies with all applicable building and construction codes. The projected timetable for construction and completion of Bethesda West is also reasonable. Bethesda West will be located at the intersection of Boynton Beach Boulevard and State Road 7, which is approximately two miles west of the Turnpike. That location is three miles from Bethesda Health City, eight to nine miles from Wellington, and ten to 11 miles from Delray, JFK, and Bethesda Memorial. Bethesda West could not be collocated with Bethesda Health City because there is not enough property at that location to construct a satellite hospital with the necessary parking facilities. Bethesda has contracted to purchase 54 acres of property at the intersection of Boynton Beach Boulevard and State Road 7 known as the “Amestoy Property.” The purchase price of the Amestoy Property was $110,000 per acre. Bethesda intends to develop Bethesda West on approximately 30 acres of the Amestoy Property and then lease or sell the remainder of the property for the development of medical office buildings. A 30-acre site is adequate for the proposed 80-bed satellite hospital, although it may inhibit future expansion. Bethesda West intends to utilize the same medical staff as Bethesda Memorial; however, Bethesda has not discussed the issue with its medical staff as a whole10 nor has it developed specific plans to implement its dual-staffing approach. Bethesda West will share management and administrative support services with Bethesda Memorial rather than duplicating those services. The total cost of Bethesda West is $73.8 million. The primary service area (PSA) for Bethesda West consists of zip codes 33436, 33437, 33463, and 33467, which roughly correspond to the boundaries of the West Boynton area. The hospital’s secondary service area (SSA) includes zip codes 33414 and 33446. There is significant overlap in the proposed service area of Bethesda West and the current service area of Bethesda Memorial; four of the six zip codes in Bethesda West’s service area are in Bethesda Memorial’s service area. There is also significant overlap between the proposed service area of Bethesda West and the service areas of Delray, Wellington, and JFK; each of the zip codes in Bethesda West’s proposed service area is also within the service area of at least two of those hospitals. Bethesda West is projected to have 10,430 patient days in its first year of operation and 14,570 patient days in its second year of operation. Those patient days equate to ADCs of 29 and 40, and occupancy rates of 35.7 percent and 49.9 percent in the first and second years of operations. By the fourth year of operation, Bethesda West is projected to have an ADC of 56, which equates to an occupancy rate of 65.2 percent. These occupancy rates are reasonable, as is the “ramp up” concept on which they are based. The projected utilization at Bethesda West is based upon an ALOS of 4.6 days. That ALOS was derived from information in the Agency’s in-patient database for residents of the West Boynton area who received in-patient services of the kind that would be offered at Bethesda West. It is a reasonable ALOS.11 The projected utilization assumes that Bethesda West will have an overall market share of 7.5 percent in its service area in the first year of operation, and that Bethesda West’s overall market share will increase to 13.5 percent by its fourth year of operation. Bethesda West is not projected to have a market share of greater than 15 percent in any individual zip code until its third year of operation. The utilization and market shares projected for Bethesda West are reasonable and attainable based upon the demographics and projected population growth in the West Boynton area. Bethesda West is projected to take patients from the hospitals that currently serve the West Boynton area, including Bethesda Memorial. Bethesda's application projects that 3,040 patients from Bethesda Memorial will be “redistributed” to, or “cannibalized” by Bethesda West in Bethesda West’s first year of operation and that the number will increase to 4,530 patients in Bethesda West's second year of operation. The remainder of Bethesda West’s projected patient days – 7,390 in its first year of operation and 10,040 in its second year of operation – will come from patients who are currently being served by an existing hospital or from growth in the service area. In addition to these projected in-patient admissions, Bethesda West is projected to have outpatient registrations ranging from 22,440 (first year of operation) to 46,310 (fourth year of operation) and ED visits ranging from 8,990 (first year of operation) to 19,720 (fourth year of operation). The projected outpatient registrations and ED visits are reasonable and attainable. Some of the outpatient registrations at Bethesda West will come at the expense of Bethesda Health City because it is currently providing some of the same outpatient services that are proposed for Bethesda West. There is no persuasive evidence quantifying the number of Bethesda West’s outpatient registrations that would have otherwise gone to Bethesda Health City, nor is there any persuasive evidence quantifying the financial impact of the redistribution of those outpatients. (2) Proposed JFK Satellite Hospital JFK’s application, CON 9660, proposes to establish an 80-bed satellite hospital in the West Boynton area by de- licensing 80 beds at Columbia and then transferring those beds to the proposed JFK satellite hospital. Columbia is located in Subdistrict 9-4 and, like JFK, it is an HCA hospital. The bed transfer proposed by JFK will increase the inventory of acute care beds in Subdistrict 9-5 by 80 beds, but the bed inventory in District 9 will remain the same; the 80-bed increase in Subdistrict 9-5 at JFK’s proposed satellite hospital will be offset by an 80-bed decrease in Subdistrict 9-4 at Columbia. Columbia has 250 licensed beds, of which 150 are acute care beds, 12 are skilled nursing beds, and 88 are psychiatric beds. Columbia’s acute care beds include a 20-bed intensive care unit/critical care unit (ICU/CCU), but only 10 of those beds are currently being used. The 12-bed skilled nursing unit is not currently being used. The acute care beds at Columbia are not well- utilized. In calendar year 2002, the utilization rate for Columbia’s 150 acute care beds was only 40 percent and during the “peak season” in 2002, the utilization rate of those beds was only 47.6 percent. The proposed bed transfer would enable Columbia to convert its existing semi-private rooms to private rooms, but according to Columbia’s CEO, to do so Columbia would also need to convert its 12 skilled nursing beds to acute care beds. JFK’s CON application did not make reference to that necessary bed conversion. The conversion of the 12 skilled nursing beds to acute care beds may require Agency approval, which Columbia had not requested as of the date of the hearing. If the bed conversions described by Columbia’s CEO did not occur, the utilization rate of the 70 remaining acute care beds at Columbia after the transfer will likely exceed 80 percent on an annual basis and, during the “peak season,” the occupancy rate will likely exceed 100 percent. Indeed, applying the number of patient days at Columbia in calendar year 2002 to 70 beds results in an annual occupancy rate of 85.7 percent and an occupancy rate of 102 percent in the “peak season.” Under the pre-2004 law, those occupancy rates would allow Columbia to add beds without CON review, and Columbia’s CEO testified that she would take steps to add beds at Columbia if necessary based upon the facility’s occupancy rates after the bed transfer. There is no credible evidence that JFK planned to construct a satellite hospital in the West Boynton area prior to February 2003. The proposal was not included in any of JFK’s strategic or business plans prior to that date. There is also no credible evidence that the Columbia planned to de-license any beds at its facility prior to the CON application at issue in this proceeding; Columbia’s long-term business plan includes the beds that are being transferred to JFK’s proposed satellite hospital. The decision to de-license and transfer 80 beds from Columbia was made by HCA officials, not Columbia’s management team. The proposed JFK satellite hospital will include 60 general med-surg beds, a 10-bed OB unit, a 10-bed ICU/CCU, a full-service ED, and surgical suites. The hospital will provide radiation oncology services, diagnostic cardiac catheterization services, and outpatient psychiatric services, and all of its beds will be in private rooms. In addition to the 80 beds described above, the proposed JFK satellite hospital will have a 12 “observation” beds in private rooms. The observation beds will be sized and equipped in the same manner as the general med-surg beds. As a result, the proposed JFK satellite hospital will effectively have 92 beds even though it will only be licensed for 80 beds. The proposed JFK satellite hospital will be in a new 195,195 square foot building. The space plan for the hospital is reasonable, and its design complies with all applicable building and construction codes. The projected timetable for construction and completion of the hospital is also reasonable. The proposed JFK satellite hospital will be located at the intersection of Boynton Beach Boulevard and the Turnpike on a 50-plus acre site known as the “Mazzoni Property.” That location is eight to nine miles from Delray and Bethesda Memorial, and 11 to 12 miles from Wellington and JFK. JFK has offered to purchase the Mazzoni Property for $130,000 per acre, but as of the date of the hearing, it had not entered into a contract to purchase the property. Bethesda had been in negotiations for the purchase of the Mazzoni Property at a similar price before it settled on, and entered into a contract to purchase the Amestoy Property. Like Bethesda, JFK intends to develop medical office buildings on its site in addition to the proposed satellite hospital. The size of the Mazzoni Property is adequate for those purposes. JFK intends to utilize its medical staff to cover the proposed satellite hospital; however, there is no credible evidence in the record detailing how the dual-staffing would work. The proposed JFK satellite hospital will share some of its management and administrative support services with JFK, but not to the same extent as those services are shared between Bethesda West and Bethesda Memorial. Indeed, the proposed JFK satellite hospital was planned and staffed as a “stand alone economic entity.” The total cost of the proposed JFK satellite hospital is approximately $109.8 million. The service area of JFK’s proposed satellite hospital is considerably larger than the service are of Bethesda West. The PSA consists of zip codes 33437, 33467, 33446, and 33484; the SSA consists of zip codes 33436, 33463, 33414, 33413, 33445, 33496, and 33498. There is significant overlap between the service area of the proposed JFK satellite hospital and the existing service areas of Bethesda, Delray, Wellington, and JFK; each of the zip codes in the proposed service area is within the service area of at least two of those hospitals. Zip codes 33437 and 33467 are expected to generate over 92 percent of the patients for the proposed JFK satellite hospital. The inordinately high number of patients that these two zip codes are expected to generate calls into question the reasonableness of service area defined by JFK, or at least the relevance of the SSA. The proposed JFK satellite hospital is projected to have 20,851 patient days in its first year of operation and 21,576 patient days in its second year of operation, which equate to ADCs of 57 and 59 and occupancy rates of 71.4 percent and 73.7 percent. By the fifth year of operation, the proposed JFK satellite hospital is projected to have an occupancy rate of percent. The projected utilization of the proposed JFK satellite hospital was based on an ALOS of 3.9 days. That figure is reasonable. See Endnote 11. To achieve the projected utilization, the proposed JFK satellite hospital will have to immediately achieve inordinately high market shares in its two primary zip codes, 33437 and 33467. Indeed, the CON application projects that the proposed JFK satellite hospital will have a 27 percent market share in zip code 33437 and a 24 percent market share in zip code 33467. It is unreasonable to expect that a new, start-up hospital will be able achieve the market share or utilization rates projected by JFK for its proposed satellite hospital even though it will be affiliated with JFK, which has an established market reputation in the area. Instead, similar to other new hospitals, the proposed JFK satellite hospital will likely have a “ramp up” period before it achieves its target market penetration and/or utilization. The 10-bed OB unit at the proposed JFK satellite hospital is projected to have an ADC of 6 in each of the first two years of operation, and approximately one half of the admissions are projected to come from zip code 33467. That zip code has fewer residents in the Female 15-44 age cohort than does zip code 33463, which is in the West Boynton area but is in the SSA of the proposed JFK satellite hospital. The utilization of the OB unit assumes market shares of 65 percent in zip code 33437, which is the zip code where the proposed JFK satellite hospital will be located (i.e., its “home zip code”), and 60 percent in the adjacent zip code 33467. Those market shares are not inherently unreasonable for OB services since OB patients are more likely to utilize a facility closer to their home; however, the market shares are materially higher than the market shares that the established programs at Palms West (45 percent) and Wellington (41 percent) have in their home zip codes. The market shares proposed for the other zip codes in the proposed JFK satellite hospital’s service area are also somewhat higher than would be expected, particularly for a start-up OB program, but they are not inherently unreasonable. Even though the OB market shares assumed by JFK are not inherently unreasonable, they are unrealistic under the circumstances of this case because the OB unit at the proposed JFK satellite hospital will not have NICU backup, which is the standard of care in South Palm Beach County, and it is unlikely that obstetricians will refer their patients to the proposed satellite hospital when other hospitals with NICU backup (e.g., Wellington and Bethesda Memorial) are available in close proximity to the West Boynton area. The patient days for the OB unit were projected based upon a population-based use rate rather than based upon a fertility rate applied to the Female 15-44 age cohort. Because the Female 15-44 age cohort is growing at a slower rate than the population as a whole, JFK’s methodology had the effect of overstating the OB patient days and the ADC of the OB unit. The fertility rate methodology is a more reasonable approach under the circumstances of this case. That methodology results in an ADC of only two to four patients in the OB unit at the proposed JFK satellite hospital, which is a more reasonable projection and is more consistent with the largely elderly demographic of the West Boynton area. In sum, the projected utilization of the proposed JFK satellite hospital is overstated, particularly in the first two years of operation, as a result of the unrealistic market shares projected for the hospital’s two primary zip codes and the overstated projection of OB patient days in the West Boynton area. The proposed JFK satellite hospital is projected to take patients from the hospitals that currently serve the West Boynton area, including JFK. JFK projects that approximately 40 percent of its patients will be “cannibalized” by the proposed JFK satellite hospital, which is a materially higher percentage than that projected for Bethesda West in its first (29.1 percent) and second (31.1 percent) years of operation. The remainder of the proposed JFK satellite hospital’s admissions will come from patients who are currently being served by an existing hospital or from growth in the service area. In addition to the projected in-patient admissions discussed above, the proposed JFK satellite hospital is expected to have outpatient registrations and ED visits; however, the number of registrations and visits is not expressly projected in the application. Accordingly, it cannot be determined whether those projections are reasonable or not.12 Institution-specific Justifications for the Proposed Satellite Hospitals Other than the prospect of enhancing access to acute care services for residents of the West Boynton area (see Part I(1)(b) below), the primary justifications offered by Bethesda and JFK for their respective satellite hospitals were institution-specific. The primary justification offered by Bethesda for the establishment of Bethesda West was its need to maintain or increase its market share of the favorable payer-mix in the West Boynton area in order to ensure its long-term financial viability. Although the evidence establishes that the West Boynton area has a more favorable payer-mix than Bethesda Memorial’s current service area, the evidence was not persuasive that Bethesda’s long-term financial viability is at risk or that it is at risk of losing market share in the West Boynton area if it is not allowed to construct Bethesda West. Bethesda also presented evidence regarding its inability to add new beds at Bethesda Memorial because of physical and/or cost constraints, but that evidence was not persuasive. The primary justification offered by JFK for the establishment of its proposed satellite hospital was its inability to expand its current facility to accommodate patients coming from the West Boynton area or elsewhere; however, the preponderance of the evidence fails to support that claim because, as of the date of the hearing, JFK still had the ability to add at least 72 more beds to its existing facility, including 36 beds without any additional construction. Impact of the Proposed Satellite Hospitals on the Existing Hospitals in Subdistrict 9-5 The evidence is not persuasive that Bethesda West or the proposed JFK satellite hospital can achieve their in-patient utilization projections through population growth in their projected service areas alone. Instead, the evidence establishes that the proposed satellite hospitals will achieve their projected utilization primarily by taking patients who are currently being served by, or would otherwise be served by one of the existing hospitals in Subdistrict 9-5. Bethesda West and the proposed JFK satellite hospital are each projected to “cannibalize” patients from Bethesda Memorial and JFK, respectively; however, they will also take patients “out of the hide” of Delray, Wellington, and each other. The projected growth in the West Boynton area will result in the existing hospitals having more patient days in the future than they currently have, whether or not either of the satellite hospitals is approved; however, the approval of either of the proposed satellite hospitals will result in the existing hospitals losing some of the growth-related admissions that they would have otherwise captured. It is appropriate to consider the loss of those growth-related admissions as part of the impact analysis because the market shares in the West Boynton area and the service areas of the proposed satellite hospitals have been relatively stable over the past several years, and it is reasonable to expect that absent a significant change of circumstances (such as the approval of a satellite hospital in the area) the existing hospitals would continue to maintain their respective market shares into the future.13 The most persuasive analysis of the impact on the existing providers of the approval of the proposed satellite hospitals is that prepared by Wellington’s health planner, Thomas Davidson (Exhibit W-4). Based upon Mr. Davidson’s analysis, the number of admissions that the existing providers would lose because of Bethesda West in its first two years of operation are as follows: Year 1 Year 2 Delray 377 512 Wellington 138 187 JFK 554 752 Based upon Mr. Davidson’s analysis, the number of patient days that the existing providers would lose because of the proposed JFK satellite hospital in its first two years of operation are as follows: Year 1 Year 2 Delray 1,035 663 Wellington 735 615 Bethesda 1,638 1,178 These lost admissions and patient days constitute a substantial adverse impact on the existing hospitals, as does the loss of income resulting from the lost admissions and patient days. The proposed JFK satellite hospital will have a slightly greater adverse financial impact on Wellington than will Bethesda West, primarily because of the OB program and larger service proposed for the JFK satellite hospital; the proposed JFK satellite hospital and Bethesda West will have materially similar adverse financial impacts on Delray. The overall effect of the lost admissions, patient days, and the resulting loss of income is greater on Wellington than it is on any of the other hospitals because Wellington has historically been less profitable than the other hospitals. There are other adverse impacts on the existing providers, including the increases in costs and/or potential impacts to quality of care resulting from the exacerbation of the emergency room (ER) call shortage of specialty physicians discussed below; however, there is no persuasive evidence quantifying those impacts. Comparative Evaluation of the CON Applications Based Upon the Applicable Statutory and Rule Criteria There is no credible evidence to justify the approval of two 80-bed hospitals in the West Boynton area. As a result, if either of the proposed satellite hospitals is to be approved, it should be the one that best satisfies the applicable statutory and rule criteria. Statutory Criteria – Section 408.035, Florida Statutes (2003)14 Subsection (1): Need in Relation to the District Health Plan15 The applicable provisions of the Local Health Plan for District 9 are as follows: Priority shall be given to area hospitals, which can show a commitment to, or historical record of service to Medicaid/indigent, handicapped and underserved population groups. Priority shall be given to applicants who can document cost containment practices in their facilities. Cost containment practices, such as sharing services with other area hospitals, enhances efficient resource utilization and assists in avoiding duplication of services. Priority shall be given to an applicant who proposes to use existing space rather than new construction, including space created by previous voluntary de- licensure of underutilized or unused beds and/or through transfer of beds within a subdistrict. As more fully discussed below in connection with Section 408.035(11), Florida Statutes, the first preference weighs in favor of Bethesda based upon its historical record of service to Medicaid and charity patients, which is marginally better than JFK’s record, and its commitment to provide five percent of the patient days at Bethesda West to Medicaid and charity patients, which is more realistic than JFK’s 10 percent commitment; however, the weight associated with this preference is minimal in light of the demographics of the West Boynton area, which is generally more wealthy and, hence, less likely to generate significant Medicaid or charity care patient days. As to the second preference, the record does not “document” any material cost containment practices at JFK or Bethesda Memorial. JFK and Bethesda each intend to use their existing medical staffs to cover their proposed satellite hospitals as a cost-containment effort; however, Bethesda has proposed a greater degree of integration (and, hence, less duplication) in the administrative functions at Bethesda West and Bethesda Memorial than did JFK at is proposed satellite hospital. Thus, the second preference also marginally weighs in favor of Bethesda. As to the third preference, both applicants are proposing new construction rather than the use of existing space. Although JFK is proposing the de-licensure of underutilized beds at Columbia, it is not using the space created by those beds for its proposed satellite hospital as the rule preference contemplates. The beds that Bethesda is transferring to Bethesda West are not underutilized and they are being transferred to a new to-be-constructed facility rather than to existing space. In sum, the local health plan preferences marginally weigh in favor of the approval of Bethesda’s application over JFK’s application. Subsections (2) and (7): Availability, Quality of Care, etc. of Existing Facilities and Enhancing Access The primary justification offered by the applicants for their respective proposed satellite hospitals (other than the hospital-specific issues discussed above) is that the facility will "enhance access" to acute care services for residents of the West Boynton area. More specifically, the applicants contend that the establishment of a new hospital in the West Boynton area will address an “access” problem that exists or soon will exist in the area. As discussed below, this contention is not supported by the preponderance of the evidence. In the CON context, “access” is typically evaluated from the vantage points of programmatic, financial, cultural, and geographic access. “Programmatic access” refers to the adequacy of the programs and services provided at existing facilities in relation to the specific health care needs of the persons served by those facilities. Programmatic access concerns arise when specific programs or services are not available for patients that need them, or when the quality of care provided in the existing programs is inadequate. The evidence was not persuasive that there are any programmatic access problems in Subdistrict 9-5 and, in any event, neither of the proposed satellite hospitals would enhance programmatic access in the subdistrict because they will not offer any programs or services that are not already offered at one or more of the tertiary hospitals in the subdistrict that currently serve the West Boynton area. Indeed, the proposed satellite hospitals will offer a more narrow range of services than the existing tertiary hospitals presently serving the area. This is significant because the elderly, who make of a large portion of the West Boynton area and who are more likely to have co-morbidities or more complex medical needs, are generally better served in a hospital offering tertiary services and more complete care. Similarly, it is reasonable to expect that many physicians will continue to admit their patients to the larger tertiary hospitals rather than shifting those patients to a satellite hospital that provides a more narrow range of services. “Financial access” refers to the extent to which persons have access to health care services without regard to their ability to pay. The evidence was not persuasive that there are any financial access problems in Subdistrict 9-5 or the West Boynton area that the proposed satellite hospitals will address. None of the existing hospitals that serve the West Boynton area have policies or practices that discourage indigent patients from seeking care at their facilities and, in any event, the low- income population makes up a relatively small portion of the West Boynton area. Cultural access” refers to the extent to which certain persons cannot or do not access the existing facilities due to cultural factors such as race, ethnicity, and national origin. Cultural access was not advanced by Bethesda or JFK as a basis for the approval or their respective applications. “Geographic access” refers to the physical accessibility of the existing facilities or services in a subdistrict taking into account population density, distance and time of travel, and geographic barriers or other impediments to access. Geographic access has been referred to as a “foundation of health planning.” Bethesda and JFK focus primarily on the projected growth of the West Boynton area and the road congestion that comes with that growth as the basis for their contention that there is, or soon will be a access problem for residents of the West Boynton area; Bethesda states in its PRO (at page 29) that "[g]eographic access is at the heart of [its] proposal." A reasonable geographic access standard for persons living in an urban area is a drive time of 30 to 40 minutes to an acute care hospital. Under that standard, there is currently no geographic access problem for residents of the West Boynton area. Indeed, there are as many as 12 hospitals within a 30-minute drive of the West Boynton area, and a “fair number” of residents have access to four hospitals -– Bethesda, JFK, Wellington, and Delray -- within a 15 to 20-minute drive time.16 All of the hospitals within the 30-minute drive time offer tertiary-level care, and a number of them offer OB services. There are no physical geographic barriers that limit access to the existing hospitals by residents of the West Boynton area. Indeed, there are a number of different major north-south and east-west roads that residents have to chose from when accessing the existing hospitals, and most of those roads have at least four lanes. The major roads in the West Boynton area have expanded along with growth of the population in the area, and they are expected to continue to do so. The infrastructure plan adopted by Palm Beach County includes continued road expansions and improvements over the planning horizon applicable to this case, and developers are often required to widen or otherwise improve the roads as a condition of the approval of new development. There is insufficient evidence that the current travel times are significantly different for the elderly population in the area. The anecdotal testimony offered by various Bethesda witnesses was not persuasive. The evidence was not persuasive that the travel times will be materially higher over the applicable five-year planning horizon. The analysis and opinion presented by Bethesda’s traffic engineer on this issue was not persuasive.17 The concurrency analysis performed by Bethesda’s traffic engineer only assessed Boynton Beach Boulevard; it did not assess any of the other major roads between the West Boynton area and the existing hospitals. Moreover, the analysis focused on the level of service (LOS) on various segments of Boynton Beach Boulevard, as measured by the projected number of trips on those segments in 2007; it did not quantify the increase in travel time along that road, if any, resulting from the reduction in the LOS which the analysis showed. The hospitals in Subdistrict 9-5 are some of the most highly-utilized hospitals in the state; however, the evidence was not persuasive that the high utilization at these hospitals has caused any access problems for residents of the West Boynton area, either for general acute care services or for OB services. The existing hospitals in Subdistrict 9-5 have been able to meet the needs of the subdistrict by incrementally expanding their facilities when the need arises. An additional 67 beds can be added to the bed inventory of Subdistrict 9-5 without any additional construction; JFK has shelled-in space for 36 new beds and Delray has shelled-in space for 31 new beds. Additionally, Delray has a master plan that has been approved by Palm Beach County that will allow it to add as many as 123 more beds on its current campus as needed, and Wellington also has plenty of space on the undeveloped property adjacent to its hospital to add more beds as needed. Having a hospital in the West Boynton area might be more convenient for residents of that area west of the Turnpike, at least in those instances where the patient is able to receive all of the necessary care at that hospital; however, convenience alone is not valid basis for the approval of a new hospital, particularly where there are as many as 12 tertiary-level hospitals within a 30-minute drive of the West Boynton area. In sum and on balance, the criteria in Subsections 408.035(2) and (7), Florida Statutes, weigh strongly against approval of either application. Indeed, despite the relatively high utilization rates at the existing hospitals in Subdistrict 9-5, the preponderance of the evidence fails to establish that there currently are, or that over the applicable planning horizon there will be any material deficiencies in the availability, quality of care, or accessibility of the existing hospitals in the subdistrict that would warrant the approval of a new hospital in the West Boynton area at this time. Subsection (3): Ability of Applicant to Provide Quality of Care The parties do not dispute the quality of care provided at any of the existing hospitals in Subdistrict 9-5, and the evidence affirmatively demonstrates that a high quality of care is currently provided at Bethesda Memorial, JFK, Delray, and Wellington. Bethesda and JFK each intend to rely on their existing medical staff, at least in part, to staff their respective satellite hospitals. As a result, the quality of care provided at the satellite hospitals will also be good, but it will be less than ideal in several respects. First, neither satellite hospital will offer interventional cardiology services, which is, or is becoming the standard of care for treating heart attack patients that present to the hospital’s ED. Second, JFK’s proposed satellite will offer OB services without NICU backup, which is below the standard of care in South Palm Beach County. Accordingly, the criterion in Section 408.035(3), Florida Statutes, weighs against the approval of either application. Subsection (4): Special Health Care Services The parties stipulated that this criterion is inapplicable, and in any event, the criterion was deleted by Chapter 2004-383, Laws of Florida, effective July 1, 2004. Subsection (5): Educational Facilities and Training Programs18 Neither JFK nor Bethesda Memorial is a teaching hospital, and neither is proposing educational or training programs at its proposed satellite hospital. The evidence was not persuasive that Wellington’s teaching programs will be adversely affected by the approval of either of the proposed satellite hospitals. The criterion in Section 408.035(5), Florida Statutes, does not materially weigh in favor of or against the approval of either of the applications. Subsection (6): Availability of Resources and Personnel for Operations The parties stipulated that Bethesda and JFK each have the ability to fund the capital and operating expenditures for their proposed satellite hospitals. The reasonableness of the financing-related costs proposed by Bethesda and JFK in their respective applications is also not in dispute. Delray and Wellington argue that neither Bethesda nor JFK will be able to adequately staff their proposed satellite hospitals due to physician and nurse shortages in South Palm Beach County and/or that the staffing of the proposed satellite hospitals will make it more difficult and costly for the existing hospitals in Subdistrict 9-5 to staff certain programs. Bethesda and JFK challenge the adequacy of each other’s staffing projections. As more fully discussed below, the evidence is not persuasive that the staffing projected for either of the proposed satellite programs is inadequate; however, the evidence establishes that the approval of either program would exacerbate physician shortages in Subdistrict 9-5 in certain specialties. Bethesda West’s staffing projections include 242.8 full-time equivalents (FTEs) in the first year of operation and 294.5 FTEs in the second year of operation. The staffing projections for the proposed JFK satellite hospital include FTEs in the first year of operation and 448.5 FTEs in the second year of operation. The disparity in the staffing levels primarily results from the higher occupancy rate projected at the proposed JFK satellite hospital, which is projected to be 71.4 percent in the first year of operation. By contrast, the occupancy rate at Bethesda West is projected be 35.7 percent in the first year of operation and then “ramp up” to approximately 69 percent by the fourth year of operation. The staffing levels at each of the proposed satellite hospitals are reasonable based upon the ADCs projected and the services to be provided at each hospital. Indeed, the staffing levels are comparable when viewed as a ratio of staff to projected ADC; the ratios at Bethesda West are 8.37 and 7.36 in the first two years of operation, and the ratios at the proposed JFK satellite hospital for its first two years of operation are 7.74 and 7.60. The evidence is not persuasive that Bethesda West’s staffing projections are understated or that they fail to include nursing and other positions necessary to ensure high quality care is provided. Nor is the evidence persuasive that the salaries projected for Bethesda West’s staff are understated. The evidence is not persuasive that the staffing projections for the proposed JFK satellite hospital are inherently unreliable based upon the manner in which they were prepared or as a result of the proxy that was used as a basis of the projections. There is a nursing shortage statewide and in South Palm Beach County, but it is not as severe as it has been in the past. Indeed, it is significant that despite the large number of beds added over the past five years at the various hospitals in South Palm Beach County, those beds have been adequately staffed with nurses and ancillary clinical personnel. JFK and Bethesda Memorial have each been successful in recruiting nursing staff despite the nursing shortage. They each have implemented innovative programs to aid in their recruiting efforts and to reduce their turnover and vacancy rates, and those programs are expected to be utilized at the proposed satellite hospitals. JFK and Bethesda Memorial each use “traveler” and per-diem nurses to supplement their full time nursing staffs, which is not uncommon in South Palm Beach County. Typically, a physician who has privileges at a hospital is required to be on ER call on a rotational basis. Many physicians have privileges at more than one hospital in South Palm Beach County, which means that they are responsible for providing ER call coverage at more than one hospital. Because of malpractice and other concerns, it is becoming increasingly difficult for hospitals to attract physicians who are willing to take ER calls. The Palm Beach County Medical Society and the CEOs of the existing hospitals in the county met as recently as December 2003 to discuss the problems related to ER call coverage; however, as of the date of the hearing, the problem still existed and was severe. It is possible for a physician to be providing ER calls to more than one hospital at the same time. This can become a serious problem if the physician is attending to a patient at one hospital when he or she is called to the ER at another hospital. The problem of ER call coverage is most significant in specialties such as neurosurgery, hand surgery, urology, OB, and ear/nose/throat. Several of the hospitals in South Palm Beach County, including Wellington and Delray, have begun to pay physicians, and particularly specialty physicians to take ER call. Adding a new hospital in South Palm Beach County will exacerbate this problem in several respects. First, it will add another hospital to the ER call rotations of the physicians who chose to obtain privileges at the satellite hospitals, thereby increasing the prospect of a physician being on call at more than one hospital at the same time. Second, it will make it even more difficult or costly for existing hospitals to obtain call coverage by the specialty physicians that are already in short supply. It is unlikely that OB/GYNs will admit their patients to the small OB unit at the proposed JFK satellite hospital. OB/GYNs typically try to keep all of their patients in one hospital because it makes it easier on them to do rounds and to respond quickly to emergency situations, and because the OB unit at the proposed JFK satellite hospital will not have NICU backup, it is unlikely that many OB/GYNs will choose that hospital as the one where they admit the bulk of their patients. In sum, the staffing levels for each of the proposed satellite hospitals are reasonable and appropriate for the services being offered at the hospitals, the projected staffing costs at each of the proposed satellite hospitals are also reasonable and appropriate, and JFK and Bethesda will be able to staff their respective satellite hospitals at the levels projected; however, the proposed satellite hospitals will exacerbate the shortage of specialty physicians in South Palm Beach County and will make it more difficult for the existing hospitals to get specialty physicians for ER call coverage. Accordingly, the criterion in Section 408.035(6), Florida Statutes, weighs against the approval of either application, and between the competing applications, this criterion does not materially weigh in favor of either application over the other. Subsection (8): Financial Feasibility The parties did not seriously contest the short-term financial feasibility of either of the proposed satellite hospitals, and the preponderance of the evidence establishes that both of the proposed satellite hospitals are financially feasible in the short-term; both applicants have the ability to fund the construction and initial capital needs of their respective projects in conjunction with the other capital projects listed on Schedule 2 of their respective CON applications. The long-term financial feasibility of each of the proposed satellite hospitals is in dispute. The general rule for assessing the long-term financial feasibility of a CON project is if the project will at least break even by the end of the second year of operation, then the project is financially feasible in the long-term; if, however, the project continues to show a loss in the second year of operations and it is not demonstrated that the project will reach a break-even point within a reasonable period of time, then the project is not financially feasible in the long-term. As more fully discussed below, Bethesda West is financially feasible in the long-term, but the proposed JFK satellite hospital is not. Accordingly, the criterion in Section 408.035(8), Florida Statutes, weighs in favor of approval of Bethesda’s application over JFK’s application. Bethesda West Schedule 8A of Bethesda's application projects that Bethesda West will generate a net loss of $3.7 million in its first year of operation and a net profit of $1.7 million in its second year of operation. The financial projections for Bethesda West were based upon conservative utilization projections, which leads a reasonable projection of operating income. The financial projections for Bethesda West are not defective based upon an overstatement of the “other operating revenue” or an understatement of the depreciation expense projected by Bethesda. The testimony of Bethesda’s expert financial witnesses is accepted over the testimony of the other financial experts on these issues. The financial projections for Bethesda West are not defective based upon understatements in land costs, construction costs, equipment costs of staffing projections. The testimony of Bethesda’s experts related to these issues is accepted over the testimony of the other experts. As discussed above, Bethesda West will “cannibalize” 3,040 and 4,530 patient days from Bethesda Memorial in its first and second years of operation. The financial impact of this “cannibalization” on Bethesda Memorial is a loss of $1.4 million and $2.1 million in the first and second years of Bethesda West’s operation. The income loss from “cannibalization” is not accounted for on Schedule 8A. Although the patient days used to calculate the “per patient day” figures in the middle two columns of that schedule take into account the “cannibalized” patient days, the dollar amounts shown in those columns do not. On this issue, the testimony of Delray’s financial expert is more logical and persuasive than the testimony of Bethesda’s financial expert. When the losses from “cannibalization” are taken into account, the approval of Bethesda West will have a negative impact on the Bethesda system of $5.1 million in its first year of operation and $400,000 in its second year of operation, which are consistent with the figures shown in Exhibit B-2 (pages 48 and 54). Even so, the system will show a net income of $300,000 and $5.6 million in the first two years of Bethesda West’s operation. The impact of the “cannibalization” on Bethesda Memorial is projected to decrease as Bethesda West becomes more established. At the same time, the profitability of Bethesda West is projected to increase as its census grows. Thus, by the third year of its operation, Bethesda West is projected to have a positive impact on the Bethesda system of $2.2 million (i.e., $4.1 million in net income at Bethesda West less $1.9 million in “cannibalization” from Bethesda Memorial). Bethesda West will not have a negative impact on Bethesda’s cash flow after its first year of operation. On this issue, the testimony of Bethesda’s expert is more persuasive than the testimony of the other financial experts. Accordingly, Bethesda West is financially feasible in the long-term. Proposed JFK Satellite Hospital Schedule 8A of JFK's application projects that its proposed satellite hospital would generate a net loss of $1.2 million in its first year of operation and a net loss of $392,000 in its second year of operation. Over the next three years, however, JFK projects its satellite hospital to generate net income from operations of $509,000, $1.5 million, and $2.5 million. The financial projections in JFK’s application were based upon overly-aggressive occupancy rates, both in the facility as a whole and in the small OB unit without NICU backup. As a result, the resulting financial projections are not reasonable. JFK’s application does not include any analysis of the financial impact on Columbia of the transfer of 80 beds to the satellite hospital, nor does it include any analysis of the impact of the “cannibalization” of JFK’s patient days that would necessarily occur if JFK’s proposed satellite was approved. As a result, the financial impact of JFK’s proposed satellite hospital, in the words of one of JFK’s financial experts, is “probably incomplete.” As a result of the unreasonable utilization projections and the incomplete presentation of the financial impact of the “cannibalization” of JFK’s patient days, JFK failed to establish that its proposed satellite hospital is financially feasible in the long-term. Subsection (9): Fostering Competition that Promotes Cost-effectiveness Neither of the proposed satellite hospitals will foster competition that proposes cost-effectiveness. The West Boynton market currently has healthy competition for the acute services proposed for the satellite hospitals, and there is no dominant provider of those services. Locating a new hospital in the West Boynton area will have the long-term effect of increasing the market share of the provider that operates the new hospital to the detriment of the other providers that are currently competing in that market. In this regard, the approval of a new hospital in the West Boynton area would adversely affect the competitive balance that currently exists in that area and which is projected to continue over the planning horizon. The approval of either of the proposed satellite hospitals would also adversely affect cost-effectiveness by exacerbating the shortage of specialty physicians and other qualified staff in the subdistrict, which in turn would require existing hospitals to raise salaries, benefits and other expenses in order to remain competitive. The approval of Bethesda West would have less of an adverse impact on competition and cost-effectiveness than would the approval of JFK’s proposed satellite hospital for several reasons. First, Bethesda West does not duplicate as many administrative services as does JFK’s proposed satellite hospital. Second, JFK currently has a higher market share in the West Boynton area than does Bethesda or any other hospital, which means that the competitive balance would be tipped to a greater extent if JFK’s satellite hospital was approved. Third, the approval of the JFK satellite would give HCA four hospitals in Palm Beach County and increase its leverage in physician and staff recruitment and the negotiation of HMO contracts. Accordingly, the criterion in Section 408.035(9), Florida Statutes, weights against the approval of either application; however, on balance between the two applications, this criterion favor’s Bethesda’s application over JFK’s application. Subsection (10): Costs and Methods of Construction The costs and methods of energy provision at the proposed satellite hospitals is not in dispute. Although the proposed satellite hospitals are similar in size, the total project costs included in the CON applications are significantly different. The $73.8 million total project cost for Bethesda West equates to a cost of $922,700 per bed. The $109.8 million total project cost for JFK’s proposed satellite hospital equates to a cost of $1.37 million per bed. The portion of the total project costs for each of the proposed satellite hospitals attributable directly to “construction” is materially similar. Bethesda West’s construction costs are approximately $34.2 million, or $180 per square foot; the construction costs for the proposed JFK satellite hospital are $40.9 million, or $210 per square foot. The estimated construction costs for each of the proposed satellite hospitals are within the range of reasonableness that can be gleaned from the testimony of the various hospital construction experts. JFK’s cost is towards the higher end of the range, and Bethesda’s cost is towards the lower end of the range. The primary differences in the total project costs are in the land purchase prices, the site preparation costs, and the equipment costs. The land purchase price included in Bethesda’s application was $4.2 million, which was based upon a 30 to 40- acre site. The land purchase price included in JFK’s application was $8 million, which was based upon a 50-acre site. Bethesda acquired the 54-acre Amestoy Property for $110,000 per acre. At $110,000 per acre, the $4.2 million attributed by Bethesda to land purchase price would be sufficient to acquire 38.2 acres, which is more than adequate for the 80-bed Bethesda West facility. Consistent with the estimate in the CON application, JFK has made an offer to purchase the 50-plus acre Mazzoni Property for $130,000 per acre. The total land purchase price in each application, and the actual cost-per-acre of the Amestoy and Mazzoni Properties are reasonable. The site development costs included in Bethesda’s application were $3.75 million, or $125,000 per acre for the 30 acres on which Bethesda West will be located. The site development costs included in JFK’s application were $6.5 million, or $150,000 per acre for the 50 acres on which JFK’s proposed satellite hospital will be located. The site development costs for each project include on-site and off-site utility (e.g., water and sewer) and roadway work, geotechnical and environmental remediation costs, stormwater retention, landscaping, and concurrency impact fees. Each of the proposed sites is relatively flat and was formerly agricultural property and, as a result, there are not expected to be any unusual costs associated with the development of either site. Bethesda West will be located further west than the proposed JFK satellite hospital and, as a result, its “radius of influence” includes fewer congested roadway links than does the proposed JFK satellite hospital; but, the Amestoy Property where Bethesda West will be located is farther away from the existing utility lines than the Mazzoni Property where the proposed JFK satellite hospital will be located. Thus, even though the cost of running utilities to Bethesda West will likely be higher than the cost of running utilities to the proposed JFK satellite hospital, the currency impact fees for Bethesda West will likely be lower than the currency impact fees for the proposed JFK satellite hospital; and, on balance, the overall per-acre and total site development costs included in each of the applications are reasonable. Bethesda’s application included equipment costs of approximately $16 million, all of which was attributable to movable equipment. The cost of fixed equipment was included in the estimated construction costs as part of the building contract. JFK’s application included total equipment costs of approximately $34.2 million. That amount was broken into fixed equipment not in the building contract ($13.9 million), movable equipment ($17.8 million), and information systems ($2.4 million). Some, but not all of the difference between the equipment cost estimates are attributable to the additional services –- e.g., OB and diagnostic cardiac catheterization –- that will be provided at the proposed JFK satellite hospital but not at Bethesda West. Additionally, some of the difference are attributable to the 12 "observation" rooms at the proposed JFK satellite hospital that are being equipped in the same manner as the hospital’s general med-surg beds. When compared on an “apples to apples” basis, the total equipment costs for Bethesda West are not materially different than the total equipment costs for the proposed JFK satellite hospital. JFK is proposing to provide more specialized equipment than Bethesda in areas such as the surgical suites and the ICU/CCU and more information technology (IT) equipment; however, the evidence is not persuasive that such specialized equipment or the IT equipment is necessary to provide high quality care or that the absence of such equipment will adversely affect the quality of care at Bethesda West. The $16 million in equipment costs at Bethesda West, which equates to approximately $200,700 per bed, is reasonable for the level and type of services that will be provided at Bethesda West. The evidence is not persuasive that Bethesda’s equipment costs are understated even though its costs are considerably less than the equipment costs proposed by JFK. If anything, JFK has over-equipped its proposed satellite hospital with specialized equipment resulting in the higher equipment costs included in JFK’s CON application.19 Although the more expensive proposed JFK satellite hospital offers some benefits, such as a larger site to facilitate future expansions and more specialized equipment in some areas, those benefits are outweighed by the additional $35 million costs associated with that facility as compared to Bethesda West. This cost saving is particularly significant since each of the proposed facilities is supposed to be a satellite of a larger, tertiary hospital rather than a stand- alone community hospital. The evidence was not persuasive that Bethesda Memorial and JFK have physical constraints that will limit their ability to add beds at their existing facilities in a cost- efficient manner. Even if the construction of a satellite hospital were the most cost-efficient way for Bethesda Memorial and JFK to add beds, the evidence was not persuasive that it is the most cost-efficient way to add beds from the perspective of the entire health care system of Subdistrict 9-5. Indeed, there are less costly methods of adding new beds to the subdistrict than the construction of a new 80-bed hospital for $73.8 million or $109.8 million. For example, 36 additional beds can be added at JFK and 31 additional beds can be added at Delray in shelled-in space that has already been constructed. The incremental cost of constructing space for additional bed expansions at Delray and Wellington would also be less than the construction costs of the proposed satellite hospitals. In sum, because there are less costly ways to add beds to the subdistrict than the construction of a new hospital, the criterion in Section 408.035(10), Florida Statutes, weighs against the approval of either application; however, between the two applications, this criterion weighs in favor of the approval of Bethesda’s application over JFK’s application since its proposed satellite hospital will cost approximately $35 million less and will provide effectively the same services in similar physical space. Subsection (11): Medicaid and Indigent Care Bethesda characterizes itself as a “safety net” hospital because its Medicaid and charity care percentages typically exceed the averages for Subdistrict 9-5 and District 9 as a whole, and because Bethesda Memorial provides the largest percentage of the Medicaid and charity care provided by all of the hospitals in Subdistrict 9-5. There is no statutory or rule provision that would support Bethesda’s designation of itself as a “safety net” provider. Moreover, the significance of Bethesda’s characterization of itself as a “safety net” hospital is diminished by the fact that the Palm Beach County Health Care District (District) reimburses all hospitals in the county through an indigent care subsidy for care provided to patients that meet the District’s indigency standards. The subsidy helps to ensure that indigent patients are able to receive medical care from any hospital in the county and, to that end, provides a county-wide “safety net” for such patients. The subsidies paid by the District do not cover the full cost of indigent care provided by the hospital, nor does the total amount of subsidies received by a hospital directly correlate to the total amount of indigent care provided by the hospital. Thus, it is not dispositive that JFK received the largest amount of subsidies from the District over the past several years or that JFK received approximately $1.6 million more in subsidies from the District in 2003 than did Bethesda. JFK recently qualified as a “disproportionate share provider,” which means that at least 15 percent of its patient days are attributed to Medicaid or supplemental security income patients. As a disproportionate share provider, JFK receives incrementally larger reimbursements from Medicaid for the provision of indigent care. Bethesda is not currently a disproportionate share provider although it has been in the past. None of the hospitals in South Palm Beach County have policies or practices that discourage Medicaid or uninsured patients. Bethesda Memorial, JFK, Wellington, and Delray each accept patients without regard to their ability to pay. Bethesda and JFK conditioned the approval of their respective CON applications on the provision of a specified percentage of patient days to Medicaid and charity patients. The percentage committed to by JFK (10 percent) is higher than the percentage committed to by Bethesda (five percent). The percentages of Medicaid and charity care committed to by the applicants may be difficult to achieve as a result of the demographics of the West Boynton area. Indeed, the more favorable payer-mix in the West Boynton area was a significant factor, and in Bethesda’s case it was the primary motivating factor for the establishment a new hospital in that area. Bethesda Memorial and JFK each have a history of providing significant levels of Medicaid and charity care at their existing hospitals. The hospitals are each located in areas with large indigent populations, which significantly contribute to the high level of indigent care that they provide. Bethesda Memorial has historically provided a larger amount of Medicaid care than has JFK in terms of a percentage of patient days, e.g., 16.1 percent verses 7.3 percent in 2001. Those percentages each exceed the Subdistrict 9-5 average of 6.3 percent. Bethesda Memorial has also historically provided a larger amount of charity care than has JFK in terms of dollars (e.g., $16.2 million verses $5.2 million in 2002) and in terms of a percentage of charges (e.g., 3.7 percent verses 0.4 percent in 2001 and 2.9 percent verses 0.6 percent in 2002). The Subdistrict 9-5 average for 2001 was 1.4 percent. These comparisons are somewhat skewed because a large portion of Bethesda’s indigent care is attributable to Bethesda Memorial’s high-volume, well-established OB and neonatal programs which tend to be “magnets” for uninsured patients. When only like-services are considered, the utilization of JFK and Bethesda Memorial by Medicaid and indigent patients is similar. JFK provides a significant amount of care to “self- pay” patients (e.g., $43.5 million in 2002), which JFK attempted to equate to charity care. Although there is often overlap between self-pay and charity care patients, the evidence was not persuasive that there is a direct correlation urged by JFK in this case. For example, JFK’s internal definitions of self-pay and charity care patients are markedly different and considerably more liberal than the Agency’s definition of charity care patients for reporting purposes. Bethesda makes a $1 million per year “contribution” to the District to help fund the District’s indigent care program. That contribution was required as part of the settlement of litigation arising out of Bethesda’s conversion from a public hospital to a private not-for-profit hospital and, as a result, it cannot be fairly characterized as additional evidence of Bethesda’s commitment to serving indigent patients. Even though both applicants demonstrated a history of and commitment to serving Medicaid and indigent patients, the criterion in Section 408.035(11), Florida Statutes, weighs in favor of Bethesda because the level of Medicaid and charity care historically provided by Bethesda Memorial is higher than that provided by JFK. On balance with the other statutory and rule criteria, the criterion in Section 408.035(11), Florida Statutes, is not given significant weight because Bethesda has committed to providing a lower percentage of Medicaid and charity care patient days at Bethesda West than JFK committed to at its proposed satellite hospital, and because the demographics of the West Boynton area make it unlikely that a significant level of indigent care will be provided at either of the proposed satellite hospitals. Subsection (12): Designation as a Gold Seal Nursing Facility The parties stipulated that this criterion is inapplicable because neither applicant is proposing additional nursing home beds. (2) Rule Criteria – Florida Administrative Code Rules 59C-1.030(2) and 59C-1.038(6) The criteria in Florida Administrative Code Rule 59C- 1.030(2) are subsumed in the statutory criteria discussed above related to the accessibility (or not) of existing acute care services in Subdistrict 9-5 and the need (or not) for new acute care beds in the West Boynton area. For the same reasons that the CON applications do not satisfy those statutory criteria, they do not satisfy the related criteria in Florida Administrative Code Rule 59C-1.030(2). Under Florida Administrative Code Rule 59C- 1.038(6)(a), priority is given to applicants with “a documented history of providing services to medically indigent patients or a commitment to do so.” This priority weighs in favor of Bethesda for the reasons discussed above in connection with Section 408.035(11), Florida Statutes. Under Florida Administrative Code Rule 59C- 1.038(6)(b), priority is given to applications that “meet the need for additional acute care beds in a particular service through the conversion of existing underutilized beds.” This priority does not materially weigh in favor either application over the other; the underutilized beds at Columbia that JFK proposes to transfer to its satellite hospital are in a different subdistrict, and the beds that Bethesda proposes to transfer from Bethesda Memorial to its proposed satellite hospital are not underutilized beds in light of the historical occupancy rate at Bethesda Memorial.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency issue a final order denying Bethesda’s CON application No. 9659 and also denying JFK’s CON application No. 9660. DONE AND ENTERED this 29th day of September, 2004, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 29th day of September, 2004.
The Issue The issues in this case are whether the statement contained in Respondent's letter dated September 9, 1997 (1997 Letter), establishing a $24.00 payment for hospital outpatient services billed as revenue code 451 constitutes a rule as defined by Subsection 120.52(15), Florida Statutes (2010),1 and, if so, whether Respondent violated Subsection 120.54(1), Florida Statutes, by not adopting the statement in accordance with applicable rulemaking procedures.
Findings Of Fact AHCA is the state agency responsible for the administration of the Florida Medicaid Program. § 409.902, Fla. Stat. Petitioners are acute care hospitals that are and were enrolled as Medicaid providers of outpatient services in Florida, at all times relevant to this proceeding. On September 9, 1997, AHCA issued a letter to hospital administrators, which provided the following: This letter is to inform you that Medicaid coverage for hospital emergency room screening and examination services is now in effect. Hospitals will be reimbursed a $24.00 flat fee for providing these services to Medipass and Medicaid fee-for-service recipients who do not require further treatment beyond the screening and examination services. This policy is retroactive to July 1, 1996. The letter further provides that the $24.00 reimbursement would be billed under the revenue code 451. The statement in the letter applies to hospitals which are Medicaid providers and, therefore, is a statement of general applicability. The statement meets the definition of a rule. AHCA concedes that the statement, which provides "payment of a $24 rate for Medicaid Hospital Outpatient Services billed under Revenue Code 451, constitutes a rule under s. 120.52(16), Fla. Stat." AHCA concedes that the statement has not been adopted as a rule by the rule adoption procedures provided in Section 120.54, Florida Statutes. AHCA has discontinued all reliance on the challenged statement.
The Issue The issue is whether BayCare Long Term Acute Care Hospital, Inc.'s Certificate of Need Application No. 9753 and University Community Hospital's Certificate of Need Application No. 9754, both submitted to the Agency for Health Care Administration, should be approved.
Findings Of Fact LTCHs defined An LTCH is a medical facility which provides extended medical and rehabilitation care to patients with multiple, chronic, or clinically complex acute medical conditions. These conditions include, but are not limited to, ventilator dependency, tracheotomy care, total parenteral nutrition, long- term intravenous anti-biotic treatment, complex wound care, dialysis at bedside, and multiple systems failure. LTCHs provide an interdisciplinary team approach to the complex medical needs of the patient. LTCHs provide a continuum of care between short-term acute care hospitals and nursing homes, skilled nursing facilities (SNFs), or comprehensive medical rehabilitation facilities. Patients who have been treated in an intensive acute care unit at a short-term acute care hospital and who continue to require intensive care once stabilized, are excellent candidates for care at an LTCH. Included in the interdisciplinary approach is the desired involvement of the patient's family. A substantial number of the patients suitable for treatment in an LTCH are in excess of 65 years of age, and are eligible for Medicare. Licensure and Medicare requirements dictate that an LTCH have an average length of stay (ALOS) of 25 days. The Center for Medicare and Medicaid Services (CMS) reimburses for care received through the prospective payment system (PPS). Through this system, CMS reimburses the services of LTCHs separately from short-term acute care providers and other post acute care providers. The reimbursement rate for an LTCH under PPS exceeds that of other providers. The reimbursement rate for an LTCH is about twice that of a rehabilitation facility. The increased reimbursement rate indicates the increased cost due to the more intensive care required in an LTCH. The Agency The Agency is a state agency created pursuant to Section 20.42. It is the chief health policy and planning entity for the State of Florida. The Agency administers the Health Facility and Services Development Act found at Sections 408.031-408.045. Pursuant to Section 408.034, the Agency is designated as the single state Agency to issue, revoke, or deny certificates of need. The Agency has established 11 health service planning districts. The applications in this case are for facilities in District 5, which comprises Pinellas and Pasco counties. UCH UCH is a not-for-profit organization that owns and operates a 431-bed tertiary level general acute care hospital and a 120-bed acute care general hospital. Both are located in Hillsborough County. UCH also has management responsibilities and affiliations to operate Helen Ellis Hospital, a 300-bed hospital located in Tarpon Springs, and manages the 300-bed Suncoast Hospital. Both of these facilities are in Pinellas County. UCH also has an affiliation to manage the open heart surgery program at East Pasco Medical Center, a general acute care hospital located in Pasco County. As a not-for-profit organization, the mission of UCH is to provide quality health care services to meet the needs of the communities where it operates regardless of their patients' ability to pay. Baycare BayCare is a wholly-owned subsidiary of BayCare Healthsystems, Inc. (BayCare Systems). BayCare Systems is a not-for-profit entity comprising three members that operate Catholic Health East, Morton Plant Mease Healthcare, and South Florida Baptist. The facilities owned by these organizations are operated pursuant to a Joint Operating Agreement (JOA) entered into by each of the participants. BayCare Systems hospitals include Morton Plant Hospital, a 687-bed tertiary level facility located in Clearwater, Pinellas County; St. Joseph's Hospital, an 887-bed tertiary level general acute care hospital located in Tampa, Hillsborough County; St. Anthony's Hospital, a 407-bed general acute care hospital located in St. Petersburg, Pinellas County; and Morton Plant North Bay, a 120-bed hospital located in New Port Richey, Pasco County. Morton Plant Mease Health Care is a partnership between Morton Plant Hospital and Mease Hospital. Although Morton Plant Mease Healthcare is a part of the BayCare System, the hospitals that are owned by the Trustees of Mease Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside, are not directly members of the BayCare System and are not signatories to the JOA. HealthSouth HealthSouth is a national company with the largest market share in inpatient rehabilitation. It is also a large provider of ambulatory services. HealthSouth has about 1,380 facilities across the nation. HealthSouth operates nine LTCHs. The facility that is the Intervenor in this case is a CMR located in Largo, Pinellas County. Kindred Kindred, through its parent company, operates LTCH facilities throughout Florida and is the predominant provider of LTCH services in the state. In the Tampa Bay area, Kindred operates three LTCHs. Two are located in Tampa and one is located in St. Petersburg, Pinellas County. The currently operating LTCH in District 5 that may be affected by the CON applications at issue is Kindred-St. Petersburg. Kindred-St. Petersburg is a licensed 82-bed LTCH with 52 private beds, 22 semi-private beds, and an 8-bed intensive care unit. It operates the array of services normally offered by an LTCH. It is important to note that Kindred-St. Petersburg is located in the far south of heavily populated District 5. The Applications UCH proposes a new freestanding LTCH which will consist of 50 private rooms and which will be located in Connerton, a new town being developed in Pasco County. UCH's proposal will cost approximately $16,982,715. By agreement of the parties, this cost is deemed reasonable. BayCare proposes a "hospital within a hospital" LTCH that will be located within Mease Hospital-Dunedin. The LTCH will be located in an area of the hospital currently used for obstetrics and women's services. The services currently provided in this area will be relocated to Mease Hospital- Countryside. BayCare proposes the establishment of 48 beds in private and semi-private rooms. Review criteria which was stipulated as satisfied by all parties Section 408.035(1)-(9) sets forth the standards for granting certificates of need. The parties stipulated to satisfying the requirements of subsections (3) through (9) as follows. With regard to subsection (3), 'The ability of the applicant to provide quality of care and the applicant's record of providing quality of care,' all parties stipulated that this statutory criterion is not in dispute and that both applicants may be deemed to have satisfied such criteria. With regard to subsection (4), 'The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation,' it was stipulated that both applicants have all resources necessary in terms of both capital and staff to accomplish the proposed projects, and therefore, both applicants satisfy this requirement. With regard to subsection (5), 'The extent to which the proposed services will enhance access to health care for residents of the service district,' it was stipulated that both proposals will increase access. Currently there are geographic, financial and programmatic barriers to access in District 5. The only extant LTCH is located in the southernmost part of District 5. With regard to subsection (6), 'The immediate and long-term financial feasibility of the proposal,' the parties stipulated that UCH satisfied the criterion. With regard to BayCare, it was stipulated that its proposal satisfied the criterion so long as BayCare can achieve its utilization projections and obtain Medicare certification as an LTCH and thus demonstrate short-term and long-term feasibility. This issue will be addressed below. With regard to subsection (7), 'The extent to which the proposal will foster competition that promotes quality and cost- effectiveness,' the parties stipulated that approval of both applications will foster competition that will promote quality and cost effectiveness. The only currently available LTCH in District 5, unlike BayCare and UCH, is a for-profit establishment. With regard to subsection (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 construction for both proposals are reasonable. With regard to subsection (9), 'the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent,' it was stipulated that both UCH and BayCare have a demonstrated history and a commitment to providing services to Medicaid, Medicaid HMO, self-pay, and underinsured payments. Technically, of course, BayCare has no history at all. However, its sponsors do, and it is they that will shape the mission for BayCare. BayCare's Medicare certification as an LTCH The evidence of record demonstrates that BayCare can comply with Medicare reimbursement regulations and therefore can achieve its utilization projections and obtain Medicare certification as an LTCH. Thus short-term and long-term feasibility is proven. Because BayCare will be situated as a hospital within a hospital, in Mease Hospital Dunedin, and because there is a relationship between that hospital and BayCare Systems, Medicare reimbursement regulations limit to 25 percent the number of patients that may be acquired from Mease Hospital Dunedin or from an organization that controls directly or indirectly the Mease Hospital Dunedin. Because of this limitation, it is, therefore, theoretically possible that the regulator of Medicare payments, CMS, would not allow payment where more than 25 percent of admissions were from the entire BayCare System. Should that occur it would present a serious but not insurmountable problem to BayCare. BayCare projects that 21 percent of its admissions will come from Mease Hospital Dunedin and the rest will come from other sources. BayCare is structured as an independent entity with an independent board of directors and has its own chief executive officer. The medical director and the medical staff will be employed by the independent board of directors. Upon the greater weight of the evidence, under this structure, BayCare is a separate corporate entity that neither controls, nor is controlled by, BayCare Systems or any of its entities or affiliates. One must bear in mind that because of the shifting paradigms of federal medical regulation, predictability in this regard is less than perfect. However, the evidence indicates that CMS will apply the 25 percent rule only in the case of patients transferring to BayCare from Mease Hospital Dunedin. Most of the Medicare-certified LTCHs in the United States operate as hospitals within hospitals. It is apparent, therefore, that adjusting to the CMS limitations is something that is typically accomplished. BayCare will lease space in Mease Hospital Dunedin which will be vacated by it current program. BayCare will contract with Mease Hospital Dunedin for services such as laboratory analysis and radiology. This arrangement will result in lower costs, both in the short term and in the long term, than would be experienced in a free-standing facility, and contributes to the likelihood that BayCare is feasible in the short term and long term. Criteria related to need The contested subsections of Section 408.035 not heretofore addressed, are (1) and (2). These subsections are illuminated by Florida Administrative Code Rule 59C- 1.008(2)(e)2., which provides standards when, as in this case, there is no fixed-need pool. Florida Administrative Code Rule 59C-1.008(2)(e)2., provides as follows: 2. If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, sub district or both; Medical treatment trends; and Market conditions. Population Demographics and Dynamics The applicants presented an analysis of the population demographics and dynamics in support of their applications in District 5. The evidence demonstrated that the population of District 5 was 1,335,021 in 2004. It is anticipated that it will grow to 1,406,990 by 2009. The projected growth rate is 5.4 percent. The elderly population in the district, which is defined as persons over the age of 65, is expected to grow from 314,623 in 2004, to 340,676, in 2009, which represents an 8.3 percent increase. BayCare BayCare's service area is defined generally by the geographic locations of Morton Plant Hospital, Morton Plant North Bay Hospital, St. Anthony's Hospital, Mease Hospital Dunedin, and Mease Hospital Countryside. These hospitals are geographically distributed throughout Pinellas County and southwest Pasco County and are expected to provide a base for referrals to BayCare. There is only one extant LTCH in Pinellas County, Kindred, and it is located in the very southernmost part of this densely populated county. Persons who become patients in an LTCH are almost always moved to the LTCH by ambulance, so their movement over a long distance through heavy traffic generates little or no problem for the patient. Accordingly, if patient transportation were the only consideration, movement from the north end of the county to Kindred in the far south, would present no problem. However, family involvement is a substantial factor in an interdisciplinary approach to addressing the needs of LTCH patients. The requirement of frequent movement of family members from northern Pinellas to Kindred through congested traffic will often result in the denial of LTCH services to patients residing in northern Pinellas County or, in the alternative, deny family involvement in the interdisciplinary treatment of LTCH patients. Approximately 70 letters requesting the establishment of an LTCH in northern Pinellas County were provided in BayCare's application. These letters were written by medical personnel, case managers and social workers, business persons, and government officials. The thread common to these letters was, with regard to LTCH services, that the population in northern Pinellas County is underserved. UCH Pasco County has experienced a rapid population growth. It is anticipated that the population will swell to 426,273, in 2009, which represents a 10.1 percent increase over the population in 2004. The elderly population accounts for 28 percent of the population. This is about 50 percent higher than Florida as a whole. Rapid population growth in Pasco County, and expected future growth, has resulted in numerous new housing developments including Developments of Regional Impact (DRI). Among the approved DRI's is the planned community of Connerton, which has been designated a "new town" in Pasco County's Comprehensive Plan. Connerton is a planned community of 8,600 residential units. The plan includes space for a hospital and UCH has negotiated for the purchase of a parcel for that purpose within Connerton. The rate of growth, and the elderly population percentages, will support the proposed UCH LTCH and this is so even if BayCare establishes an LTCH in northern Pinellas County. Availability, utilization, and quality of like services in the district, sub-district, or both The Agency has not established sub-districts for LTCHs. As previously noted, Kindred is the only LTCH extant in District 5. It is a for-profit facility. Kindred was well utilized when it had its pediatric unit and added 22 additional beds. Subsequently, in October 2002, some changes in Medicare reimbursement rules resulted in a reduction of the reimbursement rate. This affected Kindred's income because over 70 percent of its patients are Medicare recipients. Kindred now uses admission criteria that have resulted in a decline in patient admissions. From 1998, the year after Kindred was established, until 2002, annual utilization was in excess of 90 percent. Thereafter, utilization has declined, the 22-bed addition has been shut down, and Kindred projects an occupancy of 55 percent in 2005. Kindred must make a profit. Therefore, it denies access to a significant number of patients in District 5. It denies the admission of patients who have too few "Medicare- reimbursable days" or "Medicaid-reimbursable days" remaining. The record indicates that Kindred only incurs charity care or Medicaid patient days when a patient admitted to Kindred with seemingly adequate funding unexpectedly exhausts his or her funding prior to discharge. Because of the constraints of PPS, Kindred has established admission criteria that excludes certain patients with conditions whose prognosis is so uncertain that it cannot adequately predict how long they will require treatment. Kindred's availability to potential patients is thus constrained. HealthSouth, a licensed CMR, is not a substitute for an LTCH. Although it is clear that there is some overlap between a CMR and an LTCH, HealthSouth, for instance, does not provide inpatient dialysis, will not accept ventilator patients, and does not treat complex wound patients. The nurse staffing level at HealthSouth is inadequate to provide for the type of patient that is eligible for treatment in an LTCH. The fact that LTCHs are reimbursed by Medicare at approximately twice the rate that a CMR is reimbursed, demonstrates the higher acuity level of LTCH services when compared to a CMR. HealthSouth is a facility which consistently operates at high occupancy levels and even if it were capable of providing the services typical of an LTCH, it would not have sufficient capacity to provide for the need. A CMR is a facility to which persons who make progress in an LTCH might repair so that they can return to the activities of daily living. SNFs are not substitutes for LTCHs although there could be some limited overlap. SNFs are generally not appropriate for patients otherwise eligible for the type of care provided by an LTCH. They do not provide the range of services typically provided by an LTCH and do not maintain the registered nurse staffing levels required for delivering the types of services needed for patients appropriate for an LTCH. LTCHs are a stage in the continuum of care. Short- term acute care hospitals take in very sick or injured patients and treat them. Thereafter, the survivors are discharged to home, or to a CMR, or to a SNF, or, if the patients are still acutely ill but stable, and if an LTCH is available, to an LTCH. As noted above, currently in northern Pinellas County and in Pasco County, there is no reasonable access to an LTCH. An intensive care unit (ICU) is, ideally, a treatment phase that is short. If treatment has been provided in an ICU and the patient remains acutely ill but stable, and is required to remain in the ICU because there is no alternative, greater than necessary costs are incurred. Staff in an ICU are not trained or disposed to provide the extensive therapy and nursing required by patients suitable for an LTCH and are not trained to provide support and training to members of the patient's family in preparation for the patient's return home. The majority of patients suitable for an LTCH have some potential for recovery. This potential is not realized in an ICU, which is often counterproductive for patients who are stabilized but who require specialized long-term acute care. Patients who remain in an ICU beyond five to seven days have an increased morbidity/mortality rate. Maintaining patients suitable for an LTCH in an ICU also results in over-utilization of ICU services and can cause congestion when ICU beds are fully occupied. UCH in Pasco County, and to a lesser extent BayCare in northern Pinellas County, will bring to the northern part of District 5 services which heretofore have not been available in the district, or, at least, have not been readily available. Persons in Pasco County and northern Pinellas County, who would benefit from a stay in an LTCH, have often had to settle for some less appropriate care situation. Medical Treatment Trends LTCHs are relatively new cogs in the continuum of care and the evidence indicates that they will play an important role in that continuum in the future. The evidence of record demonstrates that the current trend in medical treatment is to find appropriate post acute placements in an LTCH setting for those patients in need of long-term acute care beyond the stay normally experienced in a short-term acute care hospital. Market conditions The federal government's development of the distinctive PPS for LTCHs has created a market condition which is favorable for the development of LTCH facilities. Although the Agency has not formally adopted by rule a need methodology specifically for LTCHs, by final order it has recently relied upon the "geometric mean length of stay + 7" (GMLOS +7) need methodology. The GMLOS +7 is a statistical calculation used by CMS in administering the PPS reimbursement system in determining an appropriate reimbursement for a particular "diagnostic related group" (DRG). Other need methodologies have been found to be unsatisfactory because they do not accurately reflect the need for LTCH services in areas where LTCH services are not available, or where the market for LTCH services is not competitive. GMLOS +7 is the best analysis the Agency has at this point. Because the population for whom an LTCH might be appropriate is unique, and because it overlaps with other populations, finding an algebraic need expression is difficult. An acuity measure would be the best marker of patient appropriateness, but insufficient data are available to calculate that. BayCare's proposal will provide beneficial competition for LTCH services in District 5 for the first time and will promote geographic, financial, and programmatic access to LTCH services. BayCare, in conducting its need calculations used a data pool from Morton Plant Hospital, Mease Dunedin Hospital, Mease Countryside Hospital, Morton Plant North Bay Hospital, and St. Anthony's Hospital for the 12 months ending September 2003. The hospitals included in the establishment of the pool are hospitals that would be important referral sources for BayCare. BayCare then identified 160 specific DRGs historically served by existing Florida LTCHs, or which could have been served by Florida LTCHs, and lengths of stay greater than the GMLOS for acute care patients, and compared them to the data pool. This resulted in a pool of 871 potential patients. The calculation did not factor in the certain growth in the population of the geographic area, and therefore the growth of potential LTCH patients. BayCare then applied assumptions based on the proximity of the referring hospitals to the proposed LTCH to project how many of the patients eligible for LTCH services would actually be referred and admitted to the proposed LTCH. That exercise resulted in a projected potential volume of 20,265 LTCH patient days originating just from the three District 5 BayCare hospitals and the two Mease hospitals. BayCare assumes, and the assumption is found to be reasonable, that 25 percent of their LTCH volume will originate from facilities other than BayCare or Mease hospitals. Adding this factor resulted in a total of 27,020 patient days for a total net need of 82 beds at 90 percent occupancy. BayCare's GMLOS +7 bed need methodology reasonably projects a bed need of 82 beds based on BayCare's analysis of the demand arising from the three District 5 BayCare hospitals and the two Mease hospitals. UCH provided both a GMLOS +7 and a use rate analysis. The use rate analysis is suspect in a noncompetitive environment and, obviously, in an environment where LTCHs do not exist. UCH's GMLOS +7 analyses resulted in the identification of a need for 159 additional LTCH beds in District 5. This was broken down into a need of 60 beds in Pasco County and 99 additional beds in Pinellas County. There is no not-for-profit LTCH provider in District The addition of BayCare and UCH LTCHs to the district will meet a need in the case of Medicaid, indigent, and underinsured patients. Both BayCare and UCH have agreed in their applications to address the needs of patients who depend on Medicaid, or who are indigent, or who have private insurance that is inadequate to cover the cost of their treatment. The statistical analyses provided by both applicants support the proposed projects of both applicants. Testimony from doctors who treat patients of the type who might benefit from an LTCH testified that those types of facilities would be utilized. Numerous letters from physicians, nurses, and case managers support the need for these facilities. Adverse impacts HealthSouth and Kindred failed to persuade that BayCare's proposal will adversely impact them. HealthSouth provides little of the type of care normally provided at an LTCH. Moreover, HealthSouth is currently operating near capacity. Kindred is geographically remote from BayCare's proposed facility, and, more importantly, remote in terms of travel time, which is a major consideration for the families of patients. Kindred did not demonstrate that it was currently receiving a large number of patients from the geographic vicinity of the proposed BayCare facility, although it did receive some patients from BayCare Systems facilities and would likely lose some admissions if BayCare's application is approved. The evidence did not establish that Kindred would suffer a material adverse impact should BayCare establish an LTCH in Mease Dunedin Hospital. HealthSouth and Kindred conceded that UCH's program would not adversely impact them. The Agency's Position The Agency denied the applications of BayCare and UCH in the SAARs. At the time of the hearing the Agency continued to maintain that granting the proposals was inappropriate. The Agency's basic concern with these proposals, and in fact, the establishments of LTCHs throughout the state, according to the Agency's representative Jeffrey N. Gregg, is the oversupply of beds. The Agency believes it will be a long time before it can see any measure of clinical efficiency and whether the LTCH route is the appropriate way to go. The Agency has approved a number of LTCHs in recent years and is studying them in order to get a better understanding of what the future might hold. The Agency noted that the establishment of an LTCH by ongoing providers, BayCare Systems and UCH, where there are extant built-in referring facilities, were more likely to be successful than an out-of-state provider having no prior relationships with short-term acute care hospitals in the geographic vicinity of the LTCH. The Agency noted that both a referring hospital and an LTCH could benefit financially by decompressing its intensive care unit, and thus maximizing their efficiency. The Agency did not explain how, if these LTCHs are established, a subsequent failure would negatively affect the delivery of health services in District 5. The Agency, when it issued its SAAR, did not have the additional information which became available during the hearing process.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that UCH Certificate of Need Application No. 9754 and BayCare Certificate of Need Application No. 9753 satisfy the applicable criteria and both applications should be approved. DONE AND ENTERED this 29th day of November, 2005, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 29th day of November, 2005. COPIES FURNISHED: Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 J. Robert Griffin, Esquire J. Robert Griffin, P.A. 1342 Timberlane Road, Suite 102-A Tallahassee, Florida 32312-1762 Patricia A. Renovitch, Esquire Oertel, Hoffman, Fernandez, Cole, & Bryant P.A. Post Office Box 1110 Tallahassee, Florida 32302-1110 Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Timothy Elliott, Esquire Agency for Health Care Administration 2727 Mahan Drive Building Three, Mail Station 3 Tallahassee, Florida 32308 Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308 Christa Calamas, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Richard Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether the Certificate of Need (CON) Application No. 9610, filed by St. Joseph's Hospital to establish a new 76-bed acute care satellite hospital in Hillsborough County, through the transfer of 76 acute care beds from the existing St. Joseph's Hospital, should be approved.
Findings Of Fact Agency for Health Care Administration AHCA is the single state agency responsible for administration of the CON program in Florida, pursuant to Section 408.034, Florida Statutes (2003). AHCA reviewed SJH's application to build a new, 76-bed, satellite hospital and preliminarily approved it. St. Joseph's Hospital, Inc. SJH is a Florida not-for-profit corporation, licensed to operate three existing hospitals on a single urban campus in District 6 including St. Joseph's Hospital, St. Joseph's Women's Hospital, and Tampa Children's Hospital. Although SJH has unused bed capacity, it is licensed to operate 883 beds distributed among its three hospitals and is one of Florida's largest acute care, safety-net providers. SJH has approximately 1,200 physicians on its active or senior active medical staff. The main adult SJH facility offers a full range of adult medical and surgical specialties and subspecialties, including adult open heart surgery, comprehensive oncology treatment and therapy, interventional radiology, inpatient psychiatric services, comprehensive neurological and orthopedic services, pulmonary rehabilitation, and hyper-baric services, including wound care. It is accredited by the Joint Commission of Health Care Organizations (JCAHO). St. Joseph's Women's Hospital is the only free-standing women's hospital in Florida, and is comprised of 234 acute care beds. It offers a comprehensive array of women's acute care medical and surgical services, including obstetrics, and Level II and Level III Neonatal Intensive Care Unit (NICU) services. St. Joseph's Women's Hospital provides the highest number of births among all District 6 obstetrics providers, with over 6,000 births in 2001. Tampa Children's Hospital is comprised of 111 medical/surgical pediatric rooms, and offers comprehensive pediatric and pediatric specialty services, including pediatric intensive care and pediatric open heart surgery. Tampa Children's Hospital's medical staff includes over 80 pediatric specialists practicing in 20 specialties and sub-specialties. SJH is a member of BayCare Health System which operates seven independent, affiliated hospitals in the Tampa Bay area. BayCare Health System coordinates quality standards among its member hospitals, promotes community access to health care, and facilitates joint operating efficiencies through combined purchasing, economies of scale, and consolidation of duplicative, non-patient-care services, such as administration, human resources, information management, and financial services. SJH is affiliated with and jointly manages South Florida Baptist Hospital (SFBH), a 147-bed primary acute care hospital in Plant City, Florida, in eastern Hillsborough County. SFBH provides Level I obstetrics services. SJH and SFBH operate under a single chief medical officer and board of directors, and utilizes similar policies and procedures. SFBH is accredited by JCAHO with high standing, and is certified by the Medicare and Medicaid programs. University Community Hospital, Inc. University Community Hospital, Inc., is another hospital provider in District 6. It is a not-for-profit entity licensed to operate UCH Fletcher and UCH Carrollwood. UCH Fletcher is a 431-bed Class I general hospital that provides a full range of acute care hospital services, including open heart surgery, obstetrics, and Level II and Level III NICU services. It is located in the southeastern portion of the SJH satellite proposed service area and has unused bed capacity. UCH Carrollwood is a 120-bed primary acute care hospital located in North Tampa. It provides ICU and medical/surgical services, but not obstetrics. It too has unused bed capacity. Tampa General Hospital TGH is an 846-bed Class I general hospital located in South Tampa on Davis Island. It is a not-for-profit hospital that provides a comprehensive range of services, including general acute care, organ transplant, open heart surgery, and NICU care. It is a designated teaching hospital and a Level I trauma and burn treatment center. TGH is an important safety- net hospital and a large provider of Medicaid and indigent care. SJH Proposal SJH proposes to establish a 76-bed, acute care satellite hospital in North Hillsborough County on a site acquired twenty years ago. It seeks to transfer 76 acute care beds from the SJH Main urban campus to the new suburban hospital site. The proposed location is in an area of rapid population growth where SJH annually draws 8,000 admissions. The SJH satellite will be integrated with and function as a satellite of SJH Main. It will incorporate state-of-the art technology, including the Path Speed Picture Archive & Communications System (PACS) that is currently in use at SJH enabling physicians at the satellite facility to simultaneously review digital diagnostic images and medical records with physicians at SJH Main. The SJH satellite will be a primary acute care facility with obstetrics, and will not duplicate the tertiary or other specialized services provided at SJH Main. Since acquiring the site for the proposed satellite, SJH has established several outpatient, primary care, and home health services in the satellite proposed service area. HealthPoint Medical Group, a physician group affiliated with and managed by SJH, and comprised of approximately 56 physicians, currently has three offices in the proposed service area and plans to expand. SJH also operates two outpatient imaging centers in the area. The SJH proposal seeks to enhance access to acute care and emergency medical services for SJH's existing patients residing in the proposed service area and serve future population growth in the rapidly developing northwest Hillsborough County area. It seeks to alleviate some of the volume in the SJH Main ER, allow for conversion of semi-private rooms to private rooms, and mitigate parking congestion. Relevant Statutory Criteria Section 408.035(1), Florida Statutes (2003). The need for SJH proposed satellite hospital project in relation to the applicable district health plan. The review of SJH's proposal does not involve the traditional calculation and determination of need for the 76 beds proposed at the satellite since the applicant intends to transfer existing beds within the sub-district. The Agency's fixed need pool determination does not apply to SJH's proposal, nor is SJH required to demonstrate "not-normal" circumstances for approval. However, need is reviewed in relation to the local district health plan. The District 6 Local Health Plan (LHP) identifies six factors applicable to proposed bed transfers. First, the plan considers whether a transfer will help indigent patients. Although the transfer may slightly enhance access to the poor, there is minimal access problems for indigent patients. Second, the plan considers whether a bed transfer is needed so an existing hospital can meet licensure standards. SJH is not seeking to meet any new licensure standards. The third factor is whether a bed transfer includes a proposed reduction in excess bed capacity. SJH is reducing excess bed capacity in the downtown area of Tampa and transferring beds to a growing area with increasing demand. The fourth factor considered in the LHP is whether a bed transfer adversely impacts a disproportionate provider of Medicaid/indigent care by taking away paying patients. While the transfer may reduce, to some degree, paying patient volume at TGH, the transfer will increase the volume at SJH, another safety net provider. The fifth factor is whether the proposed bed transfer will improve the existing hospital's physical plant. SJH Main, and its patients will benefit from the ultimate renovation, increased space and single patient rooms. Finally, the plan considers whether the bed transfer is more cost-efficient than improving the existing hospital. The options are incomparable. SJH is seeking to construct a satellite hospital and expand its market area, not merely transfer beds to an existing facility. It is unknown and virtually incalculable whether the proposed satellite facility will be more cost-efficient than an improvement to the existing hospital. Section 408.035(2), Florida Statutes. The availability, quality of care, accessibility and extent of utilization of existing facilities and health services in the service district. Undoubtedly, health services exist and are available in the service district. In fact, nearly all of the residents of SJH's proposed service area live within 45 minutes of an existing hospital. However, Northwest Hillsborough County is experiencing rapid growth. Many of its major roads and arteries are already congested and overcapacity. The expected growth in the proposed service area will inevitably aggravate the problem. More importantly, despite the fact that virtually all of the residents in the proposed service area live within 45 minutes of an existing hospital, the population growth is affecting health care delivery. Hospital departments, including many of the emergency rooms, are experiencing similar congestion and acute care patients often wait several hours for treatment upon arrival. UCH is experiencing capacity constraints. The demand for general acute care and emergency room services in the area is high and reasonably expected to increase throughout the foreseeable future. UCH Fletcher has experienced significant growth in utilization since 1999, and UCH Carrollwood has experienced consistent gains over the same time period. During the first four months of 2003, UCH Fletcher operated near 75 percent capacity overall, and 85 percent capacity in its general medical/surgical beds. Moreover, the hospital ER was at or near capacity. UCH Fletcher's ER, which is comprised of 39 beds, experienced 65,000 patient visits in 2002 and exceeded 70,000 visits in 2003. During peak periods, Fletcher ER patients have often been required to wait in the ER six to eight hours for an inpatient bed. UCH's birth volume has also increased with the rapid population growth in the service area and is less affected by seasonal residents. In fact, UCH recently built a new women's center and expanded its obstetrics capacity to accommodate between 3,000 and 3,500 births annually and projects it will achieve 3,100 births by the end of 2004, and operate at 90 percent of capacity. SJH also experiences capacity issues. SJH Main is completely comprised of semi-private rooms. It's composition makes it less attractive and competitive in the market and less able to maximize its utilization of existing acute care beds. However, SJH Main experiences a huge demand for emergency services at its urban campus. The emergency department is one of the busiest in Florida and increasing each year. In 2002, SJH treated 104,000 ER patients, approximately 300 each day, and nearly 18,000 of those treated originated from the satellite hospital's proposed service area. SJH's emergency department is a large, urban ER with 58 beds. It is organized into separate patient treatment areas, including a 23-bed adult treatment area, an eight-bed pediatric treatment area with a separate ER entrance, a four-bed adult psychiatric emergency treatment area, a 13-bed First Care unit, and a ten-bed Clinical Decision Unit. While SJH historically has provided excellent quality of care in its ER, its increasing volumes often result in patients receiving or waiting for treatment in corridors while more critical patients occupy the ER treatment rooms. In peak season, hallways are temporarily used for patient care. SJH has actively sought to improve the delivery of emergency care. It invested substantial capital towards improvements and expansion of its existing ER. It established a unique service known as "First Care," that provides quick emergency care to less critical ER patients, such as patients with sore throats, sprains, and simple lacerations. It created a ten-bed Clinical Decision Unit to supplement the existing ER by converting hospital space adjacent to the ER into a permanent nursing unit. In addition, it increased ER staffing and physician coverage, and implemented protocols to improve the ER receiving and treatment processes. Despite its efforts, the SJH ER continues to experience difficulties with extremely high patient volume. In addition to the capacity constraints at UCH and in SJH's ER, ER bypass in Hillsborough County presents additional problems for emergency personnel, providers, and patients. Hospital bypass or diversion occurs when a hospital requests that emergency medical transport teams bypass the hospital's ER because the hospital lacks capacity to treat additional patients or categories of emergency patients. In response to the increasing problems associated with hospital ER bypass, the Hillsborough County Trauma Agency established a committee to analyze the situation, establish protocols, and recommend solutions. In addition, Hillsborough County implemented an Internet-based system whereby hospitals electronically place themselves on and off bypass without a dispatcher. Hospital ER bypass adversely impacts the availability and accessibility of acute care services, particularly emergency services in Northwest Hillsborough County. The credible evidence demonstrates that hospitals in Hillsborough County go on bypass as often as every day during peak season, and frequently several hospitals are concurrently on bypass. Of the hospitals in Northwest Hillsborough County, UCH Fletcher and UCH Carrollwood together had the highest incidence of hospital bypass in the first six months of 2003. In an effort to minimize the problems associated with transport, Hillsborough County Fire Rescue (HCFR) tracks all of its calls. It provides all Advanced Life Support emergency transport services in the county and responds to approximately 55,000 emergency calls annually, or about 4,300 calls each month. Approximately half, or 27,000 calls annually, originate in HCFR's Northwest Hillsborough County area and nearly 10,000 of those calls result in transport of a patient to an acute care facility. HCFR currently has 12 stations in Northwest Hillsborough County and is scheduled to open four additional stations in the northwest area in the near future. Hospital ER bypass is an obstacle for HCFR that causes delays in transport, emergency care, and return to service. The applicant's proposed satellite facility will improve access to patients in need of emergency services in Northwest Hillsborough County and alleviate some of the capacity problems at UCH and SJH, as well as problems caused by frequent or extended periods of hospital ER bypass. Section 408.035(3), Florida Statutes. The ability of SJH to provide quality of care and its record of quality of care. Pursuant to the parties' stipulation, SJH's record of providing quality of care at its existing hospital is applicable, but not in dispute. SJH's ability to provide quality of care at the proposed new satellite hospital is in dispute. In general, SJH has consistently provided excellent quality of care in the provision of a sophisticated range of services. It is accredited by JCAHO and certified by the Medicare and Medicaid programs. It has received consistent recognition for its provision of high quality of care and has been awarded the Consumer Choice Award in health care in Tampa for eight consecutive years. SJH's proposed satellite hospital will be able to provide excellent quality of care and serve the vast majority of patients seeking acute care and emergency services. SJH's proposed satellite hospital will enhance access and quality of care for residents of the Northwest Hillsborough County area. Although it will not provide tertiary services, emergency patients will receive immediate, high-quality care at the facility. In addition, the smaller subset of emergency patients requiring immediate tertiary-level services will continue to have access to the tertiary hospital providers. In fact, HCFR has developed sophisticated transport protocols designed to ensure that all patients are safely delivered to the appropriate facility as efficiently as possible, and HCFR paramedics are highly skilled and trained to assess the condition of each patient. In addition, the evidence indicates that SJH will provide high-quality Level I obstetrics services at its satellite facility. While the opponents assert that the proposed program will not match the quality or scope of obstetric services provided at SJH and UCH, the evidence indicates that the SJH obstetrical program will not be sub-par or beneath the standard of care in the area. While an on-site NICU program is clearly preferable, the need for quality Level I obstetric providers is not obviated. SJH will provide quality obstetrical care. Moreover, SJH's existing quality management policies, protocols, and processes will be instituted at the satellite hospital. It will be operated under the same quality management personnel team currently responsible for quality at SJH Main. Section 408.035(4), Florida Statutes. The need in the service district for special health care services reasonably and economically accessible in adjoining areas. AHCA and SJH demonstrated that that the proposed satellite does not intend to offer nor impact special health care services that may be reasonably and economically accessible in adjoining areas. The criterion is not applicable. Section 408.035(5), Florida Statutes. The needs of research and educational facilities, including, but not limited to, facilities with institutional training programs and community training programs of health care practitioners and for doctors of osteopathic medicine and medicine at the student, internship, and residency training levels. This criterion is not applicable. Section 408.035(6), Florida Statutes. The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures for project accomplishment and operation. The evidence demonstrates that SJH has the necessary resources and experience to provide quality health and management personnel to the satellite hospital. While there is some shortage of available nurses in Florida, including the Tampa area, the vacancy rate at SJH, including RNs and staff positions, is consistently below the state average. SJH has a well-developed nurse recruitment and retention program and has achieved steady increases in the retention rate of its RNs. Management has developed a flexible pool of employed nurses enabling it to maintain appropriate and cost-effective staffing based on patient day levels. In addition, SJH has successfully recruited and retained an enormous number of recent nurse graduates as well as experienced nurses without resorting to the use of agency or contract nurses. It is also working closely with several local colleges to increase nursing enrollment. SJH will develop, recruit, and retain necessary staff to implement its proposal. While SJH competes with other hospitals for nursing personnel, the proposed satellite will have little impact on competing hospitals. UCH and TGH have consistently been able to obtain sufficient nursing staff to provide high-quality care at their facilities. UCH and TGH have impressive R.N. retention rates and are well below the state and national averages. Finally, SJH has sufficient funds for capital and operating expenditures to complete and operate the proposed satellite hospital. SJH will provide half of the $75 million project cost and finance the balance through the BayCare system. Section 408.035(7), Florida Statutes. The extent to which the proposed services will enhance access to health care for residents of the service district. In many ways, the SJH satellite hospital will enhance access to acute care and emergency services for the vast majority of patients residing in its proposed service area. First, commuting time will significantly decrease. Annually, the satellite's proposed service area supplies SJH Main with over 8,000 admissions from residents who endure significant traffic congestion and lengthy delays. Commuting time from the residential neighborhoods in the proposed service area to SJH Main has nearly doubled over the past ten years and is currently 45 minutes to an hour. The reliable travel time evidence demonstrates that the SJH satellite will significantly reduce travel times to acute care services for residents in Northwest Hillsborough County, including those in the Cheval, Northdale, Ehrlich Road, Lutz, and Lake Magdelane residential areas. Second, SJH's satellite hospital will significantly enhance patient access to emergency care and relieve pressure on the UCH Fletcher and SJH Main ERs. The SJH Main ER annually treats nearly 18,000 patients who originate from the satellite's proposed service area. It is reasonable to expect many of those patients to be redirected to the SJH satellite. Third, the SJH satellite proposal will provide another point of delivery access to HCFR and facilitate faster service to ER patients and improve "back-in-service" times for HCFR. Fourth, the availability of another ER in Northwest Hillsborough County will minimize the adverse effects of hospital bypass, and likely reduce the frequency of bypass by diverting volume from existing ERs. Fifth, the relocation of 76 acute care beds from SJH Main to the satellite will enable SJH to convert many of its underutilized, semi-private rooms into more usable, attractive, private rooms. Finally, redirection of volume from the urban SJH Main campus to a satellite campus in a high-growth, suburban area will reduce traffic congestion, minimize parking problems, save time, and save lives. Section 408.035(8), Florida Statutes. The immediate and long-term financial feasibility of the proposal. With respect to the project's short-term financial feasibility, SJH demonstrated that it can immediately finance the construction and implementation of the proposed satellite hospital project and meet its existing capital obligations. The satellite proposal is immediately financially feasible. With respect to the satellite's long-term financial feasibility, while the opponents argue that SJH's projected volumes, revenues, and expenses are inaccurate and unreasonable, SJH, on balance, sufficiently proved that the proposed satellite is financially feasible. Specifically, SJH's utilization projections are reasonable. As its basis for the projections, SJH relied on the expected population growth in the proposed service area and its historic levels of similar service in that area. Without doubt, the satellite's proposed service area, located in the northwest sector of Hillsborough County, is a region of rapid population growth and development. The population in the proposed service area has increased by 35 percent over the past ten years and is projected to grow much faster over the next three years. The area is being invaded by young adults, and the demand for obstetric services is dramatically increasing. SJH's historic levels of similar service in the area are persuasive. According to the un-refuted evidence, nearly 8,000 patient admissions, or 20 percent of SJH's existing inpatient volume, originated from the SJH satellite proposed service area, and 18,000 ER patient visits, or 17 percent of the entire SJH Main ER volume, derived from the proposed service area in 2002. In addition, SJH's strong presence in the proposed service area has enabled it to capture 32 percent of the patient days originating in the proposed service area. Given the existing patient days and expected population growth in the area, after culling out the tertiary and dissimilar services that the satellite will not provide, it is reasonable to expect that there will be over 121,000 available patient days in the proposed service area in 2007. The evidence also demonstrates that it is reasonable to expect the new satellite hospital to capture 40 percent of the patient days otherwise served at SJH Main. Moreover, given its market position, it is not unreasonable to expect the satellite to capture 15 percent of the available pool of non- tertiary patient days in the proposed service area by the second year of operation. In addition, SJH can expect 7.5 percent of the satellite patient days to originate from outside the service area thereby providing it with a reasonable projected utilization of nearly 20,000 patient days. Although the opponents argue otherwise, the evidence demonstrates that SJH's projected revenues are also reasonable. Again, SJH based the satellite's projected revenues, with some minor errors, on historic revenues for non-tertiary, non- specialty patients at SJH Main and conservatively assumed that it will achieve 90 percent of the 19,688 patient day utilization projections, or 17,800 patient days. After multiplying the financial-class-specific patient revenue per patient day by the financial-class-specific incremental patient days at the satellite facility, and applying a three percent annual inflation factor, the satellite reasonably expects approximately $1,604 in net revenue per adjusted patient day. The figure is consistent with the projected net revenue per adjusted patient day of $1,832 at SJH Main, $1,672 at UCH Fletcher, $1,432 at UCH Carrollwood and $1,408 at SFBH. SJH's projected expenses for its satellite hospital are also reasonable. SJH modeled its projections on similar historical expenses and determined that it will incur fewer maintenance expenses at the new hospital facility. Its pro forma allowances for plant operations and non-labor expenses per adjusted patient day are reasonable and consistent with the actual experience of UCH, UCH Carrollwood, Helen Ellis, Suncoast, SFBH, and Tampa General hospitals. SJH's staffing projection for new FTEs is also reasonable. The redirection of patient volume from SJH Main to the satellite will enable SJH to transfer some of its experienced FTEs to the satellite. New FTEs will be hired at the 2001 area market average salary rate for new registered nurses annually inflated by three percent. With respect to the reasonableness and appropriateness of SJH's pro forma, the opponents also argue that SJH fatally failed to include financial projections for the satellite on a stand-alone basis and, thereby, made it impossible to determine its long-term financial feasibility. The opponents assertions, while interesting, are not persuasive. AHCA's CON application forms require applicants to demonstrate the financial impact of the proposed project on the CON applicant. Within Schedules 7a and 8a of its application, SJH reasonably demonstrated the satellite's effect on SJH. Specifically, the first presented set of Schedules 7a and 8a entitled "Main" demonstrates SJH without the satellite hospital and provides a clear current baseline financial position for SJH. The second presented set of Schedules 7a and 8a, entitled "Satellite Hospital," demonstrates the projected financial benefit to SJH and the incremental increase in patient days when the satellite hospital is operational. SJH appropriately demonstrated the incremental financial benefit of the proposed project to the applicant, SJH. Furthermore, SJH's pro forma illustrate that even with an immediate loss in revenues to SJH arising from the transfer of patient days from SJH Main to the satellite, the project will generate revenues in excess of expenses in the long term. Logically, and obviously understood in the application pro forma, had SJH included a third pro forma showing the positive financial gain to the satellite relating to the additional revenues from the cannibalized patient days, the overall project would have shown even greater profitability. SJH's pro forma include and account for all revenues and expenses associated with implementation and operation of the satellite hospital. Moreover, AHCA supports SJH's method of presentation of the financial pro forma information in its CON application, and argues that it meets the Agency's requirements and is consistent with the method employed by other approved CON applicants. In light of the evidence, SJH's proposed satellite hospital project will achieve long-term financial feasibility. Section 408.035(9), Florida Statutes. The extent to which the project will foster competition that promotes quality and cost effectiveness. SJH's proposed satellite hospital will foster competition that promotes quality and cost effectiveness without significantly adversely affecting existing providers. The evidence demonstrates that the opponents will remain strongly competitive. Specifically, TGH is financially secure and will not be placed at material risk by the satellite hospital. While TGH is a safety-net provider and relies, in-part, on government funding, it achieved a net profit of $10.8 million in 2001, $56.2 million in 2002, and $25.7 million through May 2003, annualized to approximately $40 million. It also increased its admissions 10 percent from 2000 to 2002 and expects further gains. Furthermore, TGH marginally serves the rapidly developing area where the satellite will draw most of its patients. In fact, TGH receives less than one percent of its non-tertiary admissions in six of the nine ZIP codes which comprise SJH's proposed service area. TGH's projected adverse impact by the satellite hospital is overstated and unreliable. It is based on a contribution margin of $5,997 per adjusted admission and is completely inconsistent with SJH's margin for 2001 of $2,664, UCH Fletcher's contribution margin of $2,367, and UCH Carrollwood's contribution margin of $2,622. Similarly, UCH will experience only minor adverse effect from the satellite. UCH is financially strong and has limited capacity to absorb the anticipated growth in demand for acute care services. Although UCH's net profit numbers have fluctuated from 2001 through the second quarter of 2002, UCH is expecting a net profit greater than $5 million in 2003 and a net profit of $7.3 million in 2004. In addition, its inpatient admissions increased seven percent from 2000 to 2002. UCH's loss projections are patently overstated. It erroneously used a 4.2 average length of stay and exaggerated its projected lost admissions by nearly 20 percent. It admitted that the satellite would have its lowest admissions in the service area in the ZIP codes proximate to UCH, yet argued the satellite would draw admissions equally from all zip codes in the proposed service area including those immediately adjacent to UCH. It admitted that its obstetrical program will remain near capacity when the satellite is actually constructed, but argued that the satellite will substantially drain obstetric patients away. Although the satellite will inevitably draw some admissions away from UCH and TGH, the projected growth in patient days in the service area will offset any potential material adverse impact. The satellite will foster healthy competition, promote cost effectiveness, and provide faster quality health care in the area. Section 408.035(10), Florida Statutes. 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. On balance, the proposed costs and methods of construction are reasonable. The construction of the proposed satellite facility is projected to cost $49,560,000, or $652,105 per bed, which includes a 15 percent construction contingency. The satellite is expected to cost $175 per gross square foot and is reasonable, given the existing range in the area. While the total per bed "project cost" is nearly $1 million, as shown in Schedule 9, Line S, the figure is misleading. It includes nearly $20 million in equipment and other expensive, non-construction cost items. SJH also plans to construct a medical office building and imaging center prior to construction of the hospital. Upon completion of the hospital, a portion of the square footage of the imaging center will be integrated with the hospital, at minimal cost, and serve as the inpatient radiology department. SJH has committed to construct the building and has obtained the necessary permits. Although it is not CON reviewable, the construction cost for the facility, approximately $155 per square foot, is reasonable. Finally, the proposed architectural design for the satellite hospital is reasonable and satisfies applicable building codes. It consists of three medical-surgical pods of 16 beds each, one 14-bed intensive care pod, one 14-bed obstetrics pod, and one 16-bed observation pod. While the non- integrated, designed facility is rather large given its bed capacity, approximately 211,000 gross square feet, the satellite will consist of all private rooms and allow for future addition of licensed beds without major expansion or new construction. The design provides easy access and convenient parking. Notwithstanding the reasonableness of the construction costs and design, the opponents argue that there are less costly alternatives. First, the project could be rejected and the community could resort to the status quo. Given the evidence, including emergency data, denial is unreasonable. Second, the applicant could build a freestanding ER and/or an additional non-urgent care facility and minimize some of the existing problems. Given the evidence, including population trends and existing providers, the limited approach is unreasonable. Third, the applicant could be approved to build a scaled down version of its proposal. Although the facility is appropriate and reasonable as proposed in the application, a scaled down facility is clearly a less costly method of construction. However, there is insufficient evidence to determine whether a smaller version is a reasonable alternative. Section 408.035(11), Florida Statutes. The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. SJH has an impressive record of service to Medicaid patients and the medically indigent. It has long been recognized as a "safety net" provider of acute care services. In 2002, nearly 19 percent of SJH's total patient days were rendered to Medicaid-eligible patients. SJH also provides $40 million each year in uncompensated services to the community. It is a voluntary participant in the Hillsborough County Health Plan that provides funding for medically indigent or uninsured patients who do not qualify for Medicaid benefits. Consistent with its commitment to the community, SJH has conditioned approval of its CON on providing at least 15.6 percent of the satellite patient days to Medicaid and charity patients. Section 408.035(12), Florida Statutes. 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. 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 issued to approve the application. DONE AND ENTERED this 20th day of July, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of July, 2004. COPIES FURNISHED: Lori C. Desnick, Esquire Agency for Health Care Administration Fort Knox Building III, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. Post Office Box 10909 Tallahassee, Florida 32302 Elizabeth McArthur, Esquire Radey, Thomas, Yon & Clark, P.A. 313 North Monroe Street, Second Floor Post Office Box 10967 Tallahassee, Florida 32301 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Kenneth W. Gieseking, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308 Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308
The Issue Whether the certificate of need application to convert 30 acute care beds to 30 adult psychiatric beds at Broward General Medical Center meets the statutory and rule criteria for approval.
Findings Of Fact The North Broward Hospital District (NBHD) is a special taxing district established by the Florida Legislature in 1951 to provide health care services to residents of the northern two-thirds of Broward County. NBHD owns and operates four acute care hospitals: Coral Springs Medical Center, North Broward Medical Center, Imperial Point Medical Center (Imperial Point), and Broward General Medical Center (Broward General). NBHD also owns and/or operates primary care clinics, school clinics, urgent care centers, and a home health agency. FMC Hospital, Ltd., d/b/a Florida Medical Center (FMC) is a 459-bed hospital with 74 inpatient psychiatric beds, 51 for adults separated into a 25-bed adult unit and a 26-bed geriatric psychiatric unit, and 23 child/adolescent psychiatric beds. FMC is a public Baker Act receiving facility for children and adolescents and operates a mental health crisis stabilization unit (CSU) for children and adolescents. FMC also operates separately located facilities which include a partial hospitalization program, an adult day treatment program, and a community mental health center. At Florida Medical Center South, FMC operates another day treatment program and partial hospitalization program. The Agency for Health Care Administration (AHCA) is the state agency which administers the certificate of need (CON) program for health care services and facilities in Florida. The NBHD applied for CON Number 8425 to convert 30 acute care beds to 30 adult psychiatric beds at Broward General. Broward General operates approximately 550 of its total 744 licensed beds. It is a state Level II adult and pediatric trauma center and the tertiary referral center for the NBHD, offering Level II and III neonatal intensive care, pediatric intensive care, cardiac catheterization and open heart surgery services. Broward General has 68 adult psychiatric beds and is a public Baker Act receiving facility for adults. Public Baker Act receiving facilities have state contracts and receive state funds to hold involuntarily committed mental patients, regardless of their ability to pay, for psychiatric evaluation and short-term treatment. See Subsections 394.455(25) and (26), Florida Statutes. Although they serve different age groups, both FMC and Broward General are, by virtue of contracts with the state, public Baker Act facilities. When a Baker Act patient who is an indigent child or adolescent arrives at Broward General, the patient is transferred to FMC. FMC also typically transfers indigent Baker Act adults to Broward General. At Broward General, psychiatric patients are screened in a separate section of the emergency room by a staff which has significant experience with indigent mental health patients. If hospitalization is appropriate, depending on the patient's physical and mental condition, inpatient psychiatric services are provided in either a 38-bed unit on the sixth floor or a 30- bed unit on the fourth floor of Broward General. In July 1995, Broward General also started operating a 20-bed mental health CSU located on Northwest 19th Street in Fort Lauderdale. Prior to 1995, the County operated the 19th Street CSU and 60 CSU beds on the grounds of the South Florida State Hospital (SFSH), a state mental hospital. Following an investigation of mental health services in the County, a grand jury recommended closing the 60 CSU beds at SFSH because of "deplorable conditions." In addition, the grand jury recommended that the County transfer CSU operations to the NBHD and the South Broward Hospital District (SBHD). As a result, the SBHD assumed the responsibility for up to 20 CSU inpatients a day within its existing 100 adult psychiatric beds at Memorial Regional Hospital. The NBHD assumed the responsibility for up to 40 CSU inpatients a day, including 20 at the 19th Street location. The additional 20 were to be redirected to either the 68 adult psychiatric beds at Broward General or the 47 adult psychiatric beds at Imperial Point. CSU services for adult Medicaid and indigent patients in the NBHD service area were transferred pursuant to contracts between the NBHD and Broward County, and the NBHD and the State of Florida, Department of Children and Family Services (formerly, the Department of Health and Rehabilitative Services). Based on the agreements, the County leases the 19th Street building in which Broward General operates the CSU. The County also pays a flat rate of $1.6 million a year in monthly installments for the salaries of the staff which was transferred from the County mental health division to the NBHD. The County's contract with the NBHD lasts for five years, from December 1995 to September 2000. Either party may terminate the contract, without cause, upon 30 days notice. The State contract, unlike that of Broward County, does not provide a flat rate, but sets a per diem reimbursement rate of approximately $260 per patient per day offset by projected Medicaid revenues. The State contract is renewable annually, but last expired on June 30, 1997. The contract was being re-negotiated at the time of the hearing in November 1997. Based on actual experience with declining average lengths of stay for psychiatric inpatients, the contract was being re-negotiated to fund an average of 30, not a maximum of 40 patients a day. If CON 8425 is approved, NBHD intends to use the additional 30 adult psychiatric beds at Broward General to meet the requirements of the State and County contracts, while closing the 19th Street CSU and consolidating mental health screening and stabilization services at Broward General. NBHD proposes to condition the CON on the provision of 70 percent charity and 30 percent Medicaid patient days in the 30 new beds. By comparison, the condition applicable to the existing 68 beds requires the provision of 3 percent charity and 25 percent Medicaid. When averaged for a total of 98 beds, the overall condition would be 23.5 percent charity and 26.5 percent Medicaid, or a total of 51 or 52 percent. The proposed project will require the renovation of 10,297 gross square feet on the fourth floor of Broward General at a cost of approximately $450,000. The space is currently an unused section of Broward General which contains 42 medical/surgical beds. Twelve beds will be relocated to other areas of the hospital. The renovated space will include seclusion, group therapy, and social rooms, as well as 15 semi- private rooms. Twelve of the rooms will not have separate bathing/showering facilities, and seven of those will also not have toilets within the patients' rooms. Need in Relation to State and District Health Plans - Subsection 408.035(1)(a), Florida Statutes The District 10 allocation factors include a requirement that a CON applicant demonstrate continuously high levels of utilization. The applicant is given the following evidentiary guidelines: patients are routinely waiting for admissions to inpatient units; the facility provides significant services to indigent and Medicaid individuals; the facility arranges transfer for patients to other appropriate facilities; and the facility provides other medical services, if needed. Broward General does not demonstrate continuously high utilization by having patients routinely waiting for admission. Broward General does meet the other criteria required by allocation factor one. The second District 10 allocation factor, like criterion (b) of the first, favors an applicant who commits to serving State funded and indigent patients. Broward General is a disproportionate share Medicaid provider with a history of providing, and commitment to continue providing, significant services to Medicaid and indigent patients. In fact, the NBHD provides over 50 percent of both indigent and Medicaid services in District 10. See also Subsection 408.035(1)(n), Florida Statutes. Allocation factor three for substance abuse facilities is inapplicable to Broward General which does not have substance abuse inpatient services. Allocation factor 4 for an applicant with a full continuum of acute medical services is met by Broward General. See also Rule 59C-1.040(3)(h), Florida Administrative Code. Broward General complies with allocation factor 5 by participating in data collection activities of the regional health planning council. The state health plan includes preferences for (1) converting excess acute care beds; (2) serving the most seriously mentally ill patients; (3) serving indigent and Baker Act patients; (4) proposing to establish a continuum of mental health care; (5) serving Medicaid-eligible patients; and (6) providing a disproportionate share of Medicaid and charity care. Broward General meets the six state health plan preferences. See also Rule 59C-1.040(4)(e)2., Florida Administrative Code, and Subsection 408.035(1)(n), Florida Statutes. Broward General does not meet the preference for acute care hospitals if fewer than .15 psychiatric beds per 1000 people in the District are located in acute care hospitals. The current ratio in the District is .19 beds per 1,000 people. Rule 59C-1.040(4)(3)3, Florida Administrative Code, also requires that 40 percent of the psychiatric beds needed in a district should be allocated to general hospitals. Currently, approximately 51 percent, 266 of 517 licensed District 10 adult inpatient psychiatric beds are located in general acute care hospitals. On balance, the NBHD and Broward General meet the factors and preferences of the health plans which support the approval of the CON application. See also Rule 59C- 1.040(4)(e)1. and Rule 59C-1.030, Florida Administrative Code. Numeric Need The parties stipulated that the published fixed need pool indicated no numeric need for additional adult inpatient psychiatric hospital beds. In fact, the numeric need calculation shows a need for 434 beds in District 10, which has 517 beds, or 83 more than the projected numeric need. In 1994- 1995, the District utilization rate was approximately 58 percent. The NBHD asserts that the need arises from "not normal" circumstances, specifically certain benefits from closing the 19th Street CSU, especially the provision of better consolidated care in hospital-based psychiatric beds, and the establishment of a County mental health court. The NBHD acknowledges that AHCA does not regulate CSU beds through the CON program and that CSU beds are not intended to be included in the calculation of numeric need for adult psychiatric beds. However, due to the substantial similarity of services provided, NBHD contends that CSU beds are de facto inpatient psychiatric beds which affect the need for CON- regulated psychiatric beds. Therefore, according to the NBHD, the elimination of beds at SFSH and at the 19th Street CSU require an increase in the supply of adult psychiatric beds. The NBHD also notes that approval of its CON application will increase the total number of adult psychiatric hospital beds in Broward County, but will not affect the total number of adult mental health beds when CSU and adult psychiatric beds are combined. After the CSU beds at SFSH closed, the total number of adult mental health beds in the County has, in fact, been reduced. NBHD projected a need to add 30 adult psychiatric beds at Broward General by combining the 1995 average daily census (ADC) of 48 patients with its assumption that it can add up to 10, increasing the ADC to 58 patients a day in the existing 68 beds. Based on its contractual obligation to care for up to 40 CSU inpatients a day, the NBHD projects a need for an additional 30 beds. The projection assumed that the level of utilization of adult inpatient psychiatric services at Broward General would remain relatively constant. With 40 occupied beds added to the 48 ADC, NBHD predicted an ADC of 88 in the new total of 98 beds, or 90 percent occupancy. The assumption that the ADC would remain fairly constant is generally supported by the actual experience with ADCs of 48.1, 51.5, and 45.8 patients, respectively, in 1995, 1996, and the first seven months of 1997. NBHD's second assumption, that an ADC of 40 CSU patients will be added is not supported by the actual experience. Based on the terms of the State and County contracts, up to 20 CSU patients have already been absorbed into the existing beds at the Imperial Point or Broward General, which is one explanation for the temporary increase in ADC in 1996, while up to 20 more may receive services at the 19th Street location. In 1996 and 1997, the ADC in the 19th Street CSU beds was 15.3 and 14.2, respectively, with monthly ranges in 1997 from a high of 17 in April to a low of 12 in June. The relatively constant annual ADCs in psychiatric and CSU beds are a reflection of increasing admissions but declining average lengths of stay for psychiatric services. The NBHD also projects that it will receive referrals from the Broward County Mental Health Court, established in June 1997. The Court is intended to divert mentally ill defendants with minor criminal charges from the criminal justice system to the mental health system. Actual experience for only three months of operations showed 7 or 8 admissions a month with widely varying average lengths of stay, from 6 to 95 days. The effect of court referrals on the ADC at Broward General was statistically insignificant into the fall of 1997. Newspaper reports of the number of inmates with serious mental illnesses do not provide a reliable basis for projecting the effect of the mental health court on psychiatric admissions to Broward General, since it is not equipped to handle violent felons. One of Broward General's experts also compared national hospital discharge data to that of Broward County. The results indicate a lower use rate in Broward County in 1995 and a higher one in 1996. That finding was consistent with the expert's finding of a growth in admissions and bed turnover rate which measures the demand for each bed. The expert also considered the prevalence of mental illness and hospitalization rates. The data reflecting expected increases in admissions, however, was not compared to available capacity in the County nor correlated with declining lengths of stay. The District X: Comprehensive Health Plan 1994 includes an estimate of the need for 10 CSU beds per 100,000 people, or a total of 133 CSU beds needed for the District. FMC argues that the calculation is incorrect because only the adult population should be included. Using only adults, FMC determined that 116 CSU beds are needed which, when added to 434 adult psychiatric beds needed in the February 1996 projection, gives a bed need for all mental health beds of 550. That total is less than the actual combined total number of 567 mental health beds, 517 adult psychiatric beds plus 50 CSU beds in 1995. Whatever population group is appropriate, the projection of the need for CSU beds is not reliable based on the evidence that, since the end of 1995, CSU services have been and, according to NBHD, should continue to be absorbed into hospital- based adult psychiatric units. For the same reason, the increase in adult psychiatric bed admissions from 1995 to 1996 does not establish a trend towards increasing psychiatric utilization, but is more likely attributable to the closing of CSU beds at SFSH. FMC's expert's comparison of data from three selected months in two successive years is also not sufficient to establish a downward trend in utilization at the 19th Street CSU, neither is the evidence of a decline in ADC by one patient in one year. Utilization is relatively static based on ADCs in existing Broward County adult psychiatric beds and in CSU beds. FMC established Broward General's potential to decrease average lengths of stay by developing alternative non-inpatient services as FMC has done and Broward General proposes to do. See Finding of Fact 37. Based on local health council reports, FMC's data reflects a rise in the ADC at Broward General to 52.7 in 1996, and a return to 46 in the first seven months of 1997. Using a 14.2 ADC for the 19th Street CSU, FMC projects that Broward General will reach an ADC of approximately 60 in the first year of operations if the CON is approved, not 88 as projected. Broward General acknowledged its capacity to add 10 more patients to the ADC without stress on the system. Having already absorbed 20 of up to 40 CSU patients at Imperial Point and Broward General in 1996 and 1997 resulting in an ADC of 48, and given the capacity to absorb 10 more, the NBHD has demonstrated a need to accommodate an ADC of 10 more adult psychiatric patients at Broward General, or a total ADC of 68 patients. The need to add capacity to accommodate an additional 10 patient ADC was not shown to equate to a need for 30 additional beds, which would result in an ADC of 68 patients in 98 beds, or 69 or 70 percent occupancy. Special Circumstances - Rule 59C-1.040(4)(d) The psychiatric bed rule provides for approval of additional beds in the absence of fixed numeric need. The "special circumstance" provision applies to a facility with an existing unit with 85 percent or greater occupancy. During the applicable period, the occupancy at Broward General was 74.15 percent. However, occupancy rates have exceeded 95 percent in the CSU beds on 19th Street. If up to 20 patients on 19th Street are added to the 48 ADC at Broward General, the result is that the existing 68 beds will be full. A full unit is operationally not efficient or desirable and allows no response to fluctuations in demand. Therefore, the state has established a desirable standard of 75 percent occupancy for psychiatric units, a range which supports the addition of 10 to 15 psychiatric beds at Broward General. Available Alternatives - Subsection 408.035(1)(b) and (d), Florida Statutes, and Rule 59C-1.040(4)(e)4., Florida Administrative Code The psychiatric bed rule provides that additional beds will "not normally" be added if the district occupancy rate is below 75 percent. For the twelve months preceding the application filing, the occupancy rate in 517 adult psychiatric beds in District 10 was approximately 58 percent. FMC's expert noted that each day an average of 200 adult psychiatric beds were available in District 10. Broward General argues that the occupancy rate is misleading. Five of the nine facilities with psychiatric beds are freestanding, private facilities, which are ineligible for Medicaid participation. Historically, the freestanding hospitals have also provided little charity care. One facility, University Pavilion, is full. Of the four acute care hospitals with adult psychiatric beds, Memorial Hospital in the SBHD, is not available to patients in the NBHD service area. Imperial Point, the only other NBHD facility with adult psychiatric beds, is not available based on its occupancy rate for the first seven months of 1997 of approximately 81 percent, which left an average of 9 available beds in a relatively small 47-bed unit. That leaves only Broward General and FMC to care for Medicaid and indigent adult psychiatric patients. FMC is the only possible alternative provider of services, but Broward General was recommended by the grand jury and was the only contract applicant. The occupancy rate in FMC's 51 adult beds was approximately 80 percent in 1995, 73 percent in 1996, and 77 percent for the first seven months in 1997. FMC has reduced average lengths of stay by having patients "step down" to partial hospitalization, day treatment and other outpatient services of varying intensities. The same decline in average lengths of stay is reasonably expected when Broward General implements these alternatives. Adult psychiatric services are also accessible in District 10 applying the psychiatric bed rule access standard. That is, ninety percent of the population of District 10 has access to the service within a maximum driving time of forty- five minutes. The CSU license cannot be transferred to Broward General. Broward County holds the license for CSU beds which, by rule, must be located on the first floor of a building. Although Broward General may not legally hold the CSU license and provide CSU services on the fourth floor of the hospital, there is no apparent legal impediment to providing CSU services in psychiatric beds. Quality of Care - Subsection 408.035(1)(c), Florida Statutes and Rule 1.040(7), Florida Administrative Code Broward General is accredited by the Joint Commission on Accreditation of Health Care Organizations. The parties stipulated that Broward General has a history of providing quality care. Broward General provides the services required by Rule 59C-1.040(3)(h), Florida Administrative Code. Services Not Accessible in Adjoining Areas; Research and Educational Facilities; Needs of HMOs; Services Provided to Individuals Beyond the District; Subsections 408.035(1)(f),(g),(j), and (k), Florida Statutes Broward General does not propose to provide services which are inaccessible in adjoining areas nor will it provide services to non-residents of the district. Broward General is not one of the six statutory teaching hospitals nor a health maintenance organization (HMO). Therefore, those criteria are of no value in determining whether this application should be approved. Economics and Improvements in Service from Joint Operation - Subsection 408.035(1)(e), Florida Statutes The consolidation of the psychiatric services at Broward General is reasonably expected to result in economies and improvements in the provision of coordinated services to the mentally ill indigent and Medicaid population. Broward General will eliminate the cost of meal deliveries and the transfer of medically ill patients, but that potential cost-saving was not quantified by Broward General. Staff and Other Resources - Subsection 408.035(1)(h), Florida Statutes The parties stipulated that NBHD has available the necessary resources, including health manpower, management personnel, and funds to implement the project. Financially Feasibility - Subsection 408.035(1)(h) and (i), Florida Statutes The parties stipulated that the proposed project is financially feasible in the immediate term. The estimated total project cost is $451,791, but NBHD has $500,000 in funds for capital improvements available from the County and $700,000 from the Florida Legislature. As stipulated by the parties, NBHD has sufficient cash on hand to fund the project. Regardless of the census, the County's contractual obligation to the NBHD remains fixed at $1.6 million. The State contract requires the prospective payment of costs offset by expected Medicaid dollars. If the number of Medicaid eligible patients decreases, then state funding increases proportionately. The state assumed that 20 percent of the patients would qualify for Medicaid, therefore it reimburses the per diem cost of care for 80 percent of the patients. One audit indicated that 30 percent of the patients qualified for Medicaid, so that State payments for that year were higher than needed. The State contract apparently makes no provision to recover excess payments. The application projects a net profit of $740,789 for the first year of operations, and a net profit of $664,489 for the second year. If the State contract with NBHD is renewed to contemplate an average of 30 patients per day as opposed to up to 40 patients per day, then annual revenue could be reduced up to $400,000. Projected net profit will, nevertheless, exceed expenses when variable expenses are reduced correspondingly. If 20 state funded patients are already in psychiatric beds, and 20 more could be transferred from 19th Street, the result is an ADC of 68. Based on the funding arrangements, there is no evidence that the operation of a total of 98 beds could not be profitable, even with an ADC of 68, although it would be wasteful to have 30 extra beds. Impact on Competition, Quality Assurance and Cost-Effectiveness - Subsection 408.035(1)(l), Florida Statutes With a maximum of 68 inpatients or more realistically, under the expected terms of a renegotiated State contract, 58 to 60 inpatients in 98 beds, Broward General will reasonably attempt to expand the demand for its inpatient psychiatric services. Within the NBHD's legal service area, one-third of adult psychiatric patients not admitted to Broward General are admitted to FMC. Assuming a proportionate impact on competitors, FMC's expert projected that one-third of approximately 30 unfilled beds at Broward General will be filled by patients who would otherwise have gone to FMC. The projection of a loss of 9 patients from the ADC of FMC is reasonably based on an analysis showing comparable patient severity in the most prevalent diagnostic category. Given the blended payor commitment of approximately 51 or 52 percent total for Medicaid and charity in 98 beds, Broward General will be able to take patients from every payor category accepted at FMC. The loss of 9 patients from its ADC can reduce revenues by $568,967 at FMC. The impact analysis is reasonably based on lost patient days since most payers use a per diem basis for compensating FMC. For example, although Medicare reimbursement is usually based on diagnosis regardless of length of stay, it is cost-based for the geriatric psychiatric unit. Net profit at FMC, for the year 1996-1997, was expected to be approximately $4.5 million. FMC will also experience increased costs in transporting indigent patients from FMC to Broward General for admission and treatment. Because of the additional distance, the cost to transfer indigent patients is $20 more per patient from FMC to Broward General than it is from FMC to the 19th Street CSU. FMC typically stabilizes indigent adult psychiatric inpatients, then transfers them to either the 19th Street CSU or Broward General. From March through September of 1997, FMC transported approximately 256 indigent patients from FMC to the 19th Street CSU. In terms of quality assurance, the consolidation of psychiatric services at Broward General will allow all patients better access to the full range of medical services available at Broward General. The NBHD's operation of the 19th Street CSU is profitable. Approval of the CON application should reasonably eliminate all costs associated with operation of the 19th Street facility, and shift more revenues from the State and County contracts to Broward General. Some savings are reasonably expected from not having meal deliveries to 19th Street or patient transfers for medical care. The NBHD did not quantify any expected savings. Costs and Methods of Construction - Subsection 408.035(1)(m), Florida Statutes Broward General will relocate 12 of 42 medical/surgical beds and convert 30 medical/surgical beds to 30 adult psychiatric beds on one wing of the fourth floor, which is currently unused. Fifteen semi-private medical/surgical patient rooms will be converted into semi-private adult psychiatric rooms. Existing wards will be converted to two social rooms, one noisy and one quiet. With the removal of the walls of some offices, the architect designed a group therapy room. An existing semi-private room will be used as a seclusion room. Of the fifteen semi-private rooms, twelve will not have bathing or showering facilities and seven will not have toilets within the patients' rooms. At the time the hospital was constructed, the state required only a lavatory/sink in each patient room. AHCA's architect agreed to allow Broward General to plan to use central bathing and toilet facilities to avoid additional costs and diminished patient room sizes. Because the plan intentionally avoids construction in the toilets, except to enlarge one to include a shower, there is no requirement to upgrade to Americans With Disabilities Act (ADA) standards. Therefore, the $23,280 construction cost contingency for code compliance is adequate. Although the projected construction costs are reasonable and the applicable architectural code requirements are met, the design is not the most desirable in terms of current standards. Patient privacy is compromised by the lack of toilets for each patient room. Past and Proposed Provision of Services to Promote a Continuum of Care in a Multi-level System - Subsection 408.035(1)(o), Florida Statutes Broward General is a tertiary acute care facility which provides a broad continuum of care. Because it already operates the CSU and provides CSU services in adult psychiatric beds, the proposal to relocate patients maintains but does not further promote that continuum of care. Broward General's plan to establish more alternatives to inpatient psychiatric care does promote and enhance its continuum of care. Capital Expenditures for New Inpatient Services - Subsection 408.035(2), Florida Statutes Broward General is not proposing to establish a new health service for inpatients, rather it is seeking to relocate an existing service without new construction. The criteria in this Subsection are inapplicable. Factual Conclusions Broward General did not establish a "not normal" circumstance based on the grand jury's findings and recommendations. The grand jury did not recommend closing 19th Street facility. Broward General did generally establish not normal circumstances based on the desirability of consolidating mental health services at Broward General to provide a single point of entry and to improve the quality of care for the 19th Street facility patients. Broward General failed to establish the need to add 30 beds to accomplish the objective of closing the 19th Street facility. Although the existing beds at Broward General may reasonably be expected to be full as a result of the transfer of 19th Street patients, the addition of 30 beds without sufficient demand results in an occupancy rate of 69 or 70 percent, from an ADC of 68 patients in 98 beds. Broward General has requested approximately twice as many beds as it demonstrated it needs. Broward General's CON application on balance satisfies the local and state health plan preferences. In general, FMC is the only alternative facility in terms of available beds, but is not the tax-supported public facility which the grand jury favored to coordinate mental health services. Broward General meets the statutory criteria for quality of care, improvements from joint operations, financial feasibility, quality assurance, cost-effectiveness, and services to Medicaid and indigent patients. The proposal is not the most desirable architecturally considering current standards. More importantly, Broward General did not demonstrate that it can achieve its projected occupancy without an adverse impact on FMC. The NBHD proposal will add too many beds to meet the targeted state occupancy levels in relatively a static market. Broward General's application does not include a partial request for fewer additional beds which would have allowed the closing of 19th Street, while maintaining some empty beds for demand fluctuations and avoiding an adverse impact on FMC.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration deny the application of the North Broward Hospital District for Certificate of Need Number 8425 to convert 30 medical/surgical beds to 30 adult psychiatric beds at Broward General Medical Center. DONE AND ENTERED this 21st day of April, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul Vazquez, Esquire Agency For Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli & Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301
