Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration (“the Agency”) regarding Certificate of Need (“CON”) Application No. 10202, which sought the establishment of a 100-bed acute care hospital in Broward County, District 10, that had been filed by East Florida Healthcare, LLC (“East Florida”), in the second batching cycle of 2013. The Agency preliminarily denied the application. On December 30, 2013, East Florida filed a petition for formal hearing contesting the denial, which was forwarded to the Division of Administrative Hearings (“DOAH”). In January 2014, the above-named intervenors filed motions to intervene, which were granted. On April 15, Filed April 22, 2014 4:57 PM Division of Administrative Hearings 2014, East Florida filed a notice of voluntary dismissal and the DOAH issued an order closing the file and relinquishing jurisdiction back to the Agency. IT IS THEREFORE ORDERED AND ADJUDGED THAT: 1. The denial of CON Application 10202 is upheld. ) ORDERED this 5@Any of pur . 2014, in Tallahassee, Florida. , Secretary Agency For Héalth Care Administration
The Issue Whether the Respondent committed the violation alleged in the Amended Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency charged with the responsibility of regulating the practice of nursing in the State of Florida. At all times material the allegations of this case, the Respondent was a licensed registered nurse, license number RN 3254372. At all times material to the allegations of this case the Respondent was employed at the North Shore Medical Center located in Miami, Florida. The Respondent was assigned to the pediatric floor and was to provide nursing services to patients on that floor during her duty hours. Tamy Ziaukas was also employed at North Shore and had been there prior to the Respondent's employment. Ms. Ziaukas was designated the senior nurse for the pediatric floor from 11:00 p.m. until 7:00 a.m. As such, she helped coordinate the work for the nurses assigned to the floor. Although technically not a supervisor, Ms. Ziaukas did perform duties as a charge nurse for the floor. The Respondent did not appreciate the manner in which Ms. Ziaukas assumed and performed the duties of charge nurse for the floor. Although their disagreement was little more than a personality conflict, the Respondent maintains that such disagreement fueled the allegations of the instant case. Such contention is not supported by the persuasive evidence in this case. To the contrary, the weight of the credible evidence supports the finding that the Respondent inappropriately handled a pediatric patient on or about September 29, 1998. The Respondent responded to a pediatric patient whose I-V had come out. The patient was agitated and did not want the line to be reinserted. Three nurses were present for the procedure. Respondent was to insert the I-V while Ms. Ziaukas and another nurse, Ms. Mezadieu, assisted. The patient continued to be difficult. When the patient refused to cooperate, the Respondent either slapped or pushed the patient on his face to get him to submit to the procedure. The force of the slap was not sufficient to leave a mark on the patient's face. Nevertheless, Ms. Ziaukas reported the incident to her supervisor; moreover, the Respondent reported the incident to the patient's physician. When the nurses were questioned about the incident Ms. Ziaukas characterized the touch as a "slap." The Respondent did not deny touching the child but said it was a "push" to get the child to calm down. The third witness to the incident has no current recollection of the event. Statements taken from the witnesses at or near the time of the incident confirmed that the Respondent touched the child's face. The use of a forceful push or slap to a pediatric patient's face would not be medically necessary. A difficult patient may be held down or subdued without inappropriately touching the face. Prior to this incident, the Respondent had performed all aspects of her job in a satisfactory manner. The Respondent was given the opportunity to attend an anger management class but declined the employer's offer. Subsequently, the Respondent left employment at North Shore Medical Center.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health, Board of Nursing enter a Final Order imposing an administrative fine in the amount of $250, requiring the Respondent to remit the agency's costs in prosecuting this case, requiring the Respondent to complete an anger management course, and placing the Respondent on probation for a period of three years. DONE AND ENTERED this 3rd day of October, 2001, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 2001. COPIES FURNISHED: Reginald D. Dixon, Esquire Agency for Health Care Administration Post Office Box 14229, Mail Stop 39 Tallahassee, Florida 32317-4229 Peter Loblack, Esquire Law Office of Peter Loblack, P.A. Office Parks at California Club 1030 Ives Dairy Road, Suite 132 Miami, Florida 33179 Lawrence Allen Schwartz, Esquire 8005 Northwest 155th Street Miami, Florida 33016 Theodore M. Henderson, Agency Clerk Department of Health 4052 Bald Cypress Way Bin A00 Tallahassee, Florida 32399-1701 Ruth R. Stiehl, Ph.D., R.N., Executive Director Board of Nursing 4080 Woodcock Drive, Suite 202 Jacksonville, Florida 32207-2714
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
The Issue Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
Findings Of Fact The Applicants and Background Pasco-Pinellas Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist). A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975. One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County. The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million. The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county. At present, the two members of the joint venture compete to serve the Wesley Chapel area through University Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County. The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County. BayCare The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System"). BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties. Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business function consolidations and group purchasing. Its members are all not-for-profit hospitals. BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare. BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition. The Agency The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this proceeding. Community Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New Port Richey in western Pasco County, Acute Care Subdistrict 5-1. With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians. Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services. Community's hospital facility is over 30 years old. Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out. Community's Replacement Hospital Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2. Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity"). All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction. Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point"). Community's poor financial performance in recent years is expected to improve after the opening of Trinity. The Proposals Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach. Pasco-Pinellas' Proposal Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million. Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647. Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable. BayCare's Proposal BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately $308 million, the hospital will have 92 medical/surgical beds, 24 critical care beds, and 14 post-partum beds. Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County. BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site. BayCare's PSA includes some part of seven zip codes. Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647. Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7. Pasco County Hospitals There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity. No Need for Both Hospitals None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2. The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved? Need for a New Hospital; Access Enhancement Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale. The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa. Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial U.S. Census, that is, 2000, and do not take into account data of impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth. The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year. Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year. The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area. Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past. Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital. Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues. Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes. A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study concluded: The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice. Pasco-Pinellas 36, p. 27. Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55 minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes. In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012. Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush" periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation . . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id. A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes. In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years. The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area. The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future. Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2. Preliminary Agency Action; the SAAR The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977. The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers. The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR. Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify: The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors. Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA. Size and Cost Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million. The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital." Need for a New Teaching Hospital "Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes: "Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition. § 408.07(45), Fla. Stat. The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose. BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital." Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce. Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program. BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling. USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages. The Physician Shortage There is a shortage of physicians in the district as there is in Pasco County. The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase. Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages. Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area. Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital. The BayCare and USF Agreement The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs: The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement. In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . . BayCare 2, Appendix C, BayCare and USF Agreement, Section G, p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id. The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91. Adverse Impact Providers Outside the District Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district. Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections are sustained. See paragraphs 159-66, below, in the Conclusions of Law. Providers Within the District The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District. There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point. It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ. Availability of Resources Nursing and Non-Nursing Staff Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the 18-19% range. Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs. Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas. Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas. Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ. All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety. The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule 6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable. BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market. BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals. BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees. BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable. Physician Support Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals. Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties. FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area. In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment. The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department. The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area. The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital. Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians. Charity and Medicaid; Conditions Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services. BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas. BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not- for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market. St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal. Utilization Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable. The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict. BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration. The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital. The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus. Projected Revenues Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace. The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties. BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A. The projected revenues in Schedule 7A of the BayCare application are reasonable. Projected Income and Expenses Schedule 8A in a CON application contains projected income and expenses for the proposal. Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases. The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable. BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted. Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term. Financial Feasibility Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections. Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below. Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project. Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible. The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately $5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id. Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project. The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare. By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility. Costs and Construction Methods The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable. The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application. The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community. The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors. All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services. The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays, including observation areas, provide adequate emergency department capacity. The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital. The Schedule 9 construction costs of approximately $180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas). Contingencies and escalation factors have been built into the projected costs. Facilities, Sites, Related Costs At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area. Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital. After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres. The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County. The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO. A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality. The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity. The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time." Tr. 552-53. These lower quality wetlands constitute roughly 11.5 acres of the site. They will be impacted by the project but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550. The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule 1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application and presented the possibility of being less than the $121 million reflected in the application. Likewise, the equipment cost figure shown in Schedule 1 of the Pasco-Pinellas application is reasonable and achievable. The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application. The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project. The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The 17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital. The hospital will have all private beds. It will be fully digital and will rely on electronic medical records. The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300 beds. Design of the BayCare facility is based on principles of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching. Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict. DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo Post Office Box 1596 Venice, Florida 34284 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
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 The issue is whether Windmoor has standing to challenge AHCA's award of Certificate of Need No. 10074 to Community to establish a Class III Specialty Psychiatric Hospital in New Port Richey, Florida.
Findings Of Fact AHCA is the state agency responsible for administering the CON program, and is authorized to evaluate and make final determinations on CON applications pursuant to the Health Facilities and Services Development Act, sections 408.031-.045, Florida Statutes. Community Community Hospital owns and operates a 389-bed Class I general acute care hospital, comprised of 343 acute care beds and 46 adult psychiatric beds, currently located at 5637 Marine Parkway, New Port Richey, Pasco County, Florida, AHCA Health Planning District 5. AHCA previously awarded CON No. 9539 to Community authorizing construction of a replacement facility in an area known as Trinity, approximately 5.5 miles southeast of Community's current location. The Trinity replacement hospital facility is currently under construction and scheduled for occupancy in November 2011. The route between the Trinity and Community campuses is a drive of approximately one mile on a two-lane road leading into State Road 54, a six-lane divided highway. Trinity Medical Center campus is located on State Road 54. Windmoor Windmoor is a licensed Class III Specialty Hospital with 78 adult psychiatric beds and 22 adult substance abuse beds, located in Clearwater, Pinellas County, Florida. Windmoor is an existing provider of adult psychiatric services located within the same Health Planning District 5 as Community. Windmoor's facility has remained in its current location since its inception in 1987. That year, Windmoor had 200 adult psychiatric beds, which were reduced in 1996 to 163. In 2001, the number of adult psychiatric beds was reduced to its current 100. Windmoor has the capability of adding 40 to 60 additional beds. Windmoor's parent corporation is Psychiatric Solutions, Inc. (PSI), a publicly traded company based in Franklin, Tennessee, that also owns psychiatric hospitals in other states. PSI also owns at least seven other psychiatric hospitals in Florida, as well as other treatment facilities. PSI acquired all of its Florida facilities within the past five years, including Windmoor in 2006. On November 15, 2010, PSI was acquired by Universal Health Systems, which owns and operates psychiatric hospitals and general acute care hospitals throughout the United States, including Florida. This is the first CON proceeding in which Windmoor has participated. District 5 Providers District 5 consists of Pasco and Pinellas Counties. At the time the CON application was filed, Pasco County had two adult inpatient psychiatric providers: Community and Florida Hospital Zephyrhills with 15 beds. The Pinellas County providers were Morton Plant Hospital (Clearwater), St. Anthony's Hospital, Sun Coast Hospital (now known as Largo Medical Center- Indian Rocks) (Largo), and Windmoor. Windmoor was the only Class III specialty psychiatric hospital in District 5. Additionally, new CON-approved adult psychiatric beds included 17 at Largo, and approval for Ten Broeck Tampa, Inc., to construct a new 35-bed Class III adult psychiatric hospital in Pasco County. Also, Morton Plant North Bay Recovery Center (NB Recovery Center) had received CON exemptions to establish 56 adult psychiatric beds at its new Class III facility in Pasco County which had already been approved for 10 child/adolescent psychiatric beds. NB Recovery Center is a new entrant into the market, having opened its Class III psychiatric hospital in August 2010. This Class III psychiatric hospital is on the same license as North Bay Hospitals' Class I general acute care hospital (North Bay). North Bay is located about one mile north of Community. The approximate distances of the District 5 providers from Community are: NB Recovery Center, 19 miles; Florida Hospital Zephyrhills, 40 miles; Morton Plant Hospital, 24 miles; and Windmoor, 26 miles. Also, Largo, like Community, is an HCA affiliated hospital located approximately nine miles north-northwest of Windmoor, and two to four miles south of Morton Plant. St. Anthony's Hospital is located in downtown St. Petersburg. CON approvals and exemptions are no longer reliable predictors of bed inventory since existing psychiatric facilities can add beds through CON exemptions at will. Service Areas No overlap exists between Community and Windmoor's service areas. Community's primary service area (PSA) is a nine zip code area located in western Pasco County. Community's secondary service area (SSA) consists of four zip codes in Hernando County to the north, a few zip codes in eastern Pasco County, and a single zip code in the far northwestern corner of Pinellas County - 34689. Community's PSA accounts for 79.4% of its psychiatric discharges. An additional 9.1% of its discharges are from its SSA, defined as any non-PSA zip code from which it receives at least 1% of its discharges. The remaining 11% of Community's discharges are scattered among other areas. All of Community's PSA zip codes are within Pasco County. The only SSA zip code in Pinellas County is in the northwestern corner of the county – 34689, from which Community received only 2% of its discharges. Community derives 84.4% of its discharges from Pasco County, while only 6.9% of discharges originate from Pinellas County residents. Another 5.6% of Community's discharges originate in Hernando County which is outside District 5. Community's psychiatric service area is not expected to change with the implementation of the CON. While Community received 1367 discharges from its PSA, Windmoor received only 97 of its discharges from that PSA. On a percentage basis this is 79.4% versus 4.7% of discharges, respectively. Windmoor did not derive even 1% of its discharges from any single zip code within Community's PSA. When a provider receives less than 1% of its discharges from a particular zip code, that zip code is not appropriately considered part of the provider's PSA or SSA. Further, Windmoor has no significant market share in Community's SSA. On a county basis, while Community derived 84.4% of its psychiatric discharges from Pasco County residents, Windmoor received only 5.9% of its discharges from Pasco County. Conversely, Community derived only 6.9% of its discharges from Pinellas County compared with 73.6% for Windmoor. During the year ending June 2009, among all providers of inpatient psychiatric services to Community's PSA, Community had a 70% market share compared with Windmoor's 4% market share. For Pasco County as a whole, Community had a 52% market share compared with Windmoor's 4% market share. Like Windmoor, Morton Plant had only a 4% market share for both Pasco County and Community's PSA. The conclusion from this analysis is that Community is predominantly a Pasco County provider while Windmoor is predominantly a Pinellas County provider. Windmoor is not a significant provider in either Community's PSA or in Pasco County. Further, there is no physician overlap between the psychiatrists on the respective medical staffs of Community and Windmoor. Community's CON Proposal In its State Agency Action Report concerning Community's CON application, AHCA summarized the proposal: "[t]his project is to keep 46 existing adult inpatient psychiatric beds at their present location following completion of the replacement facility authorized by CON #9539." The proposal is to allow Community's psychiatric facility to remain in the same location with the same bed complement, which will remain unchanged in terms of its historical operations. The psychiatric unit at Community has been located at its current site since at least 1981. A CON is required only because, upon occupancy of the Trinity replacement facility, the continued use of the existing site for its inpatient psychiatric activity would fall within the statutory criteria for projects subject to CON review as an "establishment of additional healthcare facilities." With respect to both hospital campuses, Community will own, operate, and be the licensee of both facilities. All components of patient care will be controlled by a single governing body, and will have a single medical staff, chief medical officer, and CEO. Florida is home to other similarly situated hospitals that own and operate a Class I general acute care hospital and an affiliated Class III licensed specialty hospital on separate campuses. In each case, the Class I and Class III facilities share the same license and license number, owner, and CEO. These facilities include Westchester General Hospital and its affiliated Class III Southern Winds Hospital; Halifax Health Medical Center and its affiliated Halifax Psychiatric Center North; Shands Hospital at the University of Florida and Shands at Vista; and Morton Plant North Bay Hospital and NB Recovery Center. AHCA issues an actual license certificate for each facility for general display at each campus. The approximate distances between the two campuses of these Class I and Class III single license facilities are: Westchester General Hospital and Southern Winds Hospital – nine miles; Halifax Health Medical Center and Halifax Psychiatric Center – 1.5 miles; Shands at the University of Florida and Shands at Vista – 10 miles; and Morton Plant North Bay and NB Recovery Center – 20 miles. The scenario of a Class I hospital with an affiliated Class III hospital with a single license number is considered one licensee with two premises. Psychiatric Services at Community Will Remain Unchanged Implementation of the CON will result in no changes in the current level of health care services provided to patients for both psychiatric and non-psychiatric medical conditions. Those patients who might currently be transported internally to the psychiatric unit behavioral health unit or (BHU) upon discharge from non-psychiatric medical units of the hospital will now be transported by vehicle to the BHU campus if the patient requires transport assistance. The transport of psychiatric patients is not material to the discussion of whether the two campuses are, in fact, one hospital. Patients cannot be admitted to the BHU until they have been medically cleared of any non-psychiatric medical conditions that would require inpatient medical care. "Medically cleared" means the patient no longer requires medical/surgical inpatient care. Those processes and requirements will not change as a result of implementation of the CON. Community currently provides transport services for all types of patients. Those services will continue for patients between the two campuses, including any psychiatric patients who may need transport assistance. AHCA has never had a regulatory issue involving the movement of patients among different facilities that are operated by one licensee. AHCA has no concern about the ability of hospitals to transport patients among their various facilities, including any hospital provider-based services. Under federal regulations such services may be provided at locations up to 35 miles from the main hospital campus. A psychiatric patient presenting to a hospital's emergency department (ED) is handled the same initially as any patient. The patient undergoes triage and is seen by an ED physician. If the patient exhibits both psychiatric and non- psychiatric medical conditions, the ED physician calls a psychiatrist and together they will determine the primary diagnosis. If an ED patient has achieved medical stability, and is ready to be medically discharged from the ED, yet still suffers from a psychiatric condition, the ED physician will call in a psychiatrist to participate in the disposition of the patient. If the primary diagnosis for a patient is medical or emergent, but with a secondary or co-morbid psychiatric condition, the patient receives medical/surgical care with a psychiatrist serving as a consulting physician. If deemed appropriate, the patient would be admitted to the medical/surgical unit for care until reaching medical stability. While on the medical/surgical unit, the patient needing psychiatric care would receive it from a psychiatrist while on the medical/surgical unit. Once medically cleared for discharge, the patient requiring further inpatient psychiatric care would be transferred to the BHU. Once in the BHU, the patient would still receive any necessary care for any non- psychiatric conditions from the appropriate physicians. This system will not change with the implementation of the CON. Coverage of the BHU by hospitalists and other members of the medical staff who do rounds will not change as a result of implementation of the CON. Some patients will achieve medical stability for both the psychiatric and non-psychiatric conditions from which they suffer, and will therefore not be admitted to the BHU upon discharge from the ED or medical/surgical unit. As reflected in Community's policies and procedures, all BHU patients must be admitted under the care of a psychiatrist, and can only be discharged by a psychiatrist. Every BHU patient also receives a general medical history and physical examination performed by a consulting medical physician. Non-psychiatrist medical staff physicians are always available for consultation to the psychiatrist and other clinical staff while the patient stays in the BHU. Community's current practices with respect to psychiatric patient services and physician coverage will not change due to implementation of the CON. AHCA's Review of Community's CON Application AHCA gave notice of its intent to approve CON No. 10074 in the June 25, 2010, Florida Administrative Weekly. In AHCA's view, the status quo will be maintained by the issuance of the CON. Nothing will be different in the way Community delivers its health care services in District 5. This is a case where the applicant has to go through the CON process to arrive at the same place it already was. AHCA expects no change at all. AHCA concluded that "this project is not likely to change the current competitive structure of the existing market." By that conclusion, AHCA intended to convey a lack of adverse impact on existing providers based upon CON approval. Particularly due to deregulation, AHCA believes there have already been significant changes to the competitive structure of the District 5 market, such as psychiatric bed additions through CON exemption, CON approval of a new Ten Broeck psychiatric hospital, and upcoming shifts toward greater Medicaid HMO reimbursement and associated federal health care reform legislation. Conversely, the Agency projects no impact from Community's CON. Lack of Adverse Impact Adverse impact analyses typically arise from a new entrant to the market. Community's proposal does not present a new entrant to the market for inpatient psychiatric services. Adverse impact will occur when a new provider enters a service area or an existing provider increases its capacity to offer services. Neither of those will occur as a result of Community's CON. None of the conditions that could lead to an adverse impact is present. Implementation of the Community CON will have no adverse impact or effect on existing providers because Community will continue to have the same historic PSA and its market shares will remain the same, except for potential market changes unrelated to the CON, such as entrance of new providers. This case is unique. For example, Ms. Patricia Greenberg, Windmoor's highly qualified and experienced expert in health care planning, has never been involved in a case such as this where the applicant sought approval to remain at its current location. The typical CON application seeks permission for a new provider, facility, for beds, or services to enter a particular market for the first time. In the typical case, health care planners will agree that some shift in market share will occur among existing providers as the result of the new entrant to the market. Ms. Greenberg's adverse impact analysis did not take into account the new market entrants such as Ten Broeck and NB Recovery Center, even though she expects them to have a greater impact on Community, due in part to geography. Health care planners develop adverse impact analyses that attempt to estimate the future shift in market shares. From there, the planner will attempt to project a number of lost patients per provider, and then apply a financial impact. Regarding Community's proposal, since there will be no new entrant into the market, the typical adverse analysis cannot be performed. Windmoor, through Ms. Greenberg, creatively developed four theories of adverse impact that could result from the status quo. Each of Windmoor's theories is premised on assumptions that Community will cease providing certain clinical services that will result in Community losing the capability to serve some of its psychiatric patients. However, Windmoor provided no clinical evidence to support its alleged changes to Community's clinical services. Indeed, all clinical evidence in the record confirms that Community can and will continue its current clinical services to all patients, including its BHU patients. The four impact theories offered by Windmoor are each based upon the unproven assumption that CON implementation will transform Community into two separate unaffiliated hospitals as opposed to a single hospital with two campuses. From that assumption, Ms. Greenberg contended there are two, and only two, categories of psychiatric facilities, which she labeled as either a "hospital based unit" or a "freestanding" facility. Ms. Greenberg defined "hospital based unit" (HBU) as either located inside a hospital or on the campus of a general hospital. She defined "freestanding" as any facility that is not co-located with a general hospital on the same campus. Ms. Greenberg did not consider or address a category of commonly owned and operated Class I general acute care hospitals affiliated with Class III psychiatric hospitals. Ms. Greenberg did not recognize the existence in Florida of several general hospital affiliated Class III psychiatric hospitals. The fact that two hospital campuses of Class I and Class III facilities exist is irrelevant, so long as in reasonable proximity to one another. The relevant factors are whether the two campuses share the same: 1) license number, 2) ownership, 3) hospital administration, and 4) medical staff. If these factors are present, it is incorrect to characterize one of the two facilities or campuses as "freestanding" because that implies no connection to a general acute care hospital. Community is a general acute care hospital with an affiliated psychiatric facility which is in no sense "freestanding." Ms. Greenberg's attempt to compare statewide data for various patient characteristics between facilities that she defines as "freestanding" versus HBUs is not persuasive, primarily because it is built upon the incorrect assumption that Community and other Florida hospitals cannot operate a Class I general acute care hospital and a Class III specialty psychiatric hospital under the same license. Characteristics such as payor source or patient mix are influenced by a number of factors other than simply whether an inpatient program is "freestanding" or "hospital based," as defined by Ms. Greenberg, including influences such as age composition of the service area, income distribution, and whether the hospital is located in an urban or rural area, to cite but a few. Attempts to draw generalizations from such data and then conclude that Community will be more like a HBU than a freestanding or vice versa, is without merit. Ms. Greenberg's data indicates that Community falls into her defined HBU categories in some respects while, in other respects, falls into her freestanding categories. This type of analysis is not sound. Community will not transform into a "freestanding" facility as defined by Ms. Greenberg, as a result of this CON. Moreover, many people with a primary diagnosis of psychosis are treated in hospitals that do not have inpatient psychiatric beds. In 2008, psychosis was the number one discharge diagnosis for all males in Florida hospitals, and was the number three diagnosis for all females behind conditions associated with pregnancy. Simply looking at discharge data by diagnosis between freestanding and HBUs as defined by Ms. Greenberg is not a meaningful analysis. Every adverse impact scenario presented by Windmoor is based upon the incorrect premise that implementation of Community's CON will result in Community becoming a "freestanding" facility as defined by Ms. Greenberg. For this reason alone, none of Ms. Greenberg's adverse impact theories is valid and each must be rejected. Another common thread running through Windmoor's impact theories is the assertion that, based again upon the false "freestanding" presumption, Community's patient mix will change due to changes in clinical services available to patients, such as ED services, no medical environment for comprehensive treatment, and certain patients allegedly no longer clinically appropriate for Community's HBU. There is no evidence in the record to support such claims, either operationally or clinically. All of Ms. Greenberg's impact theories lead to the contention that CON implementation will result in Community being adversely affected by its own CON through the loss of psychiatric patients. Ms. Greenberg further speculates that because of her asserted loss of patients, Community would need to replace those patients ("backfill") with patients who might otherwise be admitted to a competing hospital. As explained previously, however, there is virtually no overlap of service area or competition between Windmoor and Community as reflected by their respective service areas. Community does not contact health care providers in Windmoor's service area regarding the availability of Community's psychiatric services. In fact, Largo, a sister facility of Community, is an inpatient provider located between Community and Windmoor. Community would not actively seek patients in those areas of Pinellas County. It is neither reasonable to expect, nor was any credible evidence presented, that to make up for lost patients, Community would go outside its current PSA into the Windmoor area to seek patients when it has its sister Largo facility near Windmoor. As stated above, Windmoor, through Ms. Greenberg, offered four adverse impact scenarios. All four scenarios are premised upon the assumption that CON implementation will transform Community's BHU into a "freestanding" facility. The premise is not correct for the reasons stated above, primarily that AHCA recognizes the ability of hospitals in Florida to have Class I general acute care facilities along with Class III specialty psychiatric hospitals under the same license, ownership, management, etc. Further, all four scenarios are based upon Ms. Greenberg's theory of "backfill" under which Community will have to make up lost patients by intruding into Windmoor's service area. The evidence supports the assertion that Community expects no lost admissions because its PSA and SSA will not change, nor will the type and extent of services it provides, including ED, medical/surgical, and a unified medical staff, change upon implementation of the CON. Medicaid Windmoor asserted that Community would lose its eligibility to receive reimbursement for services under the Medicaid program if the CON were implemented. This assertion was not supported by the evidence presented by Windmoor. Moreover, the evidence presented by Community and AHCA negated Windmoor's assertion. Prior to the filing of the CON application omissions response, Community representatives met with AHCA personnel and confirmed its continued Medicaid reimbursement eligibility, which to Community was never an issue. Community's CON application proposed a Medicaid CON condition, and contained numerous statements of expected continued ability to serve Medicaid fee-for-service patients. AHCA accepted the proposed CON condition when recommending approval of the application. Community expects to satisfy the Medicaid CON conditions. AHCA's Deputy Secretary for Medicaid, Roberta Bradford, subsequently confirmed by letter to Community that, based upon Community's representations of satisfaction of certain applicable criteria, Community's proposed 46-bed inpatient psychiatric hospital would continue to be eligible for Medicaid participation. The determination of a facility's Medicaid reimbursement is a state determination, rather than a federal CMS decision. In Florida, that determination is ultimately made by AHCA's Deputy Secretary for Medicaid, Ms. Bradford. Windmoor elicited testimony from Community to show that each of the following services would not be physically present on the campus of the Class III psychiatric hospital portion of Community following CON implementation: ED, emergency cardiac catheterization and angioplasty services, surgical and operating suites, stroke center designation, CT equipment, and the full range of medical services currently available on site at Community. Community will, however, continue to operate all of these services in the Class I acute care hospital campus, which will be under the unified license with the psychiatric campus. Satisfaction of the Medicaid letter criteria from AHCA was confirmed at hearing. The criteria include: Community will own and operate both locations and be the licensee of both facilities; all components of patient care at the facilities will be controlled by a single governing body; one Chief Medical Officer will be responsible for all medical staff activities at both facilities; one Chief Executive Officer will control both facilities' administrative activities; and the two facilities are situated closely enough geographically that it is feasible to operate them as a single entity. Mr. Jeffrey N. Gregg, AHCA's head of CON review, is satisfied that the Class III licensed Community facility will maintain its Medicaid eligibility. Southern Winds, Halifax Psychiatric Center, and Shands at Vista receive Medicaid fee-for-service reimbursement, and are similarly situated to Community. Mr. Gregg also expects NB Recovery Center to receive this type of Medicaid reimbursement when it initiates its service. Ms. Greenberg has been aware for at least 10 years that Class III psychiatric facilities affiliated with general hospitals in Florida receive fee-for-service reimbursement. She testified that if AHCA determines that Community is Medicaid eligible, her scenario related to Community losing its Medicaid eligibility "would go away." Moreover, due to recent legislative changes that will expand the use of Medicaid HMOs, the majority of Medicaid reimbursement is soon going to be under Medicaid HMOs. Class III psychiatric hospitals that are not affiliated with or on the same campus as a general acute care hospital, such as Windmoor, are eligible for Medicaid HMO reimbursement versus Medicaid fee- for-service reimbursement. Summary of Impact Analysis Conclusions All of Windmoor's adverse impact claims are based on a series of false and erroneous assumptions, none of which is supported by the evidence of record. In fact, most of the claims in the form of four scenarios are based upon ignoring the fact that what Community proposes here is not so unique in Florida. Many Florida health care facilities currently operate both Class I general acute care hospitals and Class III specialty psychiatric hospitals under the same license, management, and receive Medicaid fee-for-service reimbursement, while maintaining two physically separate campuses. This should have been common knowledge for an existing provider such as Windmoor, which based its entire case, adverse impact scenario, and decision to go forward with the hearing in this case on a series of erroneous assumptions. Windmoor offered several theories about how it would suffer a substantial and adverse impact in the event Community's CON application is approved, yet offered no competent evidence to support its claims. Windmoor failed to demonstrate that Community would lose any psychiatric patient admissions and be forced to seek admissions from Windmoor's PSA or SSA to keep its beds full. Windmoor failed to provide competent evidence that it will be adversely affected by the approval of Community's CON. Community's CON will have no impact on Windmoor.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a final order dismissing Windmoor's Petition for Formal Administrative Hearing due to lack of standing to challenge the award of CON No. 10074. DONE AND ENTERED this 6th day of July, 2011, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 2011. COPIES FURNISHED: Timothy Bruce Elliott, Esquire Smith & Associates 2873 Remington Green Circle Tallahassee, Florida 32308 Richard Joseph Saliba, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3, Mail Station 3 Tallahassee, Florida 32308 Stephen A. Ecenia, Esquire Rutledge, Ecenia & Purnell, P.A. 119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 Richard J. Shoop, Agency Clerk Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Justin Senior, General Counsel Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Elizabeth Dudek, Secretary Agency for Healthcare Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308-5403
Findings Of Fact Donald Davis is the promoter behind the formation of Community Hospital of Collier, Inc. He is a health care management consultant and a principal of the firm Health Research and Planning Associates, Inc. In his profession he concentrates on the promotion and development of health care facilities. He has engaged previously in the business of forming corporations for the purpose of submitting applications and obtaining Certificates of Need. He also provides consulting services to health service corporations. Neither Davis nor the other principals of the applicant corporation, including his wife, have any experience or expertise in constructing or operating hospitals, and Davis admitted that the sole purpose for forming the entity known as Community Hospital of Collier, Inc. was for the purpose of submitting an application and prosecuting it in order to obtain a Certificate of Need for an acute care hospital for District VIII. Mr. Davis' own company, Health Research and Planning Management Associates, Inc. was paid $15,000 by Community Hospital of Collier, Inc. to develop the Certificate of Need application at issue. Community has "a couple of thousand dollars" in its own bank account. The officers and directors of Health, Research and Planning Management Associates, Inc. are the same as those of Community Hospital of Collier, Inc. On June 15, 1983, after having previously filed a letter of intent, Mr. Davis filed an application for a Certificate of Need for a 152-bed acute care hospital on behalf of Community Hospital of Collier, Inc. Mr. Davis is an officer and director of that corporation. The articles of incorporation for Community Hospital of Collier, Inc. which gave it its de jure status were not signed until July 29, 1983 and were not filed with the Secretary of State until August 19, 1983. Be that as it may, Mr. Davis maintains that the Board of Directors of Community ratified the filing of the application. That authorization found at page 44 of the application, however, refers to the Board of Directors of Community Health Care of Okaloosa/Walton. The resolution was dated June 7, 1983 and Mr. Davis testified that the use of the name Community Health Care of Okaloosa/Walton in the caption of that Board of Director's resolution was a "typographical error." In any event, the applicant corporation had no legal existence at the time the application was filed on June 15, 1983, however, by its later acts in filing and prosecuting the application it implicitly, at least, ratified the action of its promoter, Mr. Davis, in filing the application since the officers and directors consisted of Mr. Davis, his wife and a third individual. Be that as it may, Community negotiated a stock purchase agreement with National Medical Enterprises (NME) on August 15, 1984. Pursuant to this agreement, NME is obligated to purchase all capital stock of Community if a Certificate of Need for 100 beds or more is awarded. In return for the sale of the stock of the applicant corporation to NME, Mr. Davis and the other two board members of Community will receive a total of $600,000 in addition to the $15,000 Mr. Davis has already received for his efforts in preparing and prosecuting the Certificate of Need application. The only asset of Collier is the inchoate Certificate of Need. Upon consummation of the stock purchase agreement, Mr. Davis will resign from the Board of Directors and presumably NME will appoint its own board. Community has given full authority to NME to prosecute the application as it sees fit, including making certain changes NME deemed appropriate to the application, including seeking 150 beds instead of 152 and changing the method and means of financing the project (mostly equity instead of debt). Additional changes in NME's approach to prosecution of the application include the proposed method of recruitment of personnel and management of the hospital. Community has no agreements with any other group, entities or individuals to provide financial, personnel and other resources necessary to construct, manage and operate an acute care hospital and did not demonstrate that it has any such resources in its own right. Mr. Frank Tidikis, Vice-President for Operations for the eastern region for National Medical Enterprises, testified concerning the financial and management resources and staffing arrangement NME proposes for the new hospital should it be authorized. He enumerated many medical specialties that NME intends to place on the staff of the hospital, but neither Community nor NME have done any studies revealing what types of medical specialties are presently available in the Collier County area, how many physicians in those specialties are available and what ratio exists or is appropriate for various types of physicians to the community population. The proposed staffing pattern, sources and method of recruitment was predicated solely on NME's past experience in obtaining hospital staff in other areas of the nation, and not upon any study or other investigation showing the availability of appropriate types of trained staff people in reasonable commuting distances of the proposed hospital, which would be located in northern Collier County. If NME consummates the purchase agreement, the hospital would be locally managed by a board of directors consisting of 51 per cent of the hospital's own medical staff and 49 per cent lay members chosen from the community at large. FINANCING Mr. Michael Gallo was Community/NME's expert in the area of health care finance, being NME's Vice-President for Finance. It was thus established that the total cost of the project, if approved, would be approximately $23,600,000. This amount would be financed by NME which proposes to make a 35 per cent equity contribution in the amount of approximately $8,500,000 and which will finance the balance of the project cost at a rate of approximately 13 per cent interest for 20 years. NME projects that an average daily patient census of 45 would be necessary to "break even." A daily census of 45 would yield 6,425 patient days per year, with the facility projected to break even in its first year of operation. NME projects that by the third year of operation, a return on investment of 10 to 12 per cent would be achieved. NME's projections are based on an assumed average length of stay per patient of 5.6 days. NME allocated two and sone-half per cent of its projected gross revenues for indigent patient care, and four per cent of projected gross revenues allocated to bad debt, that is, uncollectible hospital bills, not necessarily related to indigent patients. The $600,000 which NME must pay Community Hospital of Collier and Mr. Davis in order to acquire the assets of that corporation (i.e. the CON) will be treated as a project cost and will be depreciated as though it were a part of the buildings. Community/NME projects its total revenue per adjusted patient admission to amount to $4,843, with projected total revenue per adjusted patient day at $865. It predicts these figures will increase by about five per cent for successive years as a factor of inflation. The proposed hospital site consists of approximately 12 acres, available at a price of $30,000 to $50,000 per acre. The application itself originally proposed a location in the central or southern portion of Collier County. However, after NME entered into the agreement with the applicant corporation for the stock purchase and became involved in the prosecution of the application, the location was changed. Thus, it was discovered at the outset of the hearing that indeed, the proposed location of Community of Collier's hospital would be in the northern portion of Collier County in close proximity to Lee County. 1/ The proposed $360,000 to $600,000 land cost would of course, be added to the total cost of Community's proposed project. It has not been demonstrated what use would be made of the entire 12 acres, nor that the entire 12 acres is required for the hospital, its grounds, parking and ancillary facilities. STAFFING One of the reputed benefits of Community's proposed project is that it would afford a competitive hospital in the Collier County health services market to counter what Community contends is a virtual monopoly held by Naples Community Hospital, as well as to promote the attraction of more qualified medical staff to that "market". In this context, Community contends that its facility, by being built and operating as an alternative acute care hospital, would attract more physicians to the Collier County area and thus, arguably, render health services more readily available. Community thus decries the supposed "closed staff" plan of Naples, contending that Community offers an "open" staffing plan, which would serve to attract more physicians to the geographical area involved and enhance Community's ability to appropriately staff its hospital. Naples Community Hospital, on the other hand, experiences numerous physicians vacationing in the area requesting staff privileges. Many of these physicians apparently do not have any intention of permanently locating in the Naples/Collier County area, however, and therefore in order to determine which physicians are seriously interested in locating there, Naples has a screening procedure which includes an interview with the Chief of Staff, the Assistant Director for Staff Development, and the chief of the service for which a physician is applying for privileges. This preliminary screening procedure is not tantamount to a closed staffing situation, which only exists where a fixed number of physicians are permitted on a hospital staff, with others waiting until an opening occurs. In the open staff situation, as exists at Naples, no matter how rigorous the screening process, there is not a finite number of staff physicians available. Any physician who qualifies under the hospital bylaws and assures the screening committee of his intention to locate in the area served by the hospital is admitted to the staff. Thus, the staffing pattern for physicians at Naples Community Hospital augurs just as well for the attraction of physicians to the Collier County vicinity as does the staffing method proposed by Community. In that vein Naples has granted privileges to 13 new physicians in the preceding calendar year and had 8 applications pending at the time of hearing. Only one applicant was denied privileges during that year. Additional factors which must be considered in the context of staffing such a hospital concern the ability of the applicant to provide quality of care and appropriate, available resources including health care and management personnel to operate the facility. Aside from demonstrating that NME, through the stock purchase agreement, may obligate itself to provide ample funds and other resources to fund, staff and operate the project, and that it has successfully staffed and operated hospitals in numerous locales, Community did not demonstrate what likely sources would be drawn upon for nurses and other staff members to staff its hospital in order to avoid recruiting most of them from nearby facilities, including Naples Community, which could precipitate a diminution in the quality of health care at these other facilities. In short, other than showing that NME's management has the financial resources and experience to accomplish the staffing and operation of the hospital, there was no demonstration by Community which would establish the availability of sufficient health care personnel to operate and manage its hospital at adequate levels of care. COMPETITION Community contends that its facility should be built in order to foster competition in the provision of health care services in Collier County. It took the position, through its expert witness, Dr. Charles Phelps, that the Naples hospital holds a monopolistic position in Collier County inasmuch as it is the only hospital in the county. It should be pointed out somewhat parenthetically, however, that this "County market area" theme ignores the fact that this application is for an acute care hospital in District VIII, which is not subdivided by rule into County sub-districts for health care planning purposes. Further, Community originally proposed locating its hospital in the central or southerly portion of Collier County, but as of the time of the hearing, proposed to locate its hospital in the northerly portion of Collier County with a service area it itself proposed which will include the southerly portion of Lee County. This area is also within the service areas of Naples Community Hospital, Lee Memorial Hospital, Fort Myers Community Hospital and the soon to be constructed Gulf Coast Osteopathic Acute Care Hospital. Thus, in its attempt to establish Naples Community Hospital as occupying a monopolistic position in the "Collier County health care market", Community did not establish that Collier County either legally or practically is a separate health care market demarcated by the county boundary with Lee and Hendry Counties, such that Naples' status as the sole acute care hospital within the legal boundaries of Collier County is monopolistic. Indeed, it competes for patients with the Lee County hospitals named above in the northern Collier-southern Lee County market area involved. Community attempted to demonstrate a monopolistic situation in favor of Naples Community Hospital by comparing its relative increase in costs per day and costs per patient stay with Fort Myers Community Hospital and Lee Memorial Hospital. Naples Community Hospital did indeed exhibit the largest rate of cost increase in both those categories. Community's expert, Dr. Phelps, opined that lack of competition in the Naples area caused the disparity in rate of increase in costs between Lee County hospitals and the Collier County hospital. Naples called Ed Morton, who was accepted as an expert witness in hospital financial analysis, reimbursement, hospital auditing and accounting, financial feasibility and corporate finance. It was thus established that Naples does not occupy a monopoly position and provides health care at lower costs than would be the case should the Community Hospital facility be constructed. Mr. Morton demonstrated that analyzing total costs per adjusted patient day does not reliably indicate the efficiency of a hospital, since such daily costs fluctuate with the average length of stay. A better indicator for determining hospital efficiency is to analyze total revenue per adjusted admission. A comparison of Lee Memorial, Naples Community Hospital, Fort Myers Community Hospital and NME's six Florida hospitals was employed based on data provided to the hospital cost containment board for the years 1980 through 1983, in order to show which hospital operated more efficiently and tended less toward monopolistic market positions. In making this comparison, Mr. Morton employed the "total revenue per adjusted admission" and "total revenue per adjusted patient day" methods of comparing the hospitals. He used this approach because it reduces to a common denominator the various values and statistics utilized in the hospital cost containment board formulas. It was thus established that Naples has the lowest total revenue per adjusted admission and lowest total revenue per adjusted patient day of all the hospitals depicted in the comparison study (Naples Exhibit 23). Naples total revenue per adjusted admission is $400 to $1,900 less than each of the other hospitals. One reason Naples experiences less total revenue is because its charges are lower, since it employs some 1,600 volunteer workers. If these workers were paid at a minimum wage they would reflect a cost of approximately $600,000 per year. Further, the hospital over the years has obtained large donations of money and labor through funding drives, all of which have enabled it to keep charges down for its patients and to continue to operate certain services at a deficit. For instance, Naples has a discreet pediatric unit, which means a physically separate, self-contained pediatric care unit, with specialized staff, who perform no other services than those they are designated to perform in pediatrics. That unit operates at a deficit repeatedly since 40 per cent of the Naples pediatric patients originate from the Immokalee area, which is characterized by an extremely high percentage of indigent persons. Naples' witness Morton performed a patient origin study which shows that approximately 84 per cent of Naples' patients originate in Collier County, 12 per cent originate in Lee County, particularly southern Lee County, and two per cent originate from unrelated areas. The Naples Community Hospital is located in Naples, approximately in the mid-section of Collier County and a significantly greater distance from the northern Collier/Lee County line than will be the Community facility, if built. Community expects to draw approximately one-half, or six per cent, of the 12 per cent of Naples' patient load which is derived from Lee County. NCH however, at the present time, competes with Fort Myers Community Hospital and Lee Memorial Hospital, in particular, for patients from both southern Lee County and northern Collier County, Community's proposed service area. Thus, NCH does not maintain a monopoly serving Collier County or Community's proposed service area to the exclusion of these other hospitals. The placement of Community's facility at a point much closer to the Lee County border than is Naples' present facility would result in the injection of a fourth or fifth strong competitor into the Collier County-southern Lee County patient origin and health service market area, rather than merely the addition of a second competitor for Naples Community Hospital. ADVERSE COMPETITIVE EFFECTS Both Lee Memorial Hospital and Fort Myers Community Hospital already draw a substantial number of patients from southern Lee County, as well as northern Collier County. Gulf Coast Osteopathic Hospital, after protracted litigation, has secured approval of a Certificate of Need to build an osteopathic acute care hospital in the southerly portion of Lee County. That Final Order authorizes 60 beds. It is fair to assume, inasmuch as these hospitals are already drawing from southerly Lee County, that the capture of the patient market in southern Lee County will be made much more pervasive with the addition of the Gulf Coast Osteopathic acute care facility. That being the case, insofar as the 1989 horizon year is concerned, far less than 12 per cent of the Lee County origin patient days now available to hospitals located in Collier County will actually be available. Community will thus draw even less than its own projected six per cent of its patient days from Lee County. In any event, it is logical to conclude that substantially all the patient days resultantly available to a Collier County situated facility will be derived from Collier County upon the advent of the Gulf Coast Hospital. Thus, any patients drawn to Community, if its facility were built, would be at the direct expense of NCH. That being the case, it is reasonable to conclude that the analyses performed by Mr. Morton, Naples' expert, which reveal that Community Hospital will potentially siphon off as many as 80 patient days per day from Naples Community Hospital, is accurate. If this occurs, it would mean that approximately 29,200 annual patient days would be garnered by Community. Mr. Morton's analysis established that a resultant raising of rates by Naples would have to occur in the amount of $240 per patient day. Failure of Naples to so raise its rates to patients, would cause an annual revenue deficiency of 6.5 million dollars. This increase of $240 per patient day would result in a $1,536 increase in the average charge per adjusted admission, based upon the average length of stay at Naples which is 6.2 days. Even if Community obtained only half its patients from the Naples Community Hospital, (a likely understatement of its patient market impact), the resulting loss to Naples per patient day would be $220 with a concomitant necessary increase, in average patient charges per admission in the amount of $768, in order for NCH to remain financially viable. If Naples were unable to raise its charges to compensate for this loss of patients to the Community facility, then it would have to curtail services currently rendered on a deficit basis, such as its discrete pediatric unit, which experiences a 40 per cent indigent patient utilization. Community's own projections show that it expects to garner 27,790 patient days, which for the above reason, are likely to all be gained at the expense of NCH. This will result in the loss to NCH of at least 76 patient days per day with a resultant revenue shortfall nearly as high as that postulated by Morton as a result of his patient origin study and adverse impact analysis. Thus, in terms of lost patient days and lost revenue, both the figures advanced by Naples and those advanced by Community reveal that a substantial adverse impact will be occasioned to Naples by the installation of Community's hospital, especially in view of its location at approximately the midpoint between the Lee County boundary and NCH's facility in Naples. Naples derives approximately 54 per cent of its gross patient revenues from Medicare reimbursement. Four per cent of its revenues are represented by Medicaid patient reimbursement. Eight to nine per cent of its billings are not collected because of non-reimbursable, indigent patient care and bad debts. Community will obtain from 76 to 80 patient days per day case load now enjoyed by Naples Community Hospital. Community projects that its billable case load will be characterized by four per cent Medicaid reimbursable billings, and six and one- half per cent of its annual case load will be represented by indigent and bad debt uncollectible billings. Forty-six per cent of NCH's indigent and bad debt cases come from the Immokalee area lying east of State Road 887 and north of State Road 846, and the Community Hospital would be built approximately midway between that area and the location of NCH. Therefore, based upon Community's own projection of total billings for 27,790 patient days, or at most, 29,200 days per year, (according to NCH's figures which depict the loss to NCH of 80 patient days instead of 76) it becomes obvious that Community's bad debt, indigent case billings would actually be in the neighborhood of 17 per cent of its total, billable case load, rather than the six and one-half per cent it projects in its application and evidence. This would render the bad debt, indigent patient-based uncollectibles of Community to be on the order of four million dollars per year. Such a high magnitude of bad debt, uncollectible billing experience can reasonably be expected since Community's Hospital would be constructed between the source of most of the indigent bad debt case load and NCH's location. This location is also in the center of the most affluent, rapidly developing residential area of Collier County. Given the fact that Community-NME's proposed location is likely to attract a high indigent, bad debt case load from the economically depressed Immokalee area, approaching the magnitude of 17 per cent of total case load, if a policy of freely accepting indigent, uncollectible cases were followed by Community-NME, but considering also the fact that Community proposes to locate its hospital in the service area it has delineated to include the most concentrated source of more affluent, privately paying patients available to these competing hospitals, it cannot be concluded that Community-NME plans to incur such a high financial risk by free acceptance of indigent, charity cases. Rather it seeks to largely serve the collectible, private-paying patient source of northwestern Collier County, hence its recently altered proposed location. This determination is borne out by the experience of NME's other Florida hospitals, which are characterized by a very low percentage acceptance of indigent, bad debt, patient service. Thus, it is quite likely that NCH would be relegated to continued service of this large number of indigent, nonpaying patients while Community/NME would serve a patient base composed of largely private-paying and Medicare reimbursed patients drawn primarily from NCH, a significant financial detriment to that entity, which at present experiences a rather precarious operating ratio, characterized by, at best, a three per cent profit margin. Such an eventuality would force upon NCH the choice of raising its rates substantially or curtailing services, or both, with the probable alternative of seeking taxpayer subsidization of such an increased charity case load. NCH effectively competes with the pertinent hospitals in Lee County for the same patient base, due to its lower charges, as shown by the fact that Naples has the lowest revenue per adjusted admission and per adjusted patient day of the hospitals in Collier and Lee Counties. Thus, any increase in charges at Naples necessitated by the adverse effect of the installation of Community's hospital would put it at a distinct additional disadvantage in competing with the Lee County hospitals. A similar financial resultant adverse impact would be imposed on Lee Memorial, Fort Myers Community and Gulf Coast in terms of declining utilization and revenues. It is further noteworthy that Community's own projection of annual patient days reveals that it will experience an occupancy rate of approximately 50 per cent. It has not been established how 27 to 29 thousand patient days with a concomitant occupancy rate of only SO to 51 per cent can support a 150-bed free standing, acute care hospital with a full complement of ancillary services, which fact renders the financial feasibility of Community's proposed hospital substantially in doubt. In terms of the relationship of adverse impacts on existing hospitals to the legislative goals of hospital cost and rate containment, it should be pointed out that the current utilization rate of all hospitals in this area District VIII are declining, partly as a result of the impact of the "diagnostic related groups" (DRG) method of reimbursement. The utilization at NCH for the first six months of 1984 has dropped to 62.3 per cent. The utilization rate of the Lee County hospitals has been reduced to approximately 65.4 per cent. The addition of another acute care hospital to this area, which is established to likely experience a utilization of only 50 to 51 per cent itself, would only cause the current low utilization rates to plummet more drastically. This situation would substantially impair the financial viability of all existing hospitals in the relevant area of District VIII, and Community, as well. Thus, if the proposed Community Hospital were added to this area, it would only aggravate the problem the CON approval process is designed to prevent, that of avoiding escalating health care rates and costs, concomitant decline in adequate levels of service and unnecessary duplication of services. GEOGRAPHIC ACCESSIBILITY In support of its assertion that by 1989 a portion of its service area will not be accessible within 30 minutes driving time of an existing hospital, Community adduced the testimony of Mr. Michael Dudek, accepted as an expert traffic engineer. Mr. Dudek plotted the time and distance of travel from NCH, Cape Coral Hospital, Lee Memorial Hospitals Fort Myers Community Hospital, Eastpoint Hospital, the future Gulf Coast Hospital and proposed Lee Memorial 100-bed satellite facility. He employed the "floating car method" in determining travel times from each hospital to points 30 minutes from the hospital. He projected future travel times along the same routes with a view toward growth in traffic volume based upon population growth. Mr. Dudek opined that in 1989 there will be, under average traffic conditions, a portion of northern Collier and southern Lee Counties which will not be within 30 minutes average travel time of any existing hospital. In his own opinion, in peak travel seasons, coextensive with seasonal, winter population peaks in this geographic area, the situation will be aggravated such that the territory where residents are more than 30 minutes driving time from existing hospitals will expand. Mr. Dudek conceded that vehicles on roads adjacent to main artery roads would reach various main arteries at different times, depending on the density of the population in the residential neighborhoods between those main traffic arteries. He did not map his proposed 30-minute driving time contour lines to indicate these variables. Further, he acknowledged that even during the 1989 projected peak traffic season, the geographical triangle in which Community-NME will locate its proposed hospital, was not outside the driving time projected for Naples Community Hospital. He apparently based his conclusions on the premise that road and traffic improvements would not occur so as to significantly compensate for the population and traffic growth posed by various real estate developments of regional impact which have been filed and proposed for north Collier and south Lee Counties. Naples, presented the testimony of Mr. Jack Barr, also accepted as an expert traffic engineer. Mr. Barr used the "average car method" in conducting a travel-time study to determine the points on arterial roads 30-minutes distance from all existing hospitals in Lee and Collier Counties as well as from the proposed Lee Memorial Satellite Hospital. (Naples Exhibit 76). The distances between those points are interpolated and plotted on the basis of estimated average speeds on the non- arterial segments of the roadways that would be traversed by people making their way to the arterial roads. Mr. Barr also surveyed proposed road improvements in the Collier and Lee County areas (Naples Exhibit 7C). He predicated this survey on the most recent Department of Transportation traffic maps. He performed his original field study during a four-week period in December and January, 1982. The travel times for Collier County were then revised and updated on October 24, 1984 with a field survey and for Lee County on August 14 through 23, 1984. Mr. Barr was unable to determine any significant statistical difference between the contours he plotted in his 1982-83 survey and those plotted in the 1984 updated survey. Mr. Barr employed information obtained from the Southwest Florida Regional Planning Council, the Lee County Planning Department and the Collier County Traffic Planner, as well as information from his own files on proposed residential building projects with which he has been associated professionally or become aware of in the area. It was thus established that that portion of north Collier County and southern Lee County, where most of the proposed residential development will occur, and which is in Community's proposed service area, is currently partially or totally within 30-minutes driving time of three existing and one approved hospital. All the proposed major residential developments in the north Collier/south Lee County area are within 30 minutes travel time of at least one existing hospital and most lie within the 3 minute contour lines for the proposed Lee Memorial Satellite Hospital. The travel time contours will remain substantially unchanged for the next ten years based upon major road improvements planned in the next ten years. Information as to road improvements was obtained from the approved Collier County Comprehensive Plan, from average daily traffic counts on U.S. 41 conducted by the Department of Transportation and Collier County, from the Lee County Transportation and Improvement Program which shows the status of road improvements for 1985 through 1989, and from the Department of Transportation Road Improvement Program extending through the fiscal year 1989 for Lee and Collier Counties. All the roads included in the DOT projection for the next five years are committed and will be built. Although there will not be a decrease in traffic along U.S. 41, rather the increase in traffic that would normally occur on U.S. 41 will be largely offset by traffic shifting over to parallel routes which are to be developed through the road improvement programs established by Mr. Barr. There has been a steady decrease in use of the formerly highly congested U.S. 41 artery because of the development of parallel highways such as Airport Road. Mr. Barr established that the road improvements upon which his opinion is partly based are being implemented, and since most are funded by gasoline tax monies earmarked for that purpose, it is reasonable to assume that the DOT sponsored improvements will continue to be made. Further, although Community sought to show that a portion of the population of its service area is beyond a 30- minute travel time from existing acute care hospitals, it did not demonstrate that that population now or in 1989 amounts to more than 10 per cent of the Collier County population. In his capacity as a traffic-engineer, Mr. Barr has worked in Lee and Collier Counties for approximately seven years, representing public and private clients. He has monitored the implementation of the Collier Comprehensive Plan as it relates to roadways and real estate development and established that road improvements are indeed being implemented. His testimony and opinion, predicated on more accurate surveying techniques, supported by local planning and Department of Transportation documentation, is better corroborated and more competent than that of Mr. Dudek and is accepted. Thus, it has not been shown that the 30 minute travel time points and distances attributable to existing hospitals will recede sufficiently to create the new service area contemplated by Community. EXISTING SERVICE - AVAILABILITY, QUALITY, ADEQUACY OF CARE, ACCESSIBILITY To ALL, INCLUDING INDIGENTS NCH affords adequate availability and access to acute care services for patients in Collier and southern Lee Counties, including indigent patients. Community's proposed facility would not have a level 2 or 3 nursery, and would not have a discreet pediatric unit, both of which Naples has. Thus, access to pediatric, as well as obstetric services, would not be enhanced by the advent of Community's hospital, for indigent or other patients originating in Community's proposed service area. Additionally, inasmuch as NCH's pediatric unit operates at a deficits the addition of such services, even of their limited scope, by Community may, for financial reasons, result in the curtailment of such services, especially for indigent, in view of the considerations expressed above. The physician-director of the Collier County Health Department, Dr. Polkowski was called and accepted as an expert witness on behalf of Naples in the area of public health, for the purpose of discussing the distribution of medically indigent persons and availability of services in Collier County. Her work requires her to routinely review U.S. Bureau of Census data on age and health characteristics of the population of Collier County and to travel throughout the county to acquire knowledge of the health characteristics of the population. It was thus established that the highest concentration of poverty level patients occurs in Census Tracts 112, 113, 114 and 104, with a particularly high concentration in Census Tract 112 which comprises the Immokalee area in northeastern Collier County. A particular health problem in that area is teenage pregnancy, with 90 births to females under 19 years of age in 1983 out of a county-wide statistic for such births of 172. Eleven per cent of the babies born to women under 19 years of age in Collier County are low birth weight babies, which typically necessitate higher levels of neonatal, specialized care because of the increased chances of serious health problems occasioned by low birth weight. There are three recognized levels of care for newborn babies in Florida. Naples Community Hospital has a Level 1 and 2 nursery. Level 1 represents babies who have no exceptional conditions. Level 2 is for those babies with respiratory and other serious problems requiring enhanced levels of care and is characterized by such special equipment as isolettes, intensive care bassinets with respirators, cardiac monitors, apnea monitors, resuscitation and cardiac resuscitation equipment. The staffing level of the Level 2 nursery is at a ratio of one neonatal specialized nurse to three babies rather than the one nurse per six babies of the Level 1 nursery. The Level 2 and 3 babies have serious and frequently chronic health conditions for the short, and sometimes the long-term, often characterized by quite high patient costs. The Immokalee area has the highest poor as well as non white concentration in the bounty. There are approximately 14,000 permanent residents, but during the wintertime the population swells to over 20,000 when predominantly Mexican American migrant farm workers arrive in the area. The poor population has a higher mortality rate for infants and manifests more serious medical problems on a greater per capita basis than does the more affluent population lying to the west and southwest. The Immokalee area population has a high rate of tuberculosis, venereal disease, parasites and hepatitis. The current level of services provided to the indigent population by Naples Community Hospital however, is of a high quality. Richard Akin is the Director of the Collier Health Services, a private, nonprofit primary health care organization which offers primary medical and dental care services to the rural, poor population of northeast Collier County. Most of these patients are migrant farm workers who have absolutely no means of paying their own medical bills. Collier Health Services provides primary medical care at three locations in the county with the largest center being at Immokalee. The Immokalee facility has seven staff positions which include such specialties as pediatrics, family practice, internal medicine and obstetrics. The Immokalee facility records approximately 60-thousand patient visits per year. Seventy-five per cent of these are represented by Mexican- American farm workers who are employed in the area seasonally. Another 10 to 12 per cent per year are Haitian immigrants employed in agriculture. Between 60 and 80 per cent of all patient visits are not paid for by the patient. The Immokalee primary care facility refers 4,000 to 4,500 patients to a hospital annually, with about 12 to 15 such referrals per day. These are for normal, non-emergency care situations. Additionally, between 400 and 450 patients are referred to a hospital for emergency care per year. All the primary care center's emergency and non emergency patients are referred to NCH. Mr. Akin has attempted to refer patients from the Immokalee facility to other area hospitals such as in Lee County, but without success. NCH is located in fairly close proximity to the Immokalee Primary Care Center, and, even though most patients have no means of paying for medical care, NCH treats and admits them without questioning them in advance concerning their ability to pay, insurance, Medicaid and the like. Mr. Akin has previously attempted to refer his indigent patients to the Fort Myers area hospitals with little success in having them admitted. LeHigh Acres Hospital is considerably closer, being 24 miles away, but Mr. Akins has had little success in having the indigent patients he serves admitted there. Instead, he refers to Naples since the patients are treated with the same dignity and decency as paying patients at that hospital. In excess of 50 per cent of the patients he refers from the primary health center to Naples never pay anything for the services received. Approximately 30 per cent of the non-emergency patients referred to Naples annually are pediatric referrals. About 30 per cent of the emergency referrals are also pediatric patients. Four hundred to four-hundred fifty non- emergency patients annually are obstetric patients who come to full term and are delivered. It is unlikely that any of the pediatric patients would be referred to a hospital, such as the proposed Community facility, which does not have a discreet pediatric unit with a specialized staff and equipment, since the primary care center in Immokalee has the capability of treating any overnight, routine pediatric problem itself, and any pediatric patient that cannot be handled on a one-day admission at the facility, can be sent to the discreet, specialized pediatric unit at Naples Community Hospitals which Community of Collier will not offer. The standard procedure at Naples Community Hospital for admitting patients who do not have a private physician or a private physician referral, is nondiscriminatory. That is, in the triage process, when a patient arrives at the emergency room, for instance, only the patient's name, address, age, date of birth and questions eliciting his medical status are asked upon his arrival. Depending on the nature of the injury involved, the on-call medical specialist for that type of injury is then summoned to the emergency room. If it appears necessary to admit the patient to the hospital, the on-call specialist authorizes the admission. When the admission determination is made, there is no information available on the admitting documents and no questions are asked to indicate whether the patient is a paying patient, a nonpaying migrant worker, an insured patient, or a Medicare patient. Naples presently has a labor and delivery area with a birthing room and a three-stage cohort type of nursery. Infants move through three different stages in the nursery depending on age, so as to reduce infections. Seventeen of the 24 beds on the floor are designated as OB beds. Whenever more than 17 patients must use that floor, they are able to expand to gynecological medical surgical beds on the same floor which thus gives a total capacity for OB patients of 24 beds. The OB services as proposed by Community are essentially duplicative of the services in existence at Naples Community Hospital, although with a less intensive level of care for 08 and pediatric patients. Essentially all the other services proposed by Community duplicate these services already available to area residents at NCH and the other pertinent hospitals. Thus, it is apparent that if Community's facility is located where proposed, it will actually serve an area that is more elongated north to south rather than east to west, and will in reality serve the more affluent, private- paying patient origin areas lying in west-central and northwest Collier County. The reason for this is that most of the indigent patient population will bypass Community of Collier's Hospital and go to Naples for the above delineated reasons, and Community would then tend to draw patients from the more populated, wealthier areas on a north-south line from the Naples area up to and across the Lee County line rather than on an east-west axis. The fact that Community/NME would serve primarily privately-paying patients is exemplified by the fact that NME's other Florida hospitals typically have no (or very minimal) Medicaid patient days, such that that parent company's policy is not one of encouraging service to Medicaid or indigent patients. It is thus apparent that with the advent of Community/NME's hospital that there would be created two different patient bases or patient markets, with Naples continuing to serve the vast majority of the indigent, Medicaid, or bad- debt patient base. Community/NME would garner its patient base largely from private-paying, more affluent patients with substantially less bad debt ratio. This would siphon off much of Naples's private paying base, such that, with its already slim or sometimes nonexistent profit margin, its financial viability would become more and more in doubt. This would raise the alternative mentioned above of either raising its rates substantially, causing health care costs for the consuming public to rise significantly, seeking relief from the taxpayers of Collier County, or curtailment of available services to indigents and all other patients, especially GE and pediatrics; possibly even all three cost coverage alternatives. Such an eventuality would ultimately result in a reduction in the quality of health care afforded the patient public. NAPLES AVAILABLE AND PROPOSED SERVICES Mr. Mike Jernigan was tendered by NCH and accepted as an expert in health care planning and hospital financial management. Mr. Jernigan is employed as Director of Planning at Naples and prepared the instant Certificate of Need application seeking 30 beds. Naples has recently added 43 psychiatric beds under previously issued Certificates of Need. The instant application contemplates relocation of the 43 psychiatric beds to the fourth floor of a support building, there creating a discrete psychiatric care unit. Naples amended its request at hearing so as to seek 20 instead of 30 medical/surgical beds to be added to the space to be vacated by the 43 psychiatric beds. No significant construction will be required in the vacated space, rather semiprivate rooms will be converted to private rooms. The 1.7 million dollar project cost is chiefly attributable to the construction of the facility which will house the licensed 43 psychiatric beds. Thus, the reduction in the number of acute care beds sought from 30 to 20 will not significantly alter the 1.7 million dollar project cost. Naturally, the minor project costs attributable to installation of 10 acute care beds in the vacated, former psychiatric bed space will be lessened by an amount attributable to 10 beds. In any event, NCH has been demonstrated to have adequate financial resources to undertake the project outlined in its application and has those funds committed. Naples can add these 20 proposed beds and successfully operate them as a minor addition to its now feasibly operating acute care hospital. Naples has recently opened a free standing, primary care center called North Collier Health Center, in the vicinity of the proposed site of Community/NME's hospital. That facility includes a radiology room, laboratory and emergency medical service station, in addition to offering normal, primary care services. It is staffed 24 hours a day, seven days a week with a physician, but does not have inpatient beds. A similar primary care center has been constructed on Marco Island. Both of these centers have been added to Naples complement of facilities and services in implementation of a long-range health care expansion plan designed to make Naples' services more accessible and available to the public throughout its Collier County, southern Lee County service area. Given Naples low and sometimes non existent margin of revenue over expenses, the construction of these two facilities was rendered largely financially feasible through the donation of the land for both of them through community fund raising efforts, and the construction of the Marco Island facility was accomplished with entirely donated funds. The EMS substation at the North Collier Primary Care Center is operated and financed by the county, and the sleeping quarters at that sub station and at the Naples main campus facility for EMS personnel are provided free of charge at some financial loss to the hospital. Such an arrangement constitutes good health care planning, even though it results in some financial detriment to Naples, since it makes the emergency medical technicians immediately available to assist emergency patients who are transported to the primary care centers by their own means, and shortens the reaction time for emergency personnel since they are not located at separate locations from the hospital or primary care centers. These arrangements further Naples' long range goal in making its emergency primary care and primary care services more available and accessible to the public in its service area, which goal receives strong public support as evidenced by the large public donations which largely made the installation and operation of these facilities possible. Since Naples is a not-for-profit hospital, any excess of revenue over expenses it experiences is used to acquire new and needed equipment or expand facilities, including facilities and services such as these. The installation of Community/NME's hospital at its proposed locations especially, would duplicate the services offered at North Collier Primary Care Center and to a great extent those offered at the main campus of NCH in Naples. It was established through the testimony of Miles Price, an architect specializing in hospital design, that the construction costs, architectural costs and related inflation factors depicted in Naples' application are reasonable and accurate with regard to the relocation and construction for the psychiatric beds, which are to be moved, and the installation of the 20 acute care beds proposed. Acquisition of equipment necessary for the operation of the 20 proposed beds will be financially assisted by its present shared purchasing arrangements, whereby it is able to obtain resultant discounts in acquisition of the necessary equipment needed for installation and operation of the new beds. BED NEED AND BED ALLOCATION Thomas Porter was tendered and accepted as an expert in health care planning in Florida. Subpart (23) of Rule 10-5.11, F.A.C. is the acute care bed need determination methodology. It is the policy of HRS in accordance with the legal mandate referenced herein to facilitate the use of subpart (23) of the rule by regularly compiling and disseminating district bed need information, including that depicted in Community's Exhibit 16, which includes a memorandum from Phil Rond, the Administrator of the Office of Comprehensive Health Planning of HRS. If the formula at subpart (23) of the above rule is employed using historical utilization data from the years 1981 through 1982, a net bed need of 375 for all of District VIII results and that is the current bed need status of the district advocated by Community. However, as established by the memorandum from Mr. Rond incorporated in Exhibit 16, the most recent utilization data includes that for the year 1983, which is the most recent hospital reporting period envisioned by the formula and above rule. When the 1983 utilization data is added to the 1981-1982 information, a drop in total bed need for District VIII occurs from a figure of 4,147 beds to 3,654 beds. When licensed and approved beds are subtracted from that figure, a minus bed need results and District VIII has an excess of 118 beds. The rule formula at subpart (23)(g) dictates that the three most recent annual hospital licensure reporting periods must be used for the utilization data necessary to operate the need determination formula. 2/ The use of the most recent utilization data, including 1983, for District VIII causes the overall projected occupancy level contemplated in the methodology (at 10.5.11(23)(g)(2)) to fall below 75 per cent, when the bed need calculation is carried out to its conclusion. Given the projected occupancy falling below 75 per cent, the end result is that gross bed need in District VIII is 3,654 beds, rather than 4,147 beds as postulated by Community. Community contends that the 1983 utilization data should not be used since it was not available for Districts I and II and should not be used for any district until it is available and disseminated for all districts 3/ The reason the department promulgated Mr. Rond's special memorandum with regard to the bed need projections for District VIII, was to alert users of that information that in that particular district the drop in the most recent utilization data triggered the rule mechanism of subpart (23)(g)(2) because it revealed that the overall projected occupancy levels would fall below 75 per cent, all of which showed on a district-wide basis an over-bedding of 118 acute care beds. Mr. Larry Bebe is Acting Executive Director and Planner for the District VIII Health Council. He was accepted as an expert witness in health care planning and public health administration. Mr. Bebe considers the local health council plan to be a valuable planning tool for purposes of allocating beds in District VIII on a less than district-wide basis. The plan was adopted in March, 1984, but has not yet been adopted as a rule by HRS. According to the District VIII Health Council Plan, that district is sub-districted by counties, except for Glades and Hendry Counties which are combined in a two-county sub- district. This form of sub-districting has been done for approximately seven years. District VIII is sub-districted on a county basis rather than on other geographical boundaries, because population data, useful in planning allocation of beds, is only available in the form of county-based population projections by age-specific cohorts from the Bureau of Economic and Business Research at the University of Florida (BEBR). Further, in considering the location of existing hospitals, the greatest proportion of people in the seven county area of District VIII can be located within a reasonable time and access to health care services by allocating the beds on a county sub-district basis. The population data promulgated by the BEBR is employed by HRS, is generally accepted as authoritative in Certificate of Need proceedings, and is herein. It is not available by age-specific cohort in the census tract geographical subdivisions attempted to be used by Community in 4 in delineating its purported service area. 4/ Performance of population based health care planning must be done consistently and future need must be projected based upon preparing utilization rates predicated on the same population geographical area each time. A common geographical basis for allocation of beds, such as counties, is most appropriate since that is the basis on which the most accurate population data is available. The bed allocation methodology used by the local health council to allocate beds by county sub-districts is contained in Naples Exhibit No. 35. Bed allocation on a county sub-district basis is determined by taking the overall bed number available from the state methodology rule formula and breaking it down into county sub-districts according to the District VIII health plan methodology. This methodology takes into account existing hospital utilization and location, changes in population, and projected patient days. All items of information to operate the allocation formula are obtained on a county basis. Under the District VIII health plan methodology, when existing beds are subtracted from needed beds, a projected need for 20 medical/surgical beds in Collier County results with an excess of 41 existing beds in Lee County for the horizon year of 1989. Mr. Porter corroborated Mr. Bebe's testimony and established that, although not adopted by HRS rule, the sub-districting of District VIII by county for health planning purposes conforms with HRS policy in terms of population and geographical criteria and constitutes a reasonable and rational health planning tool. The methodology used by the local health councils to allocate beds to the counties incorporates standard, accepted health planning practices and HRS' policy is not to interfere with that allocation of beds on a sub-district basis, so long as the subdistricting allocation does not exceed the bed need number for the district as a whole. Mr. Porter demonstrated that it is possible under the state Subpart (23) methodology to find no need or excessive beds at a district level, however, by applying the local health council methodology a positive mathematical need might be shown in one or more county sub-districts. Thus, it has been shown that the local health council allocation method which reveals a 20-bed need for Collier County is the result of a rational, standard, accepted health planning practice with regard to determining projected bed need on a less than district- wide basis. However, although that methodology shows a formula-based "need" in Collier County, the above findings reflecting the severely declining utilization experience in Collier County at NCH, together with its already scant operating ratio, when considered with the future effect on its utilization rate caused by the advent of Gulf Coast Hospital, show that no true need for any beds exists. Bed need projections are not the only pivotal considerations in determining entitlement to a CON. Brown and Kendall Lakes Hospital, Inc., Humana, Inc. d/b/a Kendall Community Hospital v. HRS, 4 FALR 2452A, (Final Order entered October 6, 1982).
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED: That the application for a Certificate of Need submitted by Community Hospital of Collier, Inc. for 150-beds for northern Collier County be DENIED, and that the application for a Certificate of Need submitted by Naples Community Hospital, Inc. for the addition, as amended, for 20 beds be DENIED, and that, in view of the application involved in Case No. 84-0909 having been withdrawn, that that case be CLOSED. DONE and ENTERED this 16th day of August, 1985 in Tallahassee, Florida. P. MICHAEL RUFF 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 16th day of August, 1985.
The Issue The issue is whether Petitioner’s application for a Certificate of Need to establish a new 84-bed acute care hospital in Viera should be approved.
Findings Of Fact Parties Holmes and the Health First System Holmes, the applicant for the CON at issue in this case, is a not-for-profit corporation that operates two acute care hospitals in Brevard County: Holmes Regional Medical Center (HRMC) in Melbourne and Palm Bay Community Hospital (PBCH) in Palm Bay. HRMC opened in 1962. It is a 514-bed acute care hospital, with 504 acute care beds and 10 Level II neonatal intensive care (NICU) beds. HRMC provides tertiary-level services, including adult open-heart surgery, and it is the designated trauma center for Brevard County. HRMC has been recognized as one of the top 100 cardiovascular hospitals in the country, and it has received other recognitions for the high quality of care that it provides. PBCH opened in 1992. It is a 60-bed acute care hospital. PBCH does not provide tertiary-level services, and it does not provide obstetrical (OB) services. Holmes’ parent company is Health First, Inc. (Health First), which is a not-for-profit corporation formed in 1995 upon the merger of Holmes and the organization that operated Cape Canaveral Hospital (Cape Hospital). Cape Hospital is a 150-bed not-for-profit acute care hospital in Cocoa Beach. The range of services that Cape Hospital provides is broader than range of services provided at PBCH, but not as broad as the range of services provided at HRMC. For example, Cape Hospital provides OB services, but it does not have any NICU beds. All of the Health First hospitals are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Health First provides a broad range of health care services in Brevard County in addition to the hospital services provided at HRMC, PBCH, and Cape Hospital. For example, it operates a hospice program, surgical center, outpatient facilities, and fitness centers. Health First also administers the Health First Health Plan (HFHP), which is the largest managed care plan in Brevard County. All of the Health First hospitals serve patients without regard to their ability to pay, and as more fully discussed in Part F(1)(g) below, Holmes provides a significant amount of care to Medicaid and charity patients at HRMC and PBCH. Holmes also provides health care services to the medically underserved through a program known as HOPE, which stands for Health, Outreach, Prevention, and Education. HOPE was established in the early 1990’s to provide free health care for at-risk children as well as free clinics (both fixed-site and mobile) for medically underserved patients throughout Brevard County. At the time of the final hearing, the free clinics operated by HOPE were being transitioned into a federally- qualified health center, the Brevard Health Alliance (BHA). After the transition, Holmes will no longer operate the clinics; however, Holmes is obligated to provide $1.3 million per year in funding to BHA and it will continue to provide services to at- risk children through the HOPE program. Health First administers a charitable foundation that raises money to support initiatives such as the cancer center at HRMC, the construction of a hospice house, and an Alzheimer’s support center. The foundation has raised approximately $7 million since its inception in October 2001. Wuesthoff Wuesthoff operates two not-for-profit acute care hospitals in Brevard County: Wuesthoff-Rockledge and Wuesthoff- Melbourne. Like Health First, Wuesthoff provides a broad range of health care services in Brevard County in addition to its acute care hospitals. The services include a nursing home, assisted living facility, clinical laboratory, hospice program, home health agency, diagnostic center, and fitness centers. Wuesthoff-Rockledge opened in 1941. It has 245 beds, including 218 acute care beds, 10 Level II NICU beds, and 17 adult inpatient psychiatric beds. Wuesthoff-Rockledge provides tertiary-level services, including adult open-heart surgery, and it is the only acute care hospital in Brevard County designated as a Baker Act receiving facility. Wuesthoff-Rockledge is in the process of adding 44 more beds, including a new 24-bed intensive care unit (ICU) that is projected to open in 2006 and 20 acute care beds. After those beds are added, Wuesthoff-Rockledge will have 289 beds. Currently, approximately 57 percent of Wuesthoff- Rockledge’s beds are in semi-private rooms and 43 percent of the beds are in private rooms. After the addition of the 44 new beds, the percentages will be 69 percent in semi-private rooms and 31 percent in private rooms. Wuesthoff-Melbourne opened in December 2002. It originally received CON approval for 50 beds in November 2000. Before it opened, it received CON approval for an additional 50 beds, which increased its licensed capacity to 100 beds. Wuesthoff-Melbourne opened with 65 beds, all of which are in private rooms. At the time of the hearing, Wuesthoff- Melbourne had that same number of beds and an occupancy rate of approximately 80 percent. In December 2004, Wuesthoff-Melbourne added an additional 50 beds. Wuesthoff was awaiting final licensure approval from the Agency for those beds at the time of the hearing. The approval will increase Wuesthoff-Melbourne’s licensed capacity to 115 beds, all of which are in private rooms. The additional 15 beds (beyond the 100 previously licensed) were added pursuant to the 2004 amendments to the CON law, which permit bed expansions at existing hospitals without CON approval. Wuesthoff-Melbourne was designed and engineered for approximately 200 beds, and it expects to have 134 beds in service in the near future. The space for the additional 19 beds (to expand from 115 to 134) has been shelled-in, and the bed expansion will likely be completed in late-2005 or early- 2006. All of those beds will be in private rooms. The expansion of Wuesthoff-Melbourne to 134 beds will occur notwithstanding the outcome of this proceeding, but the expansion of the facility to 200 beds depends in large part on the outcome of this proceeding. Wuesthoff-Melbourne provides all of the basic acute care services, including OB services. It does not provide tertiary-level services. The Wuesthoff hospitals are accredited by JCAHO. Wuesthoff has been recognized as one of the “100 Most Wired” hospitals by Hospitals & Health Networks magazine for the comprehensive information technology (IT) systems in place at its hospitals. The Wuesthoff hospitals serve all patients without regard to their ability to pay, and as discussed in Part F(1)(g) below, the Wuesthoff hospitals provide a significant amount of care to Medicaid and charity patients. Wuesthoff also provides health care services to the medically underserved through a free health clinic in Cocoa and a mobile unit that serves patients throughout Brevard County. Like Health First, Wuesthoff administers a charitable foundation that funds initiatives at the Wuesthoff hospitals and in the community. (3) Agency The Agency is the state agency that administers the CON program and is responsible for reviewing and taking final agency action on CON applications. Application Submittal and Preliminary Agency Action Holmes filed a letter of intent and a CON application in the first batching cycle of 2004 for hospital beds and facilities. Holmes’ letter of intent and CON application were timely and properly filed. Holmes application, CON 9759, proposes the establishment of a new 84-bed acute care hospital in the Viera area of Brevard County. The proposed hospital will be known as Viera Medical Center (VMC). The fixed need pool published by the Agency for the applicable batching cycle identified a need for zero new acute care beds in Subdistrict 7-1, which is Brevard County. There were no challenges to the published fixed need pool. The Agency comparatively reviewed Holmes’ application with the CON applications filed by Wuesthoff to add 34 beds at Wuesthoff-Melbourne (CON 9760) and to add 44 beds at Wuesthoff- Rockledge (CON 9761). On June 10, 2004, the Agency issued its State Agency Action Report (SAAR), which summarized the Agency’s findings and conclusions based upon its comparative review of the applications. The SAAR recommended denial of Holmes’ application and both of Wuesthoff's applications. After the Agency published notice of its intent to deny the applications in the Florida Administrative Weekly, Holmes timely petitioned the Agency for an administrative hearing on the denial of its application. Wuesthoff did not pursue an administrative hearing on the denial of its applications as a result of the 2004 amendments to the CON law, which became effective July 1, 2004. Under the new law, a CON is not needed to add acute care beds at an existing hospital and, as indicated above, the Wuesthoff hospitals are already in the process of adding the beds that they were seeking through CON 9760 and CON 9761. The Agency reaffirmed its opposition to Holmes’ application at the hearing through the testimony of Jeffrey Gregg, the Bureau Chief for the Agency’s CON program. Acute Care Subdistrict 7-1 / Brevard County The Agency uses a five-year planning horizon in determining the need for new acute care beds, and it calculates the inventory of acute care beds and considers CON applications for new acute care beds on a subdistrict basis. Brevard County is in Subdistrict 7-1. There are no other counties in the subdistrict. There are six existing acute care hospitals in Brevard County, all of which are not-for-profit hospitals: Parrish Medical Center (Parrish) in Titusville, Cape Hosptial, Wuesthoff-Rockledge, Wuesthoff-Melbourne, HRMC, and PBCH. Brevard County is a long, narrow county. It stretches approximately 70 miles north to south, but averages only 20 miles east to west. The county is bordered on the north by Volusia County, on the west by the St. Johns River and Osceola County, on the south by Indian River County, and on the east by the Atlantic Ocean. The major north-south arterial roads in the county are Interstate 95 (I-95) and U.S. Highway 1 (US 1). The Intracoastal Waterway also runs north and south through the eastern portion of the county. Other arterial roads in the south/central portion of the county are Murrell Road, Eau Gallie Boulevard and Wickham Road. Because of the county’s long and narrow geography, three recognized market areas for hospital services have developed in the county, i.e., northern, central, and southern. The northern area of the county, which includes the Titusville area, had approximately 63,000 residents in 2003. It is primarily served by one hospital: Parrish. The central area of the county, which includes the Rockledge and Cocoa areas, had approximately 163,000 residents in 2003. It is primarily served by two hospitals: Wuesthoff- Rockledge and Cape Hospital. The southern area of the county, which includes the Melbourne and Palm Bay areas, had approximately 276,000 residents in 2003. It is primarily served by three hospitals: HRMC, Wuesthoff-Melbourne, and Palm Bay. The Viera area, discussed below, overlaps the central and southern market areas and is primarily served by Wuesthoff- Rockledge, Wuesthoff-Melbourne, and HRMC. According to the data in Table 28 of the CON application, those hospitals together accounted for 90 percent of the patients from zip code 32940, which is the “main” Viera zip code. The evidence was not persuasive that the three market areas in Brevard County equate to “antitrust markets” from an economist’s standpoint, but it was clear that the hospitals and physicians in the county recognize the existence of the market areas. For example, there is very little overlap in the medical staffs of the hospitals in different market areas, but there is significant overlap in the medical staffs of the hospitals in the same market area, and the opening of Wuesthoff-Melbourne in south Brevard County impacted HRMC and PBCH, but had little impact on the hospitals in central Brevard County. Additionally, there is very little out-migration of patients from one area of the county to hospitals in another area. The data in Tables 18 and 19 of the CON application shows that in 2003, for example, 83.6 percent of south Brevard County adult medical/surgical patients were admitted to one of the three south Brevard County hospitals, and 79.5 percent adult medical/surgical patients in central Brevard County were admitted to one of the two hospitals in that area of the county. Viera Viera is an unincorporated area in south/central Brevard County that is being developed by The Viera Company (TVC). TVC is a for-profit land development company owned by A. Duda & Sons, Inc. (Duda). The Viera DRI Viera is being developed pursuant to a development of regional impact (DRI) development order that was first adopted by Brevard County in 1990. The original DRI included 3,000 acres east of I-95, which was developed primarily as residential subdivisions. In 1995, an additional 6,000 acres were added to the DRI west of I- 95, which is being developed as a mixed-use community. The portion of the DRI east of I-95 has effectively been built-out. The build-out date for the remainder of the DRI is 2020. The master plan for the DRI includes approximately 19,000 residential units, 3.7 million square feet (SF) of office space, 2.9 million SF of commercial space, a governmental center, six schools, parks, open space, and a 7,500-seat baseball stadium and practice facility used by the Florida Marlins. As of October 2004, over 5,800 homes and approximately 2 million SF of commercial and office space have been developed west of I-95 in addition to the governmental center, several schools, and the Florida Marlins’ facilities. There are approximately 12,000 acres of undeveloped, agricultural property adjacent to and to the west of the DRI that are owned by Duda and that, according to the chief operating officer of TVC, will likely be added to the DRI in the near future. The record does not reflect what type of uses will be developed on that property or when that development will begin. The DRI development order includes authorization for up to 470 hospital beds, with vested traffic concurrency for 150 beds. The master site plan for the DRI designates an area west of I-95 on the southwest corner of the Wickham Road/Lake Andrew Drive intersection as the “Proposed Viera Medical Park.” VMC is proposed for that location. The DRI development order provides all of the local government land use approvals, including traffic concurrency, that are necessary for VMC. TVC is developing Viera for and marketing it to retirees and younger persons, including families with children. The DRI includes age-restricted subdivisions, but it also includes amenities such as three elementary schools and a large regional park with ball fields and playgrounds. (2) Negotiations for a Hospital in Viera TVC has long wanted a hospital in Viera. Wuesthoff identified the Viera area as future growth area in the 1990’s and began establishing health care facilities in the area at that time. Wuesthoff has a diagnostic center, a lab facility, and a rehabilitation facility in the Suntree area, which is just to the east of the Viera DRI. Wuesthoff expressed interest in building a hospital in Viera in 1993 and, more recently, in 2003. In August 1993, Wuesthoff and TVC entered into an agreement that gave Wuesthoff a 10-year exclusive right to develop a hospital in Viera if certain conditions were met. However, Wuesthoff ultimately built Wuesthoff-Melborune in Melbourne (rather than in Viera), and the exclusivity provision in the August 1993 contract never went into effect. In July 2003, Wuesthoff sent a letter to TVC expressing its interest in obtaining an option to purchase 25 to acres within the Viera DRI to construct a hospital. In the letter, Wuesthoff stated that it would construct the hospital “within 10 years or when the population of Viera exceeds 40,000, whichever first occurs”; that the hospital would be “constructed similar to Wuesthoff Medical Center-Melbourne which currently encompasses 65 licensed beds in a 150,000 sq. ft. facility”; that it wanted the “sole right to build a hospital or hospital like facility in Viera . . . until 5 years after the opening of the hospital” and that it wanted TVC to “consider selling the desired land to Wuesthoff at a reduced price.” Wuesthoff’s July 2003 offer was not seriously considered by TVC because, by that time, TVC was in the process of finalizing its agreement for the sale of 50 acres to Health First for VMC. Additionally, the Health First agreement was more appealing to TVC because Health First was offering to purchase more property at a higher price than was Wuesthoff, and Health First was committed to building a hospital sooner than was Wuestoff. The contract between Health First and TVC was executed on August 5, 2003, and Health First has since closed on the purchase of the 50 acres at a cost of approximately $9 million. The Health First/TVC contract includes an exclusivity provision that prohibits the development of another hospital within the Viera DRI or on any of the lands owned by Duda until 2029 if Holmes constructs at least 70 percent of Phase I of the Viera Medical Park by August 31, 2006, and begins construction on a hospital with at least 80 beds by August 31, 2010. The contract also includes exclusivity provisions relating to the other uses being developed as part of the Viera Medical Park, but the exclusivity on those uses expires in 2010, at the latest. The exclusivity provision will be included in restrictive covenants that are recorded in the public records of Brevard County. The restrictive covenants will run with the land and will bind future purchasers of property from TVC and Duda. Exclusivity provisions are not uncommon in land- purchase contracts for large commercial projects or new hospitals. The August 1993 agreement between Wuesthoff and TVC included such a provision as did Wuestoff’s July 2003 offer. However, the length of the hospital exclusivity provision in the Health First/TVC contract and the fact that it applies to the land owned by Duda outside of the Viera DRI goes beyond what is reasonably necessary to allow the new hospital to become stabilized and has the potential to stifle competition for acute care hospital services in the Viera area for the next 25 years. Viera Medical Center (1) Generally Holmes conditioned the approval of its CON application on VMC being located at the "[i]ntersection of Lake Andrew Drive and Wickham Road, Viera, Florida." VMC was projected to open in 2008 as part of the Viera Medical Park that Health First is building on the 50 acres that it purchased from TVC at that location. VMC will be located in zip code 32940, which is the “main” Viera zip code. VMC will be built on 20 of the 50 acres purchased by Health First. The remaining 30 acres will be developed with the other health care facilities that will make up the Viera Medical Park. The development of the Viera Medical Park will be done in three phases. Phase I will include a fitness center; a medical office building; and outpatient facilities such as an urgent care center, an ambulatory surgical center, and a diagnostic imaging and rehabilitation center. Phase II will include VMC. Phase III may include a nursing home and/or assisted living facility as well as “multi-family retirement units.” VMC will be a 213,000 SF facility with 84 licensed beds, 16 “observation” beds, and a full emergency room (ER). The 84 licensed beds will consist of 72 acute care beds and a 12-bed critical care unit/ICU. All of the beds will be in private rooms. The total project cost for VMC is approximately $106 million, which will be funded primarily by tax-free bonds issued by Holmes. VMC will have a cardiac catheterization lab, but it will not provide interventional cardiology services such as angioplasty. VMC will not provide any tertiary-level services or OB services, and it will not have a dedicated pediatric unit. VMC will share management and administrative support services with HRMC so as to minimize duplication of those services and to reduce overhead costs. VMC will have an integrated IT system that will utilize electronic medical records and a computerized physician order entry system, as well as an electronic ICU (e-ICU). The e-ICU is an innovative critical care management system based upon a telemedicine platform that is in use at the existing Health First hospitals in Brevard County. Except for the e-ICU, which the Wuesthoff hospitals do not have, the IT systems at VMC will be materially the same as Wuesthoff’s award-winning IT systems. VMC will have a helipad without any weight restrictions and, as discussed in Part F(1)(a)(iv) below, VMC has been designed with hurricanes and other “contingency events” (e.g., bioterrorism) in mind. Demographics of VMC’s Proposed Service Area The primary service area (PSA) for VMC consists of zip codes 32934, 32935/36, 32940, and 32955/56; the secondary service area (SSA) consists of zip codes 32901/02/41, 32904, 32922/23/24, 32926/59, and 32927. Neither Wuesthoff nor the Agency contested the reasonableness of the PSA or the SSA. All of the zip codes targeted by VMC are within the primary service area of one or more of the existing hospitals, and there are three hospitals physically located within those zip codes. Wuesthoff-Melbourne and Wuestoff-Rockledge are located in VMC’s PSA, and HRMC is in VMC’s SSA. The 2003 population of the PSA was 108,436. In 2010, which would be VMC’s third year of operation, the PSA’s population is projected to be 128,498. The 65+ age cohort, which is the group that most heavily utilizes hospital services, is projected to make up 21.5 percent of the PSA’s population in 2010. That is a lower percentage than the projected populations of the 18-44 age cohort (29.1 percent) and the 45-65 age cohort (29.7 percent) in the PSA. VMC’s PSA has a more favorable payor-mix than the county as a whole. It has a lower percentage of Medicaid patients and a higher percentage of insured patients --i.e., commercial, HMO, PPO, workers comp, and Champus/VA patients -- than the county as a whole. Except for zip code 32935/36, each of the zip codes in VMC’s PSA has a higher median household income than Brevard County as a whole. Zip code 32935/36 is the zip code in which Wuesthoff-Melbourne is located. The zip code in which VMC will be located, 32940, has the highest median household income in Brevard County. The median household income in that zip code for 2004 was $67,000 as compared to the county-wide average of $44,000. Utilization Projections VMC was projected to open in January 2008, and Holmes' CON application contains utilization and financial projections for VMC's first three years of operation, i.e., 2008, 2009, and 2010. The utilization projections are based upon an average length of stay (ALOS) of 3.69 days, which is reasonable. The utilization projections are also based upon the assumption that by VMC’s third year of operation, it will have 26.9 percent market share in its PSA and a 7.4 percent market share in its SSA. VMC's projected market share in zip code 32940, which is its “home” zip code and the “main” Viera zip code, is projected to be 35 percent. The market share assumptions are reasonable and attainable. The utilization projections include a “ramp-up” period for VMC. Its annual occupancy rate in its first year of operation is projected to be 45.6 percent; its annual occupancy rate in its second year of operation is projected to be 65.7 percent; and in its third year of operation (2010), VMC is expected to have an annual occupancy rate of 76 percent with 6,313 discharges and 23,298 patient days. The occupancy rates, and the discharges and patient days upon which they are based, are reasonable and attainable.2 The application projects that VMC will redirect or “cannibalize” a significant percentage of its patients from the other Health First hospitals. The percentage of patients that VMC will cannibalize from the other Health First hospitals in each zip code varies from 75 percent to 45 percent, depending upon the proximity of the zip code to VMC. Overall, approximately 69.4 percent of VMC’s patients will be cannibalized patients, i.e., patients that would have otherwise gone to HRMC (66.2 percent), Cape Hosptial (3.2 percent), or PBCH (less than 0.1 percent). The remaining 30.6 percent of VMC’s patients will be patients that would have otherwise gone to Wuesthoff-Rockledge (15.8 percent) or Wuesthoff-Melbourne (14.8 percent). The record does not reflect the outpatient volume projected for VMC, but Holmes’ health planner conceded at the hearing that the projected outpatient revenues for VMC did not take into account the outpatient services that will be included in Phase I of the Viera Medical Park. As a result, the volume on which the outpatient revenues were based is overstated to some degree, but there was no credible evidence regarding the extent of the overstatement. VMC is projected to treat 15,851 patients in its ER in its first year of operation (2008), and by its third year of operation (2010), VMC is expected to treat 27,780 patients in its ER. The record does not reflect how those figures were calculated, nor does it reflect what percentage of those patients would have otherwise been treated in the ERs at HRMC, PBCH, or the Wuesthoff hospitals. However, the reasonableness of those figures was not contested by Wuesthoff or the Agency. Statutory and Rule Criteria Statutory Criteria -- Section 408.035, Florida Statutes (2004)3 Subsections (1), (2) and (5) -– Need for Proposed Services; Accessibility of Existing Services; and Enhancing Access According to the CON application (page 14), the need for VMC is justified based upon: The large population base and significant population growth projected for the [Viera] area. The need to improve access and reduce travel times for this significant population for both critical care and inpatient services. The projected need for additional acute care beds at HRMC and the benefits of delivering non-tertiary services away from [HRMC’s] campus. Additionally, the CON application (page 15) asserts that the approval of VMC will: Significantly enhance the area’s Homeland Security and disaster planning and preparedness. Enhance the quality of care delivered to area residents as a result of key design and information technology innovations planned for [VMC]. Provide access to cost-effective, quality of care for all residents of the service area, including the uninsured. In its PRO (page 19), Holmes identifies those same six issues as the “not normal” circumstances that justify approval of VMC. Holmes’ health planner conceded at the hearing that the VMC project is not intended to address any cultural, programmatic, or financial access problems, and that those potential “not normal” circumstances were not advanced in the CON application as bases for approval of VMC. Population of and Growth in the Viera Area There has been considerable growth in Viera over the past 15 years, and the demand for new homes in the Viera DRI remains strong. The projected population of the Viera DRI is expected to exceed 40,000 when the DRI is built-out in 2020, and that figure does not include the population of the Suntree area, which is outside of the Viera DRI and has a number of large residential subdivisions. Zip code 32940, which is the “main” Viera zip code, had a population of 22,940 in 2003. By 2010, that zip code is projected to have a population of 31,862. That is an increase of 38.9 percent, but only 9,000 persons. As stated above, the population of VMC's PSA is projected to increase from 108,436 (in 2003) to 128,489 (in 2010). That is an increase of 18.5 percent, but only 20,000 persons. The population of VMC’s PSA is projected to grow at a faster rate than Brevard County as a whole. Over the seven-year period used in the application (2003 to 2010), the annual growth rate for VMC’s PSA is projected to be 2.64 percent while the annual growth rate of Brevard County as a whole is projected to be 1.74 percent.4 Population growth in Florida is normal and, indeed, is expected. There is nothing extraordinary about the growth projected for zip code 32940 and/or VMC’s PSA. Accordingly, the population growth projected in the Viera area does not, in and of itself, justify the approval of VMC. Enhanced Access There are two main components to Holmes’ argument that VMC will enhance access. First, Holmes contends that VMC will reduce travel times for Viera residents and thereby enhance their access to hospital services. Second, Holmes contends that the approval of VMC will relieve pressure on the overcrowded ERs at the existing hospitals in Brevard County thereby enhancing access to ER services countywide. For Viera Residents VMC will provide more convenient access to hospital services for Viera residents (at least those in need of the basic, non-OB services that will be offered at VMC), and to that extent, VMC will enhance access for Viera residents. VMC will also provide more convenient ER access for Viera residents. Quicker access to an ER is generally beneficial to the patient, although certain heart-attack patients may benefit more by going to the ER of a hospital that can do an immediate angioplasty, such as Wuesthoff-Rockledge or HRMC. VMC will not necessarily enhance access for other residents of the PSA and SSA targeted by VMC (e.g., those outside of the Viera area) because many of those residents are closer to an existing hospital. Indeed, some of those residents would have to pass an existing hospital to get to VMC, which seems particularly unlikely for emergency patients. VMC will also not enhance access for patients in need of OB services or tertiary services that will not be offered at VMC. Convenience alone is not a basis for approving a new hospital, particularly where (as here) the evidence establishes that the residents of the area to be served by the new hospital currently have reasonable access to hospital services. VMC will be located approximately 10 miles south of Wuesthoff-Rockledge, and approximately 11 miles north of Wuesthoff-Melbourne. VMC will be approximately 15 miles northwest of HRMC. There are multiple routes from the Viera area to the Wuesthoff hospitals and HRMC. The routes are along major arterial roads, including I-95, US 1, Wickham Road, Murrell Road, Fiske Boulevard, and Eau Gallie Boulevard. All of those roads are at least four lanes wide. The travel-time studies presented by Wuesthoff show that it takes less than 15 minutes to drive from either of the Wuesthoff hospitals to the VMC site. There was anecdotal testimony suggesting longer travel times, particularly from the VMC site to Wuesthoff-Melbourne,5 but that testimony was not as persuasive as Wuesthoff’s travel-time studies. The travel-time studies presented by Wuesthoff were not without flaws. For example, the travel times were calculated by driving away from the Wuesthoff hospitals, rather than driving towards the hospitals as a potential patient from Viera would be doing. Holmes did not present its own travel- time studies, and notwithstanding the directional issue and the other unpersuasive criticisms of the study by Holmes’ traffic engineer, Wuesthoff’s studies are found to be credible and persuasive. Indeed, Holmes’ traffic engineer estimated that it would take 15 to 20 minutes to get from VMC to Wuesthoff- Melbourne using the most direct route (Transcript, at 668), which is consistent with Wuesthoff’s travel-time studies. It takes longer to drive from Viera to HRMC than it does to drive from Viera to either of the Wuesthoff hospitals. The travel-time studies did not directly address the issue, but the anecdotal testimony suggests that the travel times from Viera to HRMC are between 25 and 45 minutes depending upon the time of day and traffic conditions.6 There are several road segments on the routes between Viera and the Wuesthoff hospitals whose “v/c ratios”7 currently exceeds 1.0, which is an indication of an over-capacity road. However, there are roadway improvements planned or underway that will expand the capacity of those road segments by 2010. Indeed, a comparison of the 2003 (Exhibit H-23) and 2010 (Exhibit W-50) v/c ratios for the road segments on the routes between Viera and the Wuesthoff hospitals shows only marginal increases in the ratios, with many of the 2010 ratios projected to be lower than 0.8, which according to Holmes’ traffic engineer, indicates that the “roadway that is probably operating well within its ability to carry that traffic volume.” Holmes’ traffic engineer did not attempt to quantify the extent to which travel times would increase due to the marginal increases in the v/c ratios. Thus, his opinion that travel times would “increase significantly” and be “significantly greater” in the future is not persuasive. TVC is required to mitigate for the off-site traffic impacts generated by the development of the Viera DRI. In this regard, road improvements (e.g., additional lanes, traffic signals, etc.) will be made in the future as necessary to accommodate the additional population in the Viera DRI. In fact, there are significant road improvements currently underway that are being funded, at least in part, by TVC pursuant to the Viera DRI development order, including the six-laning of I-95 through the Viera area. In sum, the evidence establishes that persons in the PSA and SSA targeted by VMC, including residents of the Viera area, currently have reasonable access to acute care services, and the evidence was not persuasive that there will be access problems over the applicable five-year planning horizon such that a new hospital in Viera is necessary to enhance access. For ER Services in Central and South Brevard County The Brevard County government is the emergency medical services (EMS) provider for the county. Brevard County EMS responds to emergency calls throughout the county and its ambulances transport emergency patients to hospital ERs. Overcrowded ERs can adversely affect the EMS system in several ways. First, if the ER is overcrowded it can take longer for ambulances to off-load patients to the ER staff, which results a longer period of time that the ambulance is “out of service.” Second, if the closest hospital is on “diversion status” because of an overcrowded ER, ambulances will have to transport patients to a more distant hospital, which also results in the ambulance being out of service for a longer period of time. Longer out-of-service periods can, on a cumulative basis, strain the EMS system because an out-of-service ambulance is not able to respond to emergency calls in its service area and the EMS provider may have to shift other ambulances to cover the area at the risk of increasing response times for emergency calls. Brevard County EMS protocol requires ambulances to take patients to the closest hospital, unless the patient is a trauma patient or the closest hospital is on diversion status. Trauma patients are taken to HRMC, which is the designated trauma center for the county. A hospital requests diversion status from EMS when it is unable to accept additional emergency patients because its ER is overcrowded. The most common reasons that an ER is overcrowded is that it had a large number of emergency patients arrive at the same time or that there is a “bottleneck” in the ER caused by a lack of inpatient beds to move patients from the ER that need to be admitted to the hospital. If diversion status is granted, EMS will take emergency patients to another hospital, even if it is further away than the hospital on diversion. As noted above, this strains the EMS system and can result in longer response times for emergency calls, which in turn, can negatively impact patient care. If diversion status is denied, the hospital is required to continue to accept emergency patients. This can create a less than optimal setting for patient care because the hospital may not have adequate space or resources to treat the patient in a timely manner. Until recently, Brevard County EMS would not grant diversion status to a hospital in south Brevard County if either of the other two hospitals in that area of the county informed EMS that they could not take the patients. That policy recently changed, and EMS will now grant diversion status to a hospital in south Brevard County if either of the other two hospitals in that area of the county informs EMS that it can take the patients. The new EMS policy change makes it easier for hospitals in south Brevard County to be placed in diversion status. For example, under the old policy, diversion status would not be granted to HRMC if either Wuestoff-Melbourne or PBCH informed EMS that they could not take HRMC’s emergency patients, but under the new policy, diversion status will be denied to HRMC only if Wuesthoff-Melbourne and PBCH both inform EMS that they cannot take HRMC’s emergency patients. In Brevard County, having a hospital on diversion was “pretty rare” until 2002. Diversion requests have become more frequent since then, and they are no longer a seasonal phenomenon caused by the influx of “snowbirds” into the county. Diversion is a more frequent problem in south Brevard County than it is in central Brevard County, and in south Brevard County, the diversion requests have come primarily from HRMC. The evidence was not persuasive that ER overcrowding is a significant problem for the Wuesthoff hospitals or PBCH. Wuesthoff-Melbourne has not requested to go on diversion, and only one occasion was identified where HRMC’s diversion request was denied because Wuesthoff-Melbourne was unable to handle HRMC's diverted patients. That occasion occurred when Wuesthoff-Melbourne had only 65 beds and, hence, less ability than it currently has to move patients out of the ER to accommodate additional emergency patients. According to Holmes, VMC will enhance access to ER services in central and south Brevard County because it will increase the area-wide ER capacity and reduce the frequency of diversion requests, which in turn, will reduce strains on the EMS system and benefit patients. The "North Expansion" underway at HRMC (discussed below) will include a new ER that is expected to help address the overcrowding issues that have required HRMC to request diversion in the past. The new ER is designed with shelled-in space to facilitate future ER expansions as needed. In any event, the evidence was not persuasive that VMC will materially reduce the ER volume at HRMC. The record does not reflect what percentage of VMC’s projected ER patients would have otherwise been served at HRMC as compared to the Wuesthoff hospitals. Moreover, it is not likely that non-trauma emergency patients from the Viera area are contributing to the overcrowding in the ER at HRMC because, under EMS protocol, those patients currently are being taken to Wuesthoff-Melbourne or Wuesthoff-Rockledge, which are closer to Viera than is HRMC. Need to “Decompress” HRMC Holmes contends that VMC will help to “decompress” HRMC and that it is the only viable option for doing so. HRMC is a well-utilized facility. According to the SAAR, its annual occupancy rate for the 12-month period ending June 2003 was 81.22 percent. HRMC's occupancy rate tends to stay above 80 percent, and at times it is as high as 115 percent. If VMC is not approved, HRMC’s annual occupancy rate for 2008 is projected to be 83.9 percent, and by 2010, its occupancy rate is projected to increase to 90 percent. Even if VMC is approved, HRMC’s annual occupancy rate is projected to be 81.7 percent in 2010. Those figures assume that HRMC will maintain its current bed capacity and they do not take into account the impact of the expansion of the Wuesthoff hospitals. HRMC currently includes approximately 612,000 SF. It is located on 18 acres of property that is bounded by streets and developed properties. Holmes owns several parcels of land adjacent to HRMC, and it is continuing to acquire parcels as they come available. Much of the adjacent land owned by Holmes is used for parking, and notwithstanding a 500-space parking garage on the south side of HRMC, there is still a shortage of parking at HRMC. Some of its staff parks at a nearby shopping center and take a shuttle to the hospital. There is an area on the north side of HRMC identified as the site of a "future parking garage," but there are no current plans to construct that structure. The original portion of the hospital, which is referred to as the “core” area, was built in the 1960’s. The remainder of the hospital has been added over the years, which has resulted in a less than ideal facility layout and has created operating inefficiencies. Some of the hospital’s support functions and administrative offices are located off- site. HRMC has undertaken a series of construction projects in recent years to reduce inefficiencies and congestion at the hospital and to increase the percentage of private rooms at the hospital. Those projects include the construction of a new OB unit and, most significantly, the $100 million “North Expansion.” The North Expansion is an eight-story, 337,000 SF addition to the hospital that is expected to be completed by the end of 2006. It will include 144 patient rooms, a new ER with a number of new observation beds, and it will allow all of the hospital’s cardiology services to be located in contiguous space. The 144 patient rooms will include 14 cardiovascular ICU beds, 22 ICU beds, and 108 acute care beds. All of the beds will be in private rooms. The 144 beds added as part of the North Expansion will not increase the bed capacity at Holmes. The same number of existing licensed beds will be eliminated, either through the conversion of existing semi-private rooms to private rooms or because the rooms are located in space that will be demolished to construct the North Expansion. The North Expansion has been designed and engineered to withstand 200-mile per hour winds, which exceeds the applicable building code requirements for hurricane protection. The North Expansion has also been designed and engineered to accommodate future expansion at HRMC in several respects. First, it includes shelled-in space on the eighth floor for an additional 36 private patient rooms. Second, it is engineered (but not shelled-in) to allow the fourth through eighth floors to be further expanded to include up to 180 additional private patient rooms in what was referred to at the hearing as a “mirror image” of the tower being built as part of the North Expansion. Third, the ER includes shelled-in space for future expansions as well as adjacent open space into which the ER could be further expanded in the future. There is no current plan to finish the shelled-in space on the eighth floor, but Holmes’ facility manger testified that he expected that to occur as soon as funding is available, and perhaps prior to the completion of the North Expansion. The beds added on the eighth floor will not increase the licensed capacity at Holmes, but rather they will come from the conversion of 36 additional existing semi-private rooms to private rooms. There is also no current plan to construct the “mirror image” side of the fourth through eighth floors of the North Expansion. That construction will be done in conjunction with the renovation of the core area of the hospital and will initially be used to locate the services from the core area that are displaced by the renovation. After the renovation of the core area, however, the "mirror image" will be used for patient rooms. In conjunction with the construction of the North Expansion, HRMC expects to relocate some of its ancillary and support services from the core area into the space where the existing ER is located, which in turn will open up space in the core area for other purposes. The space created by the construction of the new OB unit will also be available for other uses after it is no longer needed as "swing space" during the construction of the North Expansion. Additionally, Holmes recently purchased a building directly behind HRMC into which it will likely locate other ancillary and support services. Currently, less than 40 percent of HRMC’s general acute care beds are in private rooms. After the North Expansion, almost 80 percent of those beds will be in private rooms. Ultimately, Holmes wants all of the beds at HRMC to be in private rooms. Private rooms are beneficial because they offer the patients and their families more privacy and a more restful environment, and they can also help reduce the spread of infections. However, private rooms can also create operational inefficiencies for nurses who have to visit more rooms (often on longer hallways) than they would to serve the same number of patients in semi-private rooms. High quality care can be provided in semi-private rooms, and HRMC and Wuesthoff-Rockledge each do so. Although patients may prefer private rooms and most new hospitals are being designed with only private rooms, private rooms are still best characterized as an amenity, not a necessity. As a result, and Holmes’ desire to convert all of HRMC’s semi-private rooms to private rooms does not justify the building a new hospital based upon alleged capacity constraints at HRMC. Indeed, if Holmes chose to do so, it could increase the bed capacity at HRMC with little or no additional cost by adding the 36 beds in the shelled-in eighth floor of the North Expansion and/or by not converting as many semi-private rooms into private rooms. Moreover, after the North Expansion, HRMC will have approximately 50 observation beds (as compared to 20 currently) in private rooms that can be used for inpatients as needed. Indeed, as a result of the 2004 amendments to the CON law, some of those beds could be converted to licensed acute care beds at any time without CON review. Even if the beds are not converted to licensed beds, they will still help to decompress HRMC because observation patients will not need to be placed in inpatient rooms while they are being observed and evaluated for possible admission to the hospital. Several Holmes’ witnesses testified that even if Holmes wanted to add bed capacity to HRMC by converting fewer semi-private rooms to private rooms or other means, it could not do so because of limitations on the space available to provide the support services necessary for those additional rooms. That testimony was not persuasive because the witnesses conceded that Holmes has not undertaken a thorough analysis of what it intends to do with the space created in the existing building by the relocation of services as part of the North Expansion, which as noted above, will free up additional space for support services in the core area. The evidence was also not persuasive that the alternative presented in the CON application for adding 84 beds to HRMC is realistic. That alternative, the cost of which is presented in Table 23 of the CON application, was prepared after the decision was made to seek approval of a CON for VMC; it was not an alternative actually considered by Holmes and, indeed, it was characterized by the Holmes’ witness who prepared the cost estimate as a “theoretical solution” and not a viable solution to adding beds. The cost estimate in Table 23 is based upon a plan that would require the acquisition of additional land across the street from HRMC and the construction of a new bed tower on that land and an adjacent parcel on which Holmes currently owns a medical office building. The bed tower would be connected to HRMC by a two-story bridge over the street. The plan also includes the construction of a new parking garage and an office building to replace the existing medical office building. The land and building costs of the plan were approximately $86.2 million, which is approximately $18.3 million more than the land and building costs of VMC. When the equipment costs are added, the total cost of the plan is approximately $120 million. Not only was the plan not a viable solution, its cost was clearly overstated. For example, the $450/SF cost of the new bed tower was irreconcilably higher than the $278/SF cost of VMC and the $2.5 million that Holmes represented to the Agency in October 2003 that it would cost to add 50 beds to HRMC. In sum, the evidence fails to support Holmes’ claim that the only way to add bed capacity to HRMC is through the $120 million plan presented in Table 23 of the CON application. The evidence also fails to support Holmes’ claim that VMC is the only viable option to decompress HRMC. Indeed, the evidence establishes that HRMC could be decompressed if PBCH was better utilized. Holmes contends that PBCH is too far away from Viera to be a viable alternative to HRMC for patients from the Viera area. The evidence supports that claim, but that claim ignores the fact that better utilization of PBCH by Palm Bay patients will help to decompress HRMC. PBCH is currently an underutilized facility, and it has been ever since it opened in 1992. According to the SAAR, PBCH's annual occupancy rate for the 12-month period ending June 2003 was only 51.5 percent. Its annual occupancy rate is projected to be only 60.1 percent in 2008 and 65.4 percent in 2010, which are well below the 75 to 80 percent optimum utilization level. Approximately 25 to 30 percent of HRMC’s patient volume comes from the Palm Bay zip codes. If those patients were redirected to PBCH, the utilization rate at HRMC would go down and the utilization rate at PBCH would go up. Redirecting Palm Bay patients to PBCH has the potential to decompress HRMC more than redirecting Viera patients to VMC because HRMC has approximately 7,000 admissions from the Palm Bay area, as compared to approximately 6,000 admissions from the Viera area. Holmes did not present any persuasive evidence as to why patients from the Palm Bay zip codes could not be redirected to PBCH as a means of decompressing HRMC. On this issue, there was credible evidence presented by Wuesthoff that virtually no elective cases are being done at PBCH and that PBCH is essentially being used as a triage facility for HRMC. Finally, the expansion of the Wuesthoff hospitals (particularly Wuesthoff-Melbourne) will help to decompress HRMC because the Wuesthoff hospitals will be able to serve more patients. As the Wuestoff hospitals' market share grows, HRMC’s market share (and patient volume) will decline.8 Enhanced Homeland Security and Disaster Planning Brevard County is susceptible to hurricanes because of its location on the east coast of Florida and the length of its coastline. The evidence was not persuasive that Brevard County is more susceptible to hurricanes than are the other counties on the east coast. The three major storms that affected the county in the summer of 2004 were not the norm. Brevard County has a comprehensive emergency management plan to prepare for and respond to hurricanes, as do all of the existing hospitals in the county. Those plans were tested in the summer of 2004 when the county was directly impacted by three of the four major storms that hit the state Florida. The hospitals’ hurricane plans include securing the building, discharging as many patients as possible prior to the arrival of the storm, and canceling elective surgeries scheduled around the time the storm is expected to hit the area. The plans also provide for the evacuation of some of the hospitals during particularly strong storms, i.e., Category 3 or above. Cape Hospital is particularly prone to evacuation when a strong hurricane threatens the area because it is located close to the ocean on a peninsula in the middle of the Intracoastal Waterway. Cape Hospital was evacuated twice during the summer of 2004. None of the hospitals in Brevard County were evacuated during the first storm, Hurricane Charley. Cape Hospital and Wuesthoff-Rockledge were evacuated prior to the second storm, Hurricane Francis. That was the first time that Wuesthoff-Rockledge was evacuated since it opened in 1941, and its ER remained open and staffed even though the remainder of the hospital was evacuated. Cape Hosptial’s patients were taken to HRMC, and Wuesthoff-Rockledge patients were taken to Wuesthoff-Melbourne. The evacuated patients were accompanied by physicians and nurses and were transported to the receiving hospitals by ambulance. The evacuation of Cape Hospital and Wuesthoff- Rockledge placed strains on the receiving hospitals and their staffs. At one point during the evacuation, HRMC had more than 700 patients in its 514-bed facility and Wuesthoff-Rockledge had 156 patients in its 65-bed facility. By all accounts, despite the strains placed on the receiving hospitals, the evacuations went smoothly and there were no adverse patient outcomes attributable to the evacuation. Indeed, the director of Brevard County’s Health Department testified that all of the hospitals in the county responded and performed “great” during the hurricanes, and that sentiment was echoed by physicians and administrators affiliated with both of the hospital systems involved in this case. Cape Hospital was evacuated again prior to the third storm, Hurricane Jeanne. Wuesthoff-Rockledge was not evacuated during that storm, and approximately 15 of Cape Hospital’s patients were taken to Wuesthoff-Rockledge. None of the Health First or Wuesthoff hospitals suffered any significant damage from the hurricanes. The approval of VMC will not eliminate the possibility that Cape Hospital, Wuesthoff-Rockledge, or some other hospital in Brevard County may have to evacuate during a future hurricane. VMC may provide a more convenient (or at least an additional) place to evacuate some of the patients from Cape Hospital during a future hurricane because VMC is closer to Cape Hospital than is HRMC. VMC will also be more inland than HRMC and it will be designed to withstand 165 mile per hour winds. Holmes conditioned the approval of its CON application on the inclusion of a "suitable parcel, fully equipped and designed to support temporary staging of Disaster Medical Assistance Teams (DMAT)" at VMC. A DMAT is essentially a mobile emergency room set up by the federal government after a natural disaster to help serve the medical needs of those affected by the disaster. The DMAT staging area at VMC will be an open field adjacent to the hospital that is “pre-plumbed” with water, electricity, and communication lines. In some situations, it is beneficial for a DMAT to be set up proximate to a hospital, and in that regard, VMC’s inland location and proximity to I-95 may make it an attractive location to set up a DMAT in the future. It is not necessary, however, for a DMAT to be set up proximate to a hospital. DMATs are fully self-sustaining and they can be set up anywhere, including a Wal-Mart parking lot. Indeed, in some situations, it is more beneficial for the DMAT to be located closer to the persons in need of its services than to a hospital. For example, after Hurricane Jeanne, a DMAT was set up near the Barefoot Bay community in southern Brevard County, which is miles from the closest hospital. VMC’s central-county location and proximity to I-95 would also make it a good point-of-dispensing (POD) for vaccines and medicines in the case of a severe biological emergency. However, like DMATs, PODs can be set up anywhere and it is not critical for a POD to be proximate to a hospital even though proximity might allow for greater medical oversight of the dispensing process. There are high-profile, “Tier 1” terrorist targets located in Brevard County, including Kennedy Space Center, Cape Canaveral Air Force Station, Patrick Air Force Base, and Port Canaveral. There is also a nuclear power plant in Indian River County, just south of the Brevard County line. The nature of these targets is somewhat unique because they involve the country's space program, but the presence of multiple “Tier 1” terrorist targets is not unique to Brevard County and is not, in and of itself, a special circumstance that justifies approval of a new hospital. Brevard County has developed emergency management plans in conjunction with the state and federal governments to prepare for and respond to terrorist attacks on those targets. Those plans have been in place for many years, but they have been significantly strengthened since September 11, 2001. VMC will include decontamination areas and other design features to facilitate the treatment of victims of bio- terrorism. The existing hospitals in Brevard County have similar design features as well as comprehensive plans for dealing with bio-terrorism. The evidence was not persuasive that VMC, as an 84- bed, non-tertiary satellite hospital, will materially enhance County’s ability to deal with a large-scale terrorist attack, whether biological or otherwise. Similarly, the evidence was not persuasive that Brevard County’s emergency management plans for hurricanes and/or terrorism are deficient in any way or that the approval of VMC would result in material enhancements to those plans. Any enhancements attributable to VMC would be marginal, at best. The DMAT staging area and other design elements included at VMC to facilitate the hospital’s participation in the Brevard County’s response to hurricanes, terrorist attacks, or other contingencies are positive attributes. Inclusion of those features in VMC (or any new hospital for that matter) is reasonable despite the infrequency of those contingencies, but it does not follow that VMC should be approved simply because it will include those features. IT Innovations and Design Features The evidence was not persuasive that VMC will provide a higher quality of care than is currently being provided at the existing hospitals serving central and south Brevard County as a result of the “innovative” IT systems and the other design features that will be incorporated into VMC. See Part F(1)(b) below. Accordingly, the approval of VMC is not justified on that basis. Enhanced Access to Care for the Uninsured Holmes’ contention that VMC will enhance access for the uninsured implicates the issue of “financial access.” Financial access concerns arise when there is evidence that necessary services are being denied to patients based upon their inability to pay or their uninsured status. Holmes’ health planner acknowledged at the hearing that VMC was not intended to address any financial access concerns for patients in the Viera area and, indeed, there was no credible evidence of any financial access concerns in PSA and SSA targeted by VMC. As discussed in Part E(2) above, VMC’s PSA include a higher percentage of insured patients than Brevard County as a whole, and as discussed in Part F(1)(g) below, the existing hospitals are adequately serving the medically indigent patients in central and south Brevard County, both at the hospital and through outreach efforts such as the Holmes’ HOPE program and Wuesthoff’s free clinics. Accordingly, the evidence failed to establish that VMC will enhance access to care for the uninsured, and approval of VMC is not justified on that basis. Subsection (3) -- Applicant’s Quality of Care Holmes, the applicant, provides a high quality of care at HRMC and PBCH, and it is reasonable to expect that it will provide the same high quality of care at VMC. The Wuesthoff hospitals also provide a high quality of care, and Holmes' witnesses acknowledged that VMC was not proposed to address any problem with quality of care in central or south Brevard County. The evidence was not persuasive that the quality of care at VMC will be materially better (or worse) than that provided at Wuesthoff-Melbourne, which has a similar range of services that will be provided at VMC. The award-winning IT systems in place at the Wuesthoff hospitals are materially the same as those proposed for VMC except for e-ICU at VMC. The evidence was not persuasive that the e-ICU significantly enhances quality of care, and because the e-ICU is being used at the existing Health First hospitals in Brevard County, VMC will not be providing any new technology or service that is not already available to physicians and patients in the county. Thus, the "innovative" IT systems proposed for VMC do not provide an independent basis for approving the CON application. The evidence was not persuasive that VMC would exacerbate nursing or physician shortages in Brevard County thereby negatively affecting quality of care in the county. See Part F(1)(c) below. Subsection (4) -- Availability of Personnel and Resources for Operations Holmes and Health First have the management resources necessary to establish and operate VMC. Holmes’ CON application projects that VMC will have 241.4 full-time equivalents (FTEs) in its first year of operation, and that by its third year of operation, it will have 355.7 FTEs. Nursing positions -- registered nurses, licensed practical nurses, nursing aides, and nursing directors -- account for 123.1 of the FTEs in the first year of operation, and 189.2 of the FTEs in the third year of operation. According to the CON application, a significant number of the initial FTEs at VMC are expected to be filled by persons who transfer from Holmes’ existing campuses, HRMC and PBCH. The parties stipulated that the projected number of FTEs needed by position and the projected salaries contained in Holmes’ CON application are reasonable for the census projected at VMC. However, Wuesthoff disputed whether Holmes will be able to adequately staff VMC due to nurse and physician shortages in Brevard County and/or that VMC will exacerbate those shortages and make it more difficult to staff the existing hospitals in the county. There is a nursing shortage in Brevard County, as there is around Florida and across the nation, but the situation in Brevard County is improving. Wuesthoff was able to fully staff Wuesthoff-Melbourne prior to its opening in December 2002, even though the nursing shortage was more severe at that time. Additionally, Wuesthoff is currently in the process of adding beds at Wuestoff-Melbourne and Wuesthoff-Rockledge, and it expects to be able to recruit and retain the nurses necessary to staff those additional beds despite the current state of the nursing shortage. Holmes received “magnet designation” from the American Nurses Credentialing Center, which is a recognition of its excellence in nursing. No other hospital in Brevard County has magnet designation, and that designation helps Holmes attract and retain nurses. The evidence establishes that Holmes will be able to recruit and retain the nursing and other staff needed for VMC, and the evidence was not persuasive that the staffing of VMC will exacerbate the nursing shortage or otherwise significantly impact Wuesthoff. There is a shortage of physicians in Brevard County with certain specialties, including neurosurgery, neurology, orthopedics, dermatology, and gastroenterology. Like the nursing shortage, this problem is not unique to Brevard County and it is not as severe in Brevard County as it is elsewhere in the state. The shortage of physician specialists in Brevard County is to some extent hospital-specific. For example, there is only one neurosurgeon covering Wuesthoff-Rockledge and Cape Hospital, and Wuesthoff-Melbourne only has part-time coverage neurosurgical coverage, but Holmes has several neurosurgeons. Holmes has recently had success in recruiting new physicians to Brevard County, including specialists. One of the largest multi-specialty physician groups in Brevard County, whose physicians are on staff at Holmes’ and Wuestoff's hospitals, has also been successful recently in recruiting new physicians to the area. That group, Melbourne Internal Medicine Associates, will be adding more physicians whether or not VMC is approved. The evidence establishes that Holmes will be able to attract the necessary physician staff for VMC, just as Wuesthoff-Melbourne was able to do when it opened. Indeed there are a number of physicians who have offices in the Viera area that are closer to VMC than the existing hospitals where they have privileges. Holmes and Wuesthoff require physicians with privileges at their hospitals to provide coverage for ER calls on a rotational basis. Physicians with privileges at more than one of the hospitals are required to provide ER call coverage at multiple hospitals, which can create a problem if the physician is on-call at two (or more) hospitals at the same time. Physicians who choose obtain privileges at VMC will be required to provide ER call coverage at VMC. ER call coverage is a problem in Brevard County, but the evidence was not persuasive that the problem is as significant in Brevard County as it is elsewhere in the state or that VMC would seriously exacerbate the problem. More specifically, the evidence was not persuasive regarding the extent to which VMC would cause physicians to be on call at more than one hospital at the same time. Nor was the evidence persuasive regarding the likelihood that physicians would relinquish privileges at other hospitals in Brevard County to obtain privileges at VMC in such numbers that ER call coverage problems would be created for the other hospitals. Subsection (6) -- Financial Feasibility The parties stipulated that VMC is financially feasible in the short-term and that Holmes has sufficient availability of funds for VMC's capital and operating expenses. The long-term financial feasibility of VMC is in dispute. Generally, if a CON project will at least break even in the second year of operation, it is financially feasible in the long-term. If, however, the project continues to show a loss in the second year of operation it is not financially feasible in the long-term unless it is nearing break-even and it is demonstrated that the hospital will break even within a reasonable period of time. Agency precedent (e.g., Wellington, supra, at 73-74) and the evidence in this case (e.g., Exhibit W-57, at 22) establish that in the context of a satellite hospital project that is expected to “cannibalize” patients from the applicant’s existing hospital, it is important to consider the impact of the project on the entire hospital system in evaluating the long- term financial feasibility of the project. The net operating revenue projected on Schedule 7A of the CON application, which is the starting point for the net income/loss projected on Schedule 8A, is reasonable.9 On Schedule 8A of the CON application, in the column titled “VMC only,” Holmes projects that VMC will generate a net loss of $5.71 million in its first year of operation, but that it will generate net profits of $1.48 million and $5.11 million in its second and third years of operation. Thus, as a stand-alone entity, VMC is financially feasible in the long-term. However, the “VMC only” figures do not provide the complete picture of the financial feasibility of the VMC project because of the significant percentage of its patients that will be cannibalized from HRMC and PBCH. In evaluating the long-term financial feasibility of the VMC project, it is also important to consider the “incremental difference” column in Schedule 8A. That column reflects VMC’s net financial benefit (or burden) to Holmes after taking into account the patients that VMC is cannibalizing from HRMC and PBCH. The “incremental difference” column in Schedule 8A shows a net loss of $695,000 in the VMC’s first year of operation, and net profits of $605,000 and $983,000 in the second and third years of VMC’s operation. The incremental figures presented in the CON application identify the profit/loss that will be generated by the patients treated at VMC that are new to the Holmes’ system, but they do not take into account the fact that the patients treated at VMC that were cannibalized from the other Holmes’ hospitals would have generated a different profit/loss for the Holmes’ system if they were treated at one of the other Holmes’ hospitals. When incremental profit/loss associated with treating the cannibalized patients at VMC rather than HRMC or PBCH is factored in, the “incremental difference” generated by VMC will be net profits of $498,000 (year one); $720,000 (year two); and $252,000 (year three). Included in the “incremental difference” column on Schedule 8A (and embedded in the revised figures in the preceding paragraph) are negative figures on the “depreciation and amortization” line and the “interest” line. Those figures are intended to reflect the depreciation, amortization, and interest expenses that Holmes will “save” by building VMC rather than by adding 84 beds at HRMC. A critical assumption underlying the “savings” shown on those lines is that it would cost $120 million to add 84 beds to HRMC. To the extent that cost is overstated, then the depreciation, amortization, and interest expense “savings” on Schedule 8A are also overstated, as is the incremental net profit of the VMC project. The extent to which the net profit is overstated depends upon the extent to which the $120 million cost is overstated. For example, if the cost of adding 84 beds to HRMC is the same as the cost of VMC (i.e., $106 million rather than $120 million), then the depreciation, amortization, and interest expense shown in the “incremental difference” column on Schedule 8A would be $0 (rather than a negative number) because the depreciation, amortization, and interest expenses in the “with this project” and “without this project” columns would be the same. If, on the other hand, there was no cost associated with the addition of 84 beds at HRMC, then the depreciation, amortization, and interest expense shown in the “without this project” column would be $10.662 million lower in 2010 (see Endnote 10) and that amount would appear as a positive number -- i.e., expense -- rather than a negative number -- i.e., “savings” -- in the “incremental difference” column. The evidence was not persuasive that it will cost $120 million to add beds to HRMC, which is the amount underlying the projected “savings” in depreciation, amortization, and interest expense shown on Schedule 8A. Indeed, as discussed in Part F(1)(a)(iii) above, the evidence establishes that the alternative that gave rise to the $120 million cost estimate was not a viable option and that Holmes could add 84 beds at HRMC with little or no cost if it chose to do so by reducing the number of semi-private rooms that it converts to private rooms as part of the North Expansion and/or by finishing the shelled- in space on the eighth floor of the North Expansion. Accordingly, the “savings” embedded in Schedule 8A are grossly overstated as is the incremental net profit shown in that schedule. Specifically, in the third year of operation, when VMC is at a near-optimal occupancy level of 76 percent, the incremental net profit generated by VMC will be no more than $234,000 and, more likely, will be a net loss between $497,000 and $10.41 million.10 A net profit of $234,000 is a very marginal return on the $106 million cost of VMC, and is well below the three percent return that Holmes' seeks to achieve for its capital projects. However, according to Holmes' chief financial officer, the return generated by a project is not Holmes' paramount concern as a not-for profit organization, and at that level, the project would be considered financially feasible in the long-term. A $497,000 to $10.41 million incremental net loss would mean that the project is not financially feasible in the long-term. The “including this project” column on Schedule 8A projects that Holmes will have net income of approximately $31.1 million in 2010. Thus, even if VMC actually generated an incremental net loss in the range of $497,000 to $10.41 million in 2010, the Holmes' system would still be profitable. Subsection (7) -- Fostering Competition that Promotes Cost-Effectiveness Generally, competition for hospital services benefits consumers because it leads to lower prices and it creates incentives for hospitals to lower costs. It is not necessary for hospitals to be equal in size to compete, but the beneficial effects of competition will be greater if the hospitals are more equal. As explained by Dr. David Eisenstadt, Wuesthoff’s expert economist, “competitive constraints are a matter of degree” and “while it is true that a small hospital can pose some competitive constraint, it’s not correct that a small hospital can impose the same competitive constraint . . . as a large hospital could.” (Transcript at 1571-72). Holmes is, and historically has been, the dominant provider of hospital services in south Brevard County, with market shares exceeding 80 percent prior to the opening of Wuesthoff-Melbourne. Holmes still has a market share in excess of 70 percent in south Brevard County. A dominant hospital has the ability to set prices above competitive levels by commanding higher prices in negotiations with commercial payors. Holmes has done so in the past and, based upon the comparison of the commercial average net inpatient revenues reported by the Health First hospitals and the Wuesthoff hospitals in 2003 and 2004, it continues to do so. Holmes ability to set prices above competitive levels is enhanced by the fact that the largest managed care plan in Brevard County, HFHP, is operated by Health First. The original approval of the CON for Wuesthoff- Melbourne was based upon the Agency’s determinations that there was at that time a “compelling” need for competition for hospital services in south Brevard County; that the entry of a new, non-Health First provider into the market would give commercial payors and, ultimately, patients an alternative to Holmes, which because of its relationship with HFHP, had no incentive to negotiate competitive rates with other providers; and that competition would have the effect of reducing prices paid by the commercial payors to the hospitals and, ultimately, the premiums paid by patients. Wuesthoff-Melbourne’s entry into the market in December 2002 has not yet resulted in any material price reductions. Indeed, notwithstanding Wuesthoff-Melbourne’s presence in the market, HRMC increased its charges by 15 percent in 2003-04 and by an additional five percent in 2004-05. A hospital’s charges do not necessarily correspond to the prices that the hospital negotiates with commercial payors. However, in this case, there appears to be a correlation because Holmes had an 11.6 percent increase in net revenue per admission between 2003 and 2004 and it also had significant increases in the commercial average inpatient revenues per admission at HRMC and PBCH between 2003 and 2004. Moreover, the significant increase in charges at Holmes over the past two years is a strong indication that Holmes is not feeling any significant competitive pressure as a result of Wuesthoff-Melbourne’s presence in the market. Wuesthoff-Melbourne will be able to exert more competitive pressure on Holmes as its market share increases, particularly if Holmes’ market share continues to decline at the same time as is projected. As a result, Wuesthoff-Melbourne’s ability to expand and increase (or at least maintain) its market share in the growing Viera market is particularly significant to achieving price reductions (and/or minimizing price increases) in Brevard County.11 Holmes contends that even if VMC is approved, there will be sufficient competition in Viera because, according to Table 33 in the CON application, in 2010 the Health First hospitals will have a 50.5 percent market share of the PSA targeted by VMC and the Wuesthoff hospitals will have a 44.3 percent market share of the PSA. However, the approval of the VMC will have the effect of dramatically slowing the upward trend in Wuesthoff’s market share and corresponding downward trend of Health First’s market share in the PSA targeted by VMC because according to Tables 28 and 33 of the CON application, without VMC, the market share of the Wuesthoff hospitals in the PSA is projected to increase from 43.3 percent (in 2003) to 52.3 percent (in 2010), and the market share of the Health First Hospitals in the PSA is expected to decline from 51.2 percent (in 2003) to 42.5 percent (in 2010). Moreover, if VMC is approved, it is less likely that there will be sufficient need for additional acute care beds in the area to justify expanding Wuesthoff-Melbourne beyond 134 beds. That, in turn, will limit the competitive pressure that Wuesthoff-Melbourne will be able to exert on Holmes in the future. The evidence was not persuasive regarding the extent of the competitive pressure and/or price reductions that would result from the expansion of Wuesthoff-Melbourne rather than the approval of VMC.12 However, the fact remains that VMC will strengthen Holmes’ market position in central and south Brevard County, which will not foster competition that promotes cost effectiveness. Not only will the approval of VMC negatively affect the evolution of competition in south Brevard County, but it will effectively preclude the construction of another hospital in the Viera area until 2029 when the exclusivity provisions and restrictive covenants discussed in Part D(2) above expire. The evidence was not persuasive that there was an anticompetitive motivation underlying Holmes’ decision to propose VMC, but the evidence does establish that the approval of VMC will have anticompetitive effects. As a result, the criteria in Section 408.035(7), Florida Statutes, strongly weigh against the approval of Holmes’ CON application. Subsection (8) -- Costs and Methods of Construction The parties stipulated that the costs (including equipment costs), methods of construction, and energy provision for VMC are reasonable; that the architectural drawings for the VMC satisfy the applicable code requirements; and that the construction schedule for VMC is reasonable. Thus, VMC satisfies the criteria in Section 408.035(8), Florida Statutes. Subsection (9) -- Medicaid and Charity Care Holmes conditioned the approval of its application on VMC providing the following levels of Medicaid and charity care: At least 3.0 percent of inpatients at [VMC] will be covered by Medicaid and/or Medicaid HMOs. At least 2.3 percent of the gross revenues of [VMC] will be attributable to patients who meet the guidelines for charity care. The Medicaid and charity commitments are lower than the averages for Brevard County, but they are reasonable and attainable in light of the demographics of the area that will be served by VMC. Holmes has a history of providing considerable services to Medicaid and charity patients, both at its existing facilities and through community programs such as HOPE. Wuesthoff also has a history of providing considerable services to Medicaid and charity patients at its existing facilities and through community programs such as its free clinic in Cocoa. Wuesthoff-Rockledge is a Medicaid disproportionate share provider, which entitles it to a higher Medicaid reimbursement rate from the State as a “reward” for serving more than its fair share of Medicaid patients. Holmes' hospitals and Wuesthoff-Melbourne are not Medicaid disproportionate share providers. Wuesthoff-Melbourne has not been open long enough to qualify. The Wuesthoff hospitals have a contract with Well Care, which is the only Medicaid HMO in Brevard County. Holmes' hospitals do not have a contract with Well Care. On a dollar-amount basis, Holmes provides considerably more Medicaid and charity care than any other hospital in Brevard County, including the Wuesthoff hospitals. In fiscal year 2003, for example, Holmes’ Medicaid gross revenues were $53.7 million (as compared to $39.7 million for the Wuesthoff hospitals) and its charity care gross revenues were $27.8 million (as compared to $10.9 million for the Wuesthoff hospitals). The larger dollar-amount of Medicaid and charity care provided by Holmes is due, at least in part, to Holmes being almost twice the size of the Wuesthoff hospitals. On a percentage basis, Holmes provides approximately the same level of charity care as Wuesthoff-Rockledge, but it provides less Medicaid care than Wuesthoff-Rockledge. In fiscal year 2003, for example, 2.8 percent of Holmes’ gross revenue was charity care (as compared to 2.5 percent for Wuesthoff- Rockledge) and seven percent of Holmes’ patient days were attributable to Medicaid patients (as compared to 10.9 percent for Wuesthoff-Rockledge). According to Mr. Gregg, the Agency gives more weight to the percentage of Medicaid and charity care provided by a hospital than it does to the dollar amount of such services. However, Mr. Gregg acknowledged that Holmes satisfies the criteria in Section 408.035(9), Florida Statutes, based upon its history of providing services to the medically indigent and its Medicaid and charity commitments at VMC. Holmes' satisfaction of the criteria in Section 408.035(9), Florida Statutes, is not given great weight in this proceeding because the medically indigent in central and south Brevard County are currently being adequately served by the existing facilities and, more significantly, zip code 32940, in which VMC will be located and from which it is projected to draw the largest percentage of its patients, has a lower percentage of Medicaid/charity patients and a higher median household income than Brevard County as a whole. Subsection (10) -- Designation as a Gold Seal Nursing Homes The parties stipulated that Section 408.035(10), Florida Statutes, is not applicable because Holmes is not proposing the addition of any nursing home beds. Rule Criteria The Agency rules implicated in this case -- Florida Administrative Code Rules 59C-1.030(2) and 59C-1.038 -- do not contain any review criteria that are distinct from the statutory criteria discussed above. The “health care access criteria” and “priority considerations” in those rules focus primarily on the impact of the proposed facility on the medically indigent and other underserved population groups, as well as the applicant’s history of and/or commitment to serving those groups. Holmes satisfies those rule criteria, but they are not given great weight for the reasons discussed in Part F(1)(g) above. Impact of VMC on the Wuesthoff Hospitals As discussed above, VMC is projected to take patients that are currently being served by, or would otherwise be served by one of the existing hospitals in central or south Brevard County. Approximately 30 percent of VMC’s patient volume will come at the expense of the Wuesthoff hospitals. As a result of the projected population growth in central and south Brevard County over the planning horizon, the Wuesthoff hospitals are projected to have more admissions in 2010 than they currently have, whether or not VMC is approved. However, if VMC is approved, the Wuesthoff hospitals will have fewer admissions in 2010 than they would have had without VMC. The health planners who testified at the hearing agreed that in determining the impact of VMC on the Wuesthoff hospitals it is appropriate to focus on the number of admissions that the Wuesthoff hospitals would have received but for the approval of VMC. The Agency’s precedent is in accord. See Wellington, supra, at 54, 109 n.13. Holmes’ health planner projected in the CON application that the approval of VMC will result in the Wuesthoff hospitals having 1,932 fewer admissions in 2010 than they would have had without VMC, 998 at Wuesthoff-Rockledge and 934 at Wuesthoff-Melborune. Wuesthoff’s health planner projected that the approval of VMC will result in the Wuesthoff hospitals having 2,399 fewer admissions in 2010 than they would have had without VMC, 1,541 at Wuestoff-Rockledge and 858 at Wuesthoff-Melborune. The projections of Wuesthoff’s health planner are more reasonable because they are based upon more current market share data and, as to Wuesthoff-Melbourne, the projections may even be understated because its market share is still growing in the areas targeted by VMC. On a contribution-margin basis, the lost admissions projected by Wuesthoff’s health planner translate into a loss of approximately $3.9 million of income at Wuesthoff-Rocklege and a loss of approximately $2 million of income at Wuesthoff- Melbourne. Using the lost admissions projected by Holmes’ health planner, the lost income at Wuesthoff-Rockledge would be $2.51 million and the lost income at Wuesthoff-Melbourne would be $2.15 million. Thus, impact of VMC on the Wuesthoff system would be a lost income of at least $4.66 million and, more likely, $5.9 million. A loss of income in that range would be significant and adverse to the Wuesthoff hospitals, both individually and collectively. Even though the Wuesthoff system has a net worth of approximately $70.95 million, its net income (i.e., “excess of revenues over expenses”) was only $971,000 in 2003 and $1.1 million in 2004. The system is still recovering from a “devastating” financial year in 1999 when it reported a loss of almost $12 million. Wuesthoff-Melbourne reported a $4.1 million net loss in 2003, and as of June 2004, it had yet to show a profit. The significance of the projected lost income at the Wuesthoff hospitals is tempered somewhat by the increased patient volume that the hospitals are projected to have in 2010 even if VMC is approved. However, the evidence was not persuasive that the increased patient volumes will necessarily result in greater profits at the Wuesthoff hospitals in 2010.13 The approval of VMC will also likely result in a loss of outpatient volume at the Wuesthoff hospitals. However, there is no credible evidence regarding the amount of outpatient volume that would be lost or the financial impact of the lost outpatient volume on Wuesthoff.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency issue a final order denying Holmes’ application, CON 9759. DONE AND ENTERED this 17th day of June, 2005, 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 17th day of June, 2005.
