The Issue Select Specialty Hospital-Marion, Inc.'s CON Application 9710, filed with the Agency for Health Care Administration, seeks establishment of a 44-bed Long Term Care Hospital (an "LTCH") in Polk County, AHCA Health Care Planning District 6. The Agency preliminarily denied the application. Select-Marion has challenged the denial and Kindred-Bay Area seeks intervention in the proceeding. The issues in this case are two: whether Kindred-Bay Area has proven it has standing to intervene in the proceeding and whether the application should be approved.
Findings Of Fact The Parties Select-Marion, the applicant, is a wholly-owned subsidiary of Select Medical Corporation. Select Medical Corporation provides long-term acute care services at 99 LTCHs in 26 states through various subsidiaries. In addition, Select Medical Corporation operates 741 outpatient clinics and has more than 400 "contract therapy locations for freestanding rehabilitation hospitals[.]" (Tr. 65.) Select has approximately 21,000 employees. The Agency is the state agency responsible for the administration of the Certificate of Need program in Florida. See § 408.034(1), Fla. Stat. Kindred-Bay Area operates a 73-bed freestanding, long- term care hospital in Tampa, Hillsborough County, Florida, in AHCA District 6, the health services planning district in which Select-Marion hopes to construct and operate the applied-for project. Kindred-Bay Area is owned and operated by Kindred Hospitals, East, LLC, which also owns and operates a number of other long-term hospitals in Florida and other states. LTCH Services The length of stay in an acute care hospital (a "short- term hospital" or a "general hospital") for most patients is three to five days. Some hospital patients, however, are in need of acute care services on a long-term basis. A long-term basis is 25 to 30 days of additional acute care service after the typical three to five day stay in a short-term hospital. Although some of these patients are "custodial" in nature (see paragraph 19, below) and not in need of LTCH services, many of these long-term patients are better served in an LTCH than in a traditional acute care hospital. In the health care continuum, LTCH care constitutes a component dedicated to catastrophically ill and medically complex patients in need of acute care services that exceed by a considerable amount the average length of stay for those patients in a general hospital. Typically medically unstable for the entire time of stay in the general hospital, these patients require extensive nursing care with daily physician oversight usually accompanied by some type of technologically advanced support. Quite commonly, the technological support includes a ventilator. Most often elderly, LTCH patients may be younger if victims of severe trauma. Whatever the age of the patients, for a variety of reasons, once they exceed the short-term length of stay in a general hospital intensive care unit ("ICU"), they rarely receive the health care treatment that is most appropriate for them in health care settings other than an LTCH. LTCH patients are not able to tolerate, for example, the three hours per day of therapy associated with comprehensive medical rehabilitation and so are not appropriate for Comprehensive Medical Rehabilitation ("CMR") units or hospitals. As compared to LTCH patients, moreover, CMR patients usually require significantly less nursing care. They receive on average 4 to 4.5 hours of nursing care per patient day, as compared to the average eight hours of nursing care per patient day required by LTCH patients. The services in an LTCH are distinct from those provided in a skilled nursing facility ("SNF") or a skilled nursing unit ("SNU") in that more nursing hours are dedicated to the patient and physician oversight is provided with more regularity, that is, on a daily basis. Patients in SNFs or SNUs are not likely to receive daily physician visits and observation or, in terms of hours, the intensity in nursing services required by the patient appropriate for LTCH care. The level of care provided in an LTCH is analogous to that provided in an ICU progressive care unit in a short-term acute care hospital. But staff orientation at an ICU in a short-term care hospital is different from LTCH staff orientation. The ICU staff is focused on stabilizing the patient and moving the patient to the next level of care within the continuum of care. With such a focus, it is difficult for the ICU in a general hospital to sustain the level of care for the long-term as required by a patient in need of long-term intensive care. Furthermore, when a patient has "fallen off . . . [the] clinical pathway" (tr. 19) and does not leave the ICU within the short time projected for the standard short-term acute care patient, the patient is viewed as a failure by the ICU staff. Staff perspective that there is little hope for the patient's recovery dampens the motivation necessary to provide consistently the service the patient requires over the long-term if the patient is to recover. Federal Government Recognition of LTCHs The federal government recognizes the distinct place based on the high level of patient acuity occupied by LTCHs in the continuum of care. The Prospective Payment System ("PPS") of the federal government treats LTCH care as a discrete form of care. LTCH care therefore has its own system of diagnostic related groups ("DRGs") and case mix reimbursement that provides Medicare payments at rates different from what PPS provides for other traditional post-acute care providers. Effective October 1, 2002, the Centers for Medicare and Medicaid Services ("CMS") implemented categories of payment designed specifically for LTCHs, the "LTC-DRG." The LTC-DRG is a decisive sign of the recognition by CMS and the federal government of the differences between general hospitals and LTCHs when it comes to patient population, costs of care, resources consumed by the patients and health care delivery. CON Application Process Select-Marion submitted CON Application 9710 in the second CON Application Review Cycle of 2003. The application was reviewed in comparison with CON Application 9709, submitted by SemperCare Hospital of Lakeland, Inc., through which SemperCare-Lakeland sought a 30-bed "hospital in a hospital" at Lakeland Regional Medical Center in Polk County. The Agency evaluated the applications in a State Agency Action Report ("SAAR"). The SAAR recommended denial of both applications. A basis for the denial of Select-Marion's application is summed up as follows: The applicant contends that Polk County LTCH appropriate patients are remaining in acute care hospitals within the county as no appropriate or available alternatives exist with an acceptable distance. The applicant did not demonstrate that Polk County residents are being denied access to existing appropriate post-acute care services including LTCH services. There are two licensed LTCHs with an average occupancy in calendar year 2002 below 75 percent located in adjacent Hillsborough County. Travel distances to existing LTCHs, skilled nursing facilities, comprehensive medical rehabilitation facilities, or any appropriate provider of post-acute care were not demonstrated to be unreasonable. AHCA Ex. 2, p. 34. The SAAR also recommended denial of SemperCare-Lakeland's application. On December 10, 2003, authorized representatives of AHCA adopted the recommendation contained in the SAAR and released it. See id., p. 37. Both Select-Marion and SemperCare-Lakeland timely challenged the denials of their respective applications. The petitions of the two were referred to DOAH and consolidated for purposes of hearing. SemperCare-Lakeland subsequently withdrew its challenge. An order was entered closing the DOAH file on the Sempercare challenge, see DOAH Case No. 04-0460CON, leaving this case to proceed on its own. Issues Aside from the standing issue with regard to Kindred- Bay Area, the issue in this case is approval of Select-Marion's application. This primary issue breaks into related sub-issues reflected in the provision of the SAAR, quoted above. Has Select-Marion demonstrated that there is need for an LTCH in Polk County despite the existence of other LTCHs in the district and given their less-than-optimal occupancy rates? If so, would an LTCH in Polk County enhance access to LTCH service for District 6 residents and specifically for those who reside or are hospitalized in Polk County? Put another way, is there a legally cognizable barrier to access for Polk County patients to LTCH beds available elsewhere in the district that would justify approval of the application? LTCH Need Methodology and AHCA's Concerns The Agency has not adopted a need methodology for LTCH services. Consequently, it does not publish fixed need pools for LTCHs. In response to a rise in LTCH applications over the last several years, the Agency has consistently voiced concerns about identification of the patients that appropriately comprise the LTCH patient population. Because of a lack of specific data from applicants with regard to the composition of LTCH patient population, the Agency is not convinced that there is not an overlap between the LTCH patient population and the population of patients served in other healthcare settings. In the absence of data identifying the LTCH patient population, AHCA has reached the conclusion "that there are other options available to those patients [the population targeted by the LTCH applicant], depending on . . . things such as physician preference." (Tr. 175.) Another expression of the Agency's view is that LTCH applicants have taken an "overly-broad" (id.) approach to determining the LTCH patient population with an emphasis on long lengths of stay in general hospitals. The Agency accepts that the candidate population for placement in a long-term care hospital includes at least some of those patients with extended lengths of stay in an acute care setting. But "in the absence of better data that evaluated severity of illness, as well," AHCA fears that the approval of an LTCH application "has a tendency to allow less severely ill people to drift into these otherwise very expensive facilities [that is, LTCHs]." (Tr. 175-176.) A better approach in AHCA's view would be to focus on severity of illness because some long stay patients in general hospitals whose stays are more custodial in nature are not appropriate candidates for LTCH services. These long stay "custodial" patients are neither catastrophically ill nor medically complex. For them, rather than the more specialized and highly technological-based services accompanied by intensive nursing care required by the LTCH patient, fewer services of less complexity suffice. When there is an oversupply of LTCH beds, moreover, they tend to attract less severely ill patients than those who are appropriate for LTCH services. The Agency draws support for its concerns from a report to the Congress in June 2004 by MedPAC.1 MedPAC's concern about LTCHs stems from the cost associated with LTCH services: a cost that is higher than other skilled nursing facilities or inpatient rehabilitation facilities. Just as the Agency has concluded, MedPAC expects LTCHs with an oversupply of LTCH beds to attract patients who are not severely ill enough to be appropriate for LTCH care. In a setting whose costs are higher than is appropriate for them, more Medicare dollars are expended on these patients than is necessary. The Agency's concerns about LTCH applications in general are compounded in this case by declining occupancies in LTCHs in District 6. "For the calendar year 2002, they were at 74.47%, and for calendar year 2004 they're at 66.65%, according to our [AHCA] records." (Tr. 178.) Existing LTCHs in District 6 There are currently two licensed LTCHs operating in District 6: Kindred Hospital-Central Tampa, and the Intervenor in this case, Kindred-Bay Area. Kindred-Bay Area is approximately 50 to 60 miles, and within an hour's drive of the Winter Haven Area where Select-Marion intends to locate its proposed LTCH; Kindred Hospital-Central Tampa is 5 to 7 miles closer to Winter Haven than is Kindred-Bay Area. Kindred-Central Tampa is a 102-bed LTCH. It is JCAHO accredited. The recent trend in its average occupancy is a declining one. In 2002, the average occupancy rate was 79.4%. In 2003, it fell to 70.6%. In 2004, it fell, yet again, although the decline was less dramatic, to 69.6%. On the average day, Kindred-Central Tampa had 30 to 32 beds available to accommodate additional patients. Kindred-Bay Area is a 73-bed LTCH in Hillsborough County. Also JCAHO accredited, it is licensed as an acute care hospital and is designated as an LTCH by the Medicare program. It offers a variety of long-term care services: respiratory/ventilator services, IV services, neurological services, wound care, dialysis and others. Kindred has a 4-bed ICU, an 8-bed "step down" unit, and 61 med-surg beds. Need Demonstration: the Applicant's Responsibility It is the applicant's responsibility to demonstrate under Florida Administrative Code Rule 59C-1.008(2)(e)2., that there is a need for the services for which approval is sought. The Agency analyzes LTCH applications on a district basis. The approach offered by Select-Marion, however, was a different one from the Agency’s. The approach is outlined in Select-Marion’s application. Extensive testimony about the approach, moreover, was offered at hearing through Select-Marion's expert health planner, Patricia Greenberg. Select-Marion’s Application and Proposal Submitted in the second application cycle for 2003, Select-Marion’s application was assigned CON 9710. Select-Marion estimates its total project costs to be approximately $11,244,000. It has not yet acquired the site for its proposed LTCH but anticipates that the facility will be located near or in Winter Haven in the central eastern region of Polk County. Select-Marion, however, has not conditioned its application on the location of the facility in the Winter Haven area. It has only offered to condition the application on the location of the facility in Polk County. If located in the Winter Haven area, the proposed LTCH will be within 20 miles of the existing acute care providers in the county, a location sufficiently close to the major referral sources for the facility. Uncontested Statutory and Rule Criteria By stipulation of the parties it has been agreed that Select-Marion's application meets most of the statutory and rule criteria applicable to CONs or that those criteria are not applicable. The primary exception to the parties' agreement is need. As testified at hearing by the Agency's sole witness, the applicant's alleged failure to demonstrate need is the sole reason the application was denied. (See Tr. 169.) Ms. Greenberg's Testimony Patricia Greenberg is the President of National Health Care Associates, "a health care consulting firm that specializes in health care planning, health care finance and health care operations." (Tr. 100.) She has extensive experience as a consultant on health care projects "including Certificate of Need work." (Tr. 101.) Since the Agency does not have an LTCH need methodology in rule nor an Agency policy on LTCH need methodology in place, Select-Marion is responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics: Population, demographics and dynamics; Availability, utilization and quality of like services in the district, sub-district or both; Medical treatment trends; and, Market conditions. See the testimony of Ms. Greenberg at tr. 115 and Florida Administrative Code Rule 59C-1.008(2)(e). Select-Marion addressed each of these topics in its application. On the basis of the each of the above-quoted topics and using several numeric need methodologies that follow general health planning principles, generally accepted by AHCA in other contested LTCH CON cases, as testified by Ms. Greenberg, there is a need for at least 44 LTCH beds in Polk County. Ms. Greenberg's analysis does not overlook the beds that are available elsewhere in the district, that is, in Hillsborough County where Kindred-Central Tampa and Kindred-Bay Area are located. But in her words, "[t]he facilities in the neighboring county [Hillsborough] are not accessible to this [the Polk County] population." (Tr. 135.) Ms. Greenberg elaborated on this point later in her testimony when discussing the extent of impact to Kindred-Bay Area that might occur should the application be granted, "Kindred-Bay Area may have beds, but they're not accessible to that population, or they would be using them." (Tr. 150.) The gist of the testimony with regard to accessibility was reiterated by Ms. Greenberg when asked directly whether the Kindred facilities in Tampa are "reasonable alternatives to the patients in Polk County": No, they are not reasonable alternatives at all. [The two Kindred facilities] have beds that are available. The physicians that support the need for the project, in the depositions I have reviewed[2], say they're not an alternative, they're not sending patients to them, they only get a few patients going [to the Kindred facilities] because of the family hardship, continuity of care, . . . . They're not an alternative at all for that patient population. (Tr. 162, 163.) In contrast to the approach of Select-Marion to need on a "Polk County" basis, as explained by Ms. Greenberg in her testimony, AHCA, however, does not approach LTCH need on a sub- district basis. The Agency approaches LTCH need on a district basis. Polk County is but one county in the multi-county health planning district in which it is located: District 6. District 6 At the time of filing of the application, the population in District 6 was over 1,955,700. The population included 323,869 in the age cohort of 65 and over, the age cohort eligible for Medicare services, and the cohort that contains patients primarily served by LTCHs. The population of Polk County at the time of the filing of the application was 507,839, including 94,950 in the age cohort, 65 and over. Approximately one-third of the District’s Medicare eligible population lives in Polk County. Polk County is one of five counties that comprise AHCA Health Care Planning District 6. (The other four are Hillsborough, Manatee, Hardee, and Highlands Counties.) The two LTCHs that presently exist in the District are Kindred-Central Tampa and Kindred-Bay Area. Evidence was presented as to Kindred-Bay Area's Patient Recruitment and Admissions Practices, the sources of its admissions, market conditions and impacts to Kindred-Bay Area's census and the adverse impact to Kindred-Bay Area. Kindred-Bay Area’s Patient Recruitment and Admissions Practices Kindred-Bay Area has “clinical liaisons” who serve to educate health care providers as to the availability of Kindred’s services to build relationships with potential referral sources, and to gather information for the evaluation of potential LTCH patients from other health care facilities. The majority of Kindred’s referrals and admissions come from short-term acute care hospitals, primarily intensive care units within such hospitals but also the med-surg units. The clinical liaison’s job includes conducting “in- service training” to educate hospital staff as well as physicians and other health care professionals of the services and treatments Kindred offers, and the types of patients for whom Kindred may be an appropriate placement option. Kindred- Bay Area’s clinical liaison for Polk County, Mindy Wright, has been performing in-service training in Winter Haven for ten years, typically once a year but more frequently if turnover demands. She attempts a visit to the Winter Haven area at least every two weeks and frequently for periods of every week. The clinical liaison also gathers information concerning potential referrals to Kindred from acute care hospitals in the Winter Haven area. The clinical liaison transmits this information to the hospital and the information is evaluated by a team consisting of the hospital’s CEO, CFO, internal case manager, and a nurse or physician to make a decision on admission. There is an incentive for LTCHs to admit patients who meet medical criteria for admission. Reimbursement from Medicaid and Medicare programs may be denied if a patient has not met appropriate admission criteria. Reimbursement, moreover, may be reduced if the patient initially met appropriate criteria but then turns out to have a relatively short length of stay in the LTCH. Some patients are denied admission to Kindred-Bay Area for clinical reasons. For example, the patient may not meet Interqual criteria for admission. Failure to meet clinical admission criteria can occur if the patient has been kept in the short-term acute care hospital too long, possibly even for several months, when the patient should have been referred to Kindred much sooner. The majority of patients referred to Kindred-Bay Area are admitted. Patients are also denied admission to Kindred for financial reasons. On principle, Select does not decry such a practice, acknowledging that it also seeks to assure that some revenue stream is available to assist in providing the expensive care that comprises LTCH services. Sources of Admissions to Kindred-Bay Area Kindred-Bay Area draws the majority of its patients (60 to 75%) from Hillsborough and Polk Counties and specifically from the cities of Tampa and Lakeland and the Brandon and Winter Haven areas. It has also drawn patients from the Orlando/Orange County area, other areas of Polk County, and from as far south as the Naples Area. In 2003, Kindred-Bay Area underwent renovations. The renovations limited the number of patients it could admit. In 2004, Mindy Wright, the clinical liaison responsible for the Orange County and Polk County areas, was on maternity leave for four months. Her absence significantly reduced Kindred’s presence in Polk County health care facilities. The hospital did not replace Ms. Wright. Although other clinical liaisons provided some coverage in her area, it was not as effective as Ms. Wright had been. The result was not unexpected; when clinical liaisons are not in regular contact with short-term acute care hospitals and other providers, referrals and admissions to the LTCH from such facilities usually drop significantly. In addition to renovations and Ms. Wright's absence, there were several other factors that had an impact on admissions to Kindred-Bay Area in the last few years. First, several hurricanes in 2004 had an impact on Central Florida. They seriously disrupted the delivery of health care services, particularly in Polk County. The disruption resulted in a drop in referrals and admissions to Kindred-Bay Area from Polk County. Second, turnover in staffs at hospitals to which Ms. Wright was assigned, including Winter Haven, had an impact on referrals. If the social worker at the hospital does not know about Kindred and its capabilities, the social worker may not identify patients meeting Kindred’s criteria for admission. The conditions that led to declining admissions to Kindred-Bay Area from Polk County were temporary. So far in 2005, the downward trend in admissions between 2002 and 2004 has been reversed. Admissions through the first four months of 2005 at Kindred-Bay Area have been 20% higher for the same period in 2004, higher than the same period in 2003 and nearly at the same level for the period in 2002. Admissions from Orange County, on the other hand, have dropped and are not likely to rebound. Orange County admissions went from 50 in 2002 to 28 in 2003 and only 10 in 2004. An LTCH operated by SemperCare, subsequently acquired by Select Medical Corporation, opened in Orange County in June 2003 (at a location about an hour’s drive from Winter Haven). The drop in Orange County admissions is likely to be exacerbated by the opening of another CON-approved Select facility in Orange County, a 40-bed, freestanding facility. LTCH Market Conditions and Impact on Census Kindred-Bay Area's census has declined in recent years, from an average daily census of 52 patients (72% occupancy) in 2002 to 48 patients (66%) in 2003 to 46 patients (63%) in 2004. On the average day in 2004, Kindred-Bay Area had beds available to accommodate another 27 patients. At the time of final hearing, Kindred-Bay Area's occupancy level was at 60% or about 44 beds. Optimal occupancy for Kindred-Bay Area would be 69 to 70 patients or about 95% occupancy. The existence of a decline in occupancy rates for District 6 LTCHs is supported by AHCA data which shows a decline from about 74.5% in 2002 to 66.7% in 2004. It is also reasonable to assume that some patients from eastern Polk County will follow historic trends and flow to the existing LTCH and approved LTCH in Orange County. The combination of declining occupancy in District 6 LTCHs and possible outmigration of eastern Polk County residents to Orange County for LTCH services diminish Select-Marion's claim that an LTCH is needed in Polk County. Other changes in the LTCH market are also likely to impact Kindred-Bay Area in terms of referrals and admissions from other areas. Select has won a recommendation for approval for an LTCH in Lee County in a formal administrative proceeding. At the time of filing of proposed recommended orders in this proceeding the recommended order in the Lee County proceeding was pending. Kindred-Bay Area maintains a clinical liaison in Lee County to seek referrals in much the same manner as conducted by Ms. Wright. If a Select facility opens in Ft. Myers, it will have an impact on the referrals that Kindred-Bay Area receives from Ft. Myers and surrounding areas. In addition, HealthSouth has received CON approval for an LTCH in Sarasota expected to open in August 2005. Kindred- Bay Area does not directly market to the Sarasota area. Another Kindred Hospital, Kindred-St. Petersburg markets in that area. It is reasonable to assume that the areas south of Sarasota toward Ft. Myers will begin to refer patients to the closer HealthSouth-Sarasota facility rather than continuing referrals to Kindred-Bay Area. Further, as HealthSouth-Sarasota seeks to establish its present in the market, it will likely engage in some marketing in the Tampa Bay area, in areas currently served by Kindred-Bay Area. Kindred-Bay Area's sister hospital, Kindred-Central Tampa, no longer a party to this proceeding, does not contend that the opening of a Select facility would result in the loss of patients to Kindred-Central Tampa. Kindred-Central Tampa, however, is available to accept referrals from Polk County health care providers, either directly or at the request of Kindred-Bay Area. Kindred-Bay Area, like Kindred-Central Tampa, has an open medical staff and any physician can apply for admitting or consulting privileges and would be granted them if they met qualifications. Further, declining occupancy levels at Kindred-Central Tampa, a 102-bed facility, demonstrates that there is available capacity at Kindred-Central Tampa to absorb patients from Polk County, just as there is capacity at Kindred- Bay Area to absorb additional patients from Polk County who are in need of LTCH services. Adverse Impact on Kindred For the periods of calendar years 2002 and 2003 and the first half of 2004, the gross revenue impact on Kindred-Bay Area attributable to the number of patients from Polk County that Kindred-Bay Area would have lost to Select-Marion's proposed facility ranged from $1.75 million to $4.7 million. In terms of net revenue and after-tax margin, however, the losses would be substantially smaller. For the 32 patients from Polk County admitted to Kindred-Bay Area in 2004, the total after-tax margin impact would be only $240,000. Furthermore, Kindred-Bay Area is not likely to lose all of its Polk County patients if the proposed project is located in the Winter Haven area since Lakeland area patients, located closer to Tampa than Winter Haven, might still choose LTCH services at Kindred-Bay Area over the proposed Select facility. As found earlier in this order, however, Select-Marion has not conditioned its CON on locating the proposed facility in Winter Haven. A Winter Haven facility, moreover, with a primary service area with a 20-mile radius would capture Lakeland in its primary service area. On balance, the impact of the proposed facility located in Polk County on Kindred is not substantial enough to confer standing on Kindred-Bay Area. The SAAR Following its review of Select's application, AHCA issued its State Agency Action Report (the "SAAR") recommending that CON 9710 be denied. Following the signature of officials at the Agency indicating approval of the recommendation, the SAAR became the preliminary action of the Agency subject to challenge under Chapter 120, Florida Statutes. At trial, the Agency, through its witness, Jeffrey Gregg, Chief of the Agency's Bureau of Health Facility Regulation, testified that the only reason the application was denied is the Select-Marion's failure in AHCA's view to demonstrate need for the facility. Select-Marion's expert health care planner testified that there is need in Polk County for the facility. The need is based on need methodologies that are both reasonable and appropriate from a health planning perspective and that are consistent with methodologies approved by final orders of the Agency. As discussed, above, however, there is a critical difference in the application of the need methodologies in this case from other cases. In this case the need methodologies developed by Select-Marion applied only to Polk County and not to the district as a whole. The Agency determines need on a district-wide basis. Select-Marion maintains that there are barriers to Polk County patients' access to existing LTCH facilities. The barriers are described as geographical based on physician referral patterns and family participation in rehabilitation. Patient and Physician Preference and Practice Select-Marion largely bases its case for need on allegations of the preferences of patients, family members and their physicians. As to family members, it is not to be doubted that family members wish to avoid the burdens of travel. To the extent, however, that family members value specialized care, they are more likely to have the patient travel the distance necessary to receive it. Indeed, some Polk County families of LTCH patients are willing to travel the distance necessary to visit family members who are patients outside Polk County. With regard to referring physicians, the majority of referring physicians choose not to serve as the attending physician for their patients once referred to an LTCH, even when the LTCH is located in the same city as the referring physician. Typically, a referring physician relies upon another doctor or a practice group to attend to his or her patient in the LTCH setting.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration deny CON 9710 filed by Select Specialty-Marion, Inc. DONE AND ENTERED this 31st day of October, 2005, 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 31st day of October, 2005.
The Issue The issue is whether the Agency for Health Care Administration should approve Petitioner's application for a Certificate of Need to establish a freestanding 44-bed long-term acute care hospital in Sarasota County.
Findings Of Fact Based upon the testimony and evidence received at the hearing and the parties' stipulations, the following findings are made: Parties Petitioner is a wholly-owned subsidiary of Select Medical Corporation (Select), which owns and operates 79 LTACHs in 24 states including a 40-bed LTACH in Miami-Dade County that was licensed in December 2002. The Agency is the state agency responsible for administering the CON process and licensing LTACHs and other hospital facilities. Petitioner’s Proposed LTACH In the first batching cycle of 2003 for “other beds and programs,” Petitioner timely filed an application for a CON to establish a freestanding 44-bed LTACH in Sarasota County. Sarasota County is located in District 8 for health planning purposes. The other counties in District 8 are DeSoto, Charlotte, Lee, Glades, Hendry, and Collier. Petitioner's proposed LTACH will be located in the city of Sarasota, which is in northern Sarasota County, close to the boundary between Sarasota and Manatee Counties. Petitioner projected in the application that its proposed LTACH would be operational by June 2005. The utilization projections in the application focused on the facility's third year of operation, which is the 12-month period ending June 2008. The specific mix of services to be provided at Petitioner’s proposed LTACH has not yet been determined; however, it is expected that the services will include the same "core" services found at other Select LTACHs. Those services are the treatment of pulmonary and ventilator patients, neuro- trauma and stroke patients, medically complex patients, and wound care. Petitioner’s facility will include a four-bed “high observation” unit in which the most unstable and highest acuity patients will be located. The nurse-to-patient ratio in that unit will be two-to-one, and the level of monitoring will be similar to that of an intensive care unit (ICU) in a general acute care hospital. Application Review and Denial Petitioner's application was designated CON 9657, and was reviewed along with the CON application filed by Petitioner for a 60-bed LTACH in Lee County. The Lee County application, CON 9656, is not at issue in this proceeding. On June 11, 2003, the Agency issued its State Agency Action Report (SAAR), which recommended denial of both CON applications filed by Petitioner. The primary basis for denial of the Sarasota County application described in the SAAR was Petitioner's failure to demonstrate a need for its proposed 44- bed LTACH. The parties stipulated that Petitioner's CON application satisfied all of the applicable statutory and rule criteria except those related to "need," and that the only issue to be determined in this proceeding is whether Petitioner established a need for its proposed facility.1 LTACHs, Generally LTACHs are health care facilities that provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions. To qualify as an LTACH, the facility must serve a patient population whose average length of stay exceeds 25 days. LTACH services are most highly utilized by persons in the 65 and older (“65+”) age cohort because those persons are more likely to have complex and/or co-morbid medical conditions that require long-term acute care. The typical LTACH patient is still in need of considerable acute care, but a traditional acute care hospital is no longer the most appropriate or lowest cost setting for that care. Most LTACH admissions are patients transferred from a traditional acute care hospital. It is not uncommon for an LTACH patient to be transferred directly from the hospital's critical care unit or ICU after the patient has been diagnosed and stabilized. Traditional post-acute care settings -- nursing homes, skilled nursing facilities (SNFs), skilled nursing units (SNUs), comprehensive medical rehabilitation (CMR) hospitals, and home health care -- are not appropriate for the typical LTACH patient because the patient's acuity level and medical/therapeutic needs are higher than those generally treated in those settings. Indeed, unlike traditional post-acute care settings which typically do not admit patients who still require acute care, the core patient-group served by LTACHs are patients who require considerable acute care through daily physician visits and intensive nursing care which can average as much as nine hours per day. LTACH patients are often discharged to a traditional post-acute care setting such as a nursing home, SNF, SNU, CMR, or home health care. Thus, those facilities cannot be considered as "substitutes" for LTACHs, even though there is overlap between the diagnoses and services provided to lower acuity LTACH patients and higher acuity patients in those traditional post-acute care settings. The federal government has recently developed a Medicare payment system specifically for LTACHs. That system recognizes the LTACH patient population as being distinct from the patient populations treated by traditional acute care hospitals and post-acute care providers such as nursing homes, SNFs, SNUs, and CMRs, even though there may be some overlap between the patient populations served by LTACHs and those other types of facilities. LTACH services are reimbursed by Medicare at a predetermined rate that is weighted based upon the patient's diagnosis and acuity, regardless of the cost of care. This reimbursement system is similar to, but uses Diagnosis Related Groups (DRGs) that are different than the DRGs used in the traditional acute care hospital setting. LTACHs fit into the continuum of care between traditional acute care hospitals and traditional post-acute care facilities. LTACHs are designed to serve patients that would otherwise have to be maintained in a traditional acute care hospital, where the standard reimbursement rates may be insufficient to cover the costs associated with a lengthy stay, or be moved to an alternative setting such as a nursing home, SNF, SNU, or CMR, where the patient may not receive the level of curative care needed. The recently-adopted, LTACH-specific system for Medicare reimbursements is expected to enhance the status of LTACHs as part of the continuum of care. LTACHs in Florida Currently, there are only nine LTACHs operating in Florida with a total of 683 licensed beds. The facilities are concentrated in six counties, Dade, Broward, Hillsborough, Pinellas, Duval, and Clay. There are an additional 182 beds which have been approved by the Agency but which are not yet operational. Those beds include a new 40-bed facility in Sarasota County (discussed below) and an additional 22 beds at the existing 60-bed Pinellas County facility, which is in the health planning district (District 5) immediately to the north of District 8. The Pinellas County facility is located in St. Petersburg, which is approximately 25 to 30 miles north of Petitioner’s proposed facility. The Florida LTACH facilities are well utilized. The occupancy rates at the facilities range from 54.6 percent to 99.2 percent. Four of the nine facilities have occupancy rates higher than 80 percent, and the average occupancy rate for all of the facilities is 76.6 percent. The average length of stay for all patients discharged from Florida LTACHs between July 2001 and June 2002 was 42.2 days. The 65+ age cohort accounted for approximately 77 percent of the LTACH discharges in Florida for that period. Relevant Demographics of Sarasota County The 2003 population of Sarasota County was 343,966, which was 25.8 percent of the total District 8 population. In 2008, which is the third year of operation for Petitioner's proposed LTACH, the population of Sarasota County is projected to increase by 6.2 percent to 365,439. Over that same period, the population of District 8 as a whole is projected to increase by 10.4 percent. The 65+ age cohort, which is the group most likely to utilize LTACH services and the group that utilizes LTACH services at the highest rate, represents 31.2 percent of Sarasota County's 2003 population and 31.5 percent of the county's projected 2008 population. By contrast, in 2003 the District 8 average for the 65+ age cohort was 26.9 percent and the statewide average was 17.5 percent. Sarasota County has a higher percentage of persons in the 65+ age cohort than do any of the counties that currently have an LTACH facility. Pinellas County, with 22 percent of its population in the 65+ age cohort (and 82 licensed and approved LTACH beds), has the highest rate of the counties with LTACHs. There are four acute care hospitals in Sarasota County, two of which -- Sarasota Memorial Hospital and Doctors Hospital of Sarasota -- are located in the city of Sarasota in close proximity to the proposed location of Petitioner's LTACH. The other two hospitals in Sarasota County -- Bon Secours Venice Hospital and Englewood Community Hospital -- are located in the southern part of the county and are 16 miles and 28 miles, respectively, from the proposed location of Petitioner's LTACH. In the CON application, Petitioner stated that the four hospitals in Sarasota County would "provide a solid base of patients" for the proposed LTACH. The application further stated that patients would also likely come from three hospitals in Charlotte County -- Charlotte Regional Medical Center, Fawcett Memorial Hospital, and Bon Secours St. Joseph Hospital - - and one hospital in DeSoto County -- Desoto Memorial Hospital -- even though the Charlotte County hospitals are almost 40 miles from the proposed site of Petitioner's LTACH and the DeSoto County hospital is more than 40 miles from the proposed site. The record does not reflect how many total acute care beds are in these hospitals, nor does it reflect whether any of the hospitals are trauma centers or whether they have any specialty programs that might impact (either positively or negatively) the potential LTACH patient pool for Petitioner's proposed facility. Approved LTACH in District 8 There are no LTACHs currently operating in Sarasota County or District 8. HealthSouth received a CON in October 2002 to establish a freestanding 40-bed LTACH in Sarasota County, but that facility has not yet opened. HealthSouth is behind schedule in the development of its LTACH. If HealthSouth does not "break ground" on its LTACH by April 2004, its CON will expire; however, as of the date of the hearing, HealthSouth's CON was still valid. The Agency expressed a concern in the SAAR that "the ultimate development of the HealthSouth LTCH [sic] in District 8 is uncertain" based upon legal and financial problems at HealthSouth. However, as of the date of the hearing, the Agency had not received any formal indication from HealthSouth that it is not going forward with the development of its Sarasota County LTACH. HealthSouth did not seek to intervene in this proceeding. Numeric Need for Petitioner’s Proposed LTACH Petitioner has the burden to demonstrate "need" for its proposed LTACH. The Agency does not publish a fixed-need pool for LTACHs, nor is there an Agency rule which provides a specific formula or methodology for determining numeric need for an LTACH.2 HealthSouth's 40 approved, but not yet operational LTACH beds must be factored into the analysis of need for any additional LTACH beds in District 8. Accordingly, it is necessary for Petitioner to demonstrate a numeric need for at least 84 LTACH beds for its application to be granted. The application states that “the primary service area [for Petitioner’s proposed LTACH] is Sarasota County and the broader service area includes portions of Charlotte County and DeSoto County . . . .” This service area encompasses an approximately 40-mile radius around the site of the proposed facility, and includes the eight acute care hospitals referenced above. In contrast to the application’s description of the service area, Petitioner’s expert witness in the area of LTACH development, Greg Sasserman, testified that the “actual” service area for Petitioner’s proposed LTACH would be a 10 to 20-mile radius around the facility. That distance is a more reasonable estimate of the distance that patients would likely travel for LTACH services. In its application, Petitioner attempted to demonstrate numerical need for the proposed facility under two distinct methodologies, one based upon "use rate" and another based upon "length of stay." “Use Rate” Methodology Petitioner’s "use rate" methodology projected the number of LTACH patient days that will likely be generated by Sarasota County residents based upon the utilization rates of LTACH services by the residents of the counties in which LTACH facilities are currently located. The utilization rates for the existing facilities were calculated by age cohort and were shown as a number of patient days per 1,000 persons in each age cohort. Those rates were then applied to the projected population of Sarasota County in 2008 in each age cohort in order to calculate a projected number of patient days that will be generated by Sarasota County residents in that year. Those patient days were then "grossed up” by an occupancy standard of 80 percent and then "grossed up" by an additional 44.5 percent to account for patients coming to the facility from outside of Sarasota County. The utilization rate calculated under this methodology is not a true “statewide” rate. The existing LTACHs are concentrated in only six of the states 67 counties, and more significantly, Petitioner excluded the facilities in Miami-Dade and Pinellas Counties from its calculations because their utilization rates were, according to Petitioner, “misleadingly conservative.” The 44.5 percent out-of-county rate was purportedly derived from the experience of the other LTACHs operating in Florida. However, the record does not include the raw data upon which that rate was calculated, and it does not reflect whether the rate includes the two facilities excluded from the calculation of the “statewide” utilization rate or the distances from which out-of-county patients are drawn to the facilities. Nor can the 44.5 percent rate be squared with the calculations of potential LTACH discharges from the eight area hospitals as part of the “length of stay” methodology (discussed below), which reflect only 24.7 to 26.8 percent of the patients coming from hospitals outside of Sarasota County.3 Petitioner's calculations produced an estimate of 29,654 LTACH patient days generated by Sarasota County residents in 2008, which translated into an average daily census (ADC) of 81 patients and a need for 101 LTACH beds; and an estimate of 53,431 LTACH patient days, which translated into an ADC of 146 patients and a need for 182 LTACH beds when the out-of-county residents were taken into consideration. Use rate methodologies are commonly used by health planners to project need for acute care beds and other types of services. However, in the LTACH context, a use rate methodology is not necessarily a reliable indicator of bed need because the existing LTACHs are not evenly distributed statewide and the utilization rates for the existing LTACHs vary significantly. The unreliability of Petitioner’s “use rate” analysis is further demonstrated by the fact that Petitioner excluded two of the existing facilities in the calculation of its “statewide” utilization rate. If the utilization rates of those facilities were included, the number of patient days and bed need projected by Petitioner would have been lower. “Length of Stay” Methodology Petitioner’s "length of stay" methodology projected bed need based upon an analysis of the discharges from the eight District 8 hospitals identified above. More specifically, the analysis focused on the discharges that Petitioner considered to be “appropriate” LTACH admissions based upon the nature of the patient’s diagnosis and the length of the patient’s stay at the hospital. Open heart surgery DRGs were included in the analysis, and DRGs “for people age 0 to 17, obstetric and gynecological care, newborns, alcohol and drug abuse, rehabilitation and psychoses” were excluded from the analysis. The application also makes various references to LTACH-appropriate diagnoses by Major Diagnostic Category (MDC) and "program area"; however, the specific discharges identified by Petitioner as being potential LTACH patients from the eight hospitals are not broken down by DRG in the application. Petitioner used two approaches to determine whether the patient is an “appropriate” LTACH patient from a length of stay perspective. Both approaches estimate the number of days that patients who otherwise would have remained in and been discharged from an acute care hospital would have likely spent at an LTACH, if one was available The first approach, which was characterized in the application and at hearing as the more “conservative” measure, only considered patients whose length of stay at the acute care hospital was at least 15 days longer than the geometric mean length of stay (GMLOS) for the patient's DRG (hereafter “the GMLOS plus 15 methodology.)” The estimated number of patient days produced by the GMLOS plus 15 methodology is the sum of the patients' actual lengths of stay less the GMLOS, which represents the number of days that the patients would likely stay in the LTACH facility. The second approach, which was characterized in the application as the more “aggressive” measure, considered all patients whose length of stay was more than 15 days (hereafter “the LOS plus 15 methodology”). The estimated number of patient days produced by the LOS plus 15 methodology is the sum of the patients' actual lengths of stay less 15 days, which again reflects the number of days that the patients would likely stay in an LTACH facility. The GMLOS is a statistically-adjusted value for all cases within a DRG that takes into account “outlier” cases,4 transfer cases, and other cases that could skew an arithmetic average length of stay. The GMLOS is calculated by the federal government. The only difference in the two approaches is that the GMLOS plus 15 methodology includes only those patients with considerably longer lengths of stay than expected for their diagnoses (i.e., 15 days in excess of the GMLOS for the applicable DRG), whereas the LOS plus 15 methodology includes all patients with long lengths of stay (i.e., in excess of 15 days) irrespective of their diagnoses. Patients who, because of co-morbidities, otherwise complex medical conditions, or frailties due to age, have lengths of stay in excess of the GMLOS plus 15 days are generally appropriate LTACH patients, particularly if the patient would otherwise remain in the ICU of the acute care hospital. In such circumstances, an LTACH would likely be the more appropriate setting for the patient from both a financial and patient-care standpoint. The GMLOS plus 15 methodology resulted in an estimated 13,263 LTACH patient days, which translates into an ADC of 36.3 patients and a need of 45 LTACH beds based upon an 80 percent occupancy standard. The LOS plus 15 methodology resulted in an estimated 21,753 LTACH patient days, which translates into an ADC of 59.6 patients and a need for 74 LTACH beds based upon an 80 percent occupancy standard. The patient days computed through the GMLOS plus 15 methodology and the LOS plus 15 methodology were characterized in the application and at the hearing as the lower and upper ends, respectively, of the projected LTACH patient days in the area to be served by Petitioner’s proposed LTACH. The mid-point of that range, 17,508 patient days, was then broken out by age cohort and was used to compute “hospital specific” utilization rates by age cohort. Those “hospital-specific” utilization rates were then multiplied by the projected future population of the respective age cohorts in the area to be served by Petitioner’s LTACH – Sarasota County and one-half of the population of Charlotte County – to project the total number of LTACH beds needed in 2008. No adjustment was made for out-of-county admissions because the hospitals included in both of the length-of-stay methodologies already included projected admissions from out-of- county hospitals. The end-result of the mid-point analysis and, hence, the end-result of Petitioner’s “length of stay” methodology was a projected need for 67 LTACH beds in 2008. Under the circumstances of this case, the GMLOS plus 15 methodology provides a more reasonable projection of LTACH patient days than does the LOS plus 15 methodology or the mid- point analysis. Specifically, the LOS plus 15 methodology is based upon the premise that physicians would be more likely to transfer their patients who would otherwise require long hospital lengths of stays to an LTACH “as soon as possible in their treatment regiment when LTAC [sic] beds are available,” but the record is devoid of competent evidence, such as letters or testimony from local physicians, that would provide support for that premise. Both of the “length of stay” methodologies appear to assume a 100 percent capture rate of the LTACH-appropriate patients by Petitioner’s proposed facility. The record is devoid of competent evidence demonstrating the reasonableness of that assumption, either with or without the HealthSouth facility in place. For example, the record does not include any tentative transfer agreements or other documentation that demonstrates a willingness of the local hospitals to transfer patients to Petitioner’s LTACH if it is constructed.5 Furthermore, based upon Mr. Sasserman’s definition of the service area of Petitioner’s proposed LTACH, it was not reasonable to include the patient days generated by discharges from five of the eight hospitals used by Petitioner in its “length of stay” methodologies, since those hospitals are outside of the 10 to 20-mile radius identified by Mr. Sasserman. Finally, there is no basis in the record to conclude that any overstatement of the bed need resulting from the inclusion of hospitals outside of the service area as defined by Mr. Sasserman would be offset by referrals from Manatee Memorial Hospital, which is located in District 5 approximately 10 miles north of the proposed site for Petitioner’s LTACH. The testimony on this point by Mr. Sasserman and Petitioner's Health Planner is pure speculation. Ultimate Findings Regarding Numeric “Need” The bed need projected by Petitioner through its “use rate” methodology is not reliable because of the significant shortcomings in that methodology described above. Of the two measures used by Petitioner as part of its “length of stay” methodology, the GMLOS plus 15 methodology is more reasonable than the LOS plus 15 methodology; however, neither methodology resulted in a projected bed need that is sufficient to account for HealthSouth’s 40 approved beds and Petitioner’s 44 proposed beds.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency for Health Care Administration issue a final order denying Petitioner’s application for a Certificate of Need to establish a 44-bed LTACH in Sarasota County. DONE AND ENTERED this 15th day of March, 2004, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2004.
The Issue The issue in this case is whether the Agency for Health Care Administration (AHCA) should grant the application of Wuesthoff Memorial Hospital, Inc. (WUESTHOFF), for a Certificate of Need (CON) (CON 8597) to establish a new 50-bed general acute care hospital in South Brevard County, District 7.
Findings Of Fact WUESTHOFF is a 303-bed, acute care hospital in Brevard County, Florida. In addition to its hospital, WUESTHOFF has three home health locations, eight or nine walk-in clinics, a hospice, a durable medical equipment business, an ambulatory surgery center, two freestanding diagnostic centers, and outpatient labs throughout Brevard County. HRMC is a JCAHO accredited, 528-bed, regional, not-for- profit community hospital based in Melbourne, Brevard County, Florida. HRMC is comprised of two acute care campuses: a 468- bed tertiary hospital in Melbourne, and a 60-bed, general acute care hospital in Palm Bay. The Melbourne campus operates a 10-bed, Level II, neonatal, intensive care unit, and 428 general medical and pediatric beds. The Proposed Project WUESTHOFF chose to establish a satellite hospital complex in South Brevard County by applying separately for: (1) a certificate of need (CON) to decertify and de-license 100 general acute care hospital beds and undertake certain renovations and improvements at its existing Rockledge hospital facility; (2) a CON for a medical office building (MOB); (3) a non-reviewability letter for a $35 million diagnostic and treatment center (DTC), which would provide all of the ancillary services for the new satellite hospital; and (4) the CON to establish the 50-bed hospital (CON 8597) which is at issue in this case. In CON 8597, WUESTHOFF has asked AHCA to treat the $35 million DTC as the “sunk” costs of an existing facility, and to review the CON application at issue in this case incrementally— i.e., as consisting of only the inpatient tower and the additional ancillary activities that would take place at the complex, over and above those that would take place at the DTC without the inpatient tower. Viewing CON 8597 in this way, WUESTHOFF presented total project costs of only $13 million. In preparing the financial schedules for CON 8597, WUESTHOFF presented the revenues and expenses of the entire hospital operation (including the DTC), except for the additional activities (inpatient and ancillary) that would result from the addition of the inpatient tower, and the revenues and expenses of the entire hospital operation, including the additional activities (inpatient and ancillary) that would result from the addition of the inpatient tower. By presenting the financial schedules in this manner, WUESTHOFF never presented the revenues and expenses of the entirety of the new satellite hospital it is proposing to establish, and AHCA has not had the opportunity to review those revenues and expenses. WUESTHOFF planned to build the MOB, the DTC and the inpatient tower in one continual course of construction and to open the entire complex at the same time; the complex, when completed, was planned to function as a single, integrated hospital facility. AHCA granted the first three applications comprising WUESTHOFF’s project but denied CON 8597. In a subsequent batch, WUESTHOFF filed a letter of intent for a single CON application that the combined the DTC and inpatient tower projects at a total cost of approximately $50,000,000. Need In Relation To State And District Health Plans: Section 408.035(1)(a) Florida Statutes State Health Plan The first State Health Plan preference favors applicants who demonstrate that the subdistrict occupancy rate is at or exceeds 75 percent, or in the case of existing facilities, where the occupancy rate for the most recent 12 months is at or exceeds 85 percent. WUESTHOFF failed to meet this preference. For the applicable period, the subdistrict occupancy was approximately 53 percent; however, more recent data shows that occupancy is below 53 percent, which suggests a continuing decline in inpatient occupancy rates in the subdistrict. During the applicable period, the occupancy rate at WUESTHOFF’s Rockledge facility was only slightly more than 45 percent. The second State Health Plan preference favors an applicant with a history of providing a disproportionate share of the subdistrict’s acute care and Medicaid patient days, and further meets the Medicaid disproportionate share hospital criteria. WUESTHOFF failed to meet this preference, as it is not a disproportionate share provider. The third State Health Plan preference favors an applicant that provides or proposes to provide disproportionate share of Medicaid and charity care patient days in relation to other hospitals within the district or subdistrict. WUESTHOFF’s existing facility is not a disproportionate share hospital. (Although WUESTHOFF’s CON application proposes to condition award of the CON setting aside 15 percent of its discharges for Medicaid, charity, and indigent patients, its application does not provide percentages for each category.) The fourth State Health Plan preference considers the current and projected indigent inpatient case load, the proposed facility size, and the case and service mix, WUESTHOFF’s application partially complies with the preference in that it proposes to provide some indigent care. The fifth State Health Plan preference favors proposals that would not negatively affect the financial viability of an existing, disproportionate share hospital. This preference is not applicable in this case. The sixth State Health Plan preference favors applicants with a record of accepting indigent patients for emergency care. WUESTHOFF meets this preference. The seventh State Health Plan preference favors applicants for any type of hospital project if the facility is verified as a trauma center. WUESTHOFF does not meet this preference. WUESTHOFF claims that it operate the emergency room at the proposed facility with “the same level of services as WUESTHOFF’s existing emergency room.” WUESTHOFF does not currently operate a Level II trauma center at its Rockledge campus. The eighth State Health Plan preference favors applicants who can document that they provide a full range of emergency services. WUESTHOFF’s Rockledge facility offers a range of emergency services, but the emergency department at the proposed facility will necessarily offer a limited range of services, as the proposed facility will not be a tertiary care hospital, and emergency patients in need of those services will have to be transferred. The ninth State Health Plan preference favors applicants who can document that it has not been fined by HRS for any violation of the emergency services statutes. WUESTHOFF meets this preference. Local Health Plan Preferences The District 7 Local Health Plan sets forth five preferences to be used in evaluating CON applications for the transfer/relocation/delicensure of acute care beds. The health plan provides that “[p]reference shall be given to applications for transfer of existing acute care beds, delicensure/conversion of existing acute care beds and/or relocation of an entire facility if the applicant can provide substantial documentation of: The need for acute care beds or specialty beds in the service area proposed to receive the beds. Need should address specific populations, access consideration, etc. The impact of the proposed project on the parent facility including projected occupancy declines, curtailing of service effect on operating cost, use of vacated space at the main campus and charge changes. The proposed service improving access by at least 25 minutes to at least 10 percent of the population or a minimum of at least 35,000 people. This should be substantiated by analyses of patient origin to existing providers, physician referral practices and location of physician offices. Commitment to provision of care to both no-pay and low-pay medically indigent patients and Medicaid patients at a minimum of no more than 2 percent below the most recent HCB publication for the District of the charity/uncompensated care percentage of net revenues. Agreement to participate in any indigent care programs which exist in the county or counties proposed to be served. Participation should be at a rate equal to or greater than the average for the general hospitals also serving that area. As to the first preference, WUESTHOFF failed to demonstrate a need for the proposed 50-bed general acute care hospital. Even with the delicensure of 100 acute care beds as a result of WUESTHOFF’s companion application, there still is an oversupply of 215 acute care beds in the county. The evidence presented at the final hearing failed to demonstrate any geographic or other barriers to accessing acute care services that would warrant the expenditure proposed by WUESTHOFF to construct the proposed project. Indeed, WUESTHOFF’s own evidence was clear that every resident of Brevard County has access to a general acute care hospital within a maximum drive time of 30-40 minutes and, in almost all instances, to two different acute care facilities within a 30-40 minute drive time. WUESTHOFF contends that its proposed 50-bed general acute care hospital is needed for four reasons: (1) to provide a high quality alternative inpatient health care provider in south Brevard County; (2) to introduce competition into the south Brevard area; (3) to enhance access to care to Medicaid, charity, and indigent population, as well as to enhance access for the managed care segment of the population; and (4) to enable WUESTHOFF to remain competitive in the marketplace. The evidence is clear that HRMC provides high quality inpatient health care in south Brevard County. See Findings 30- 44, infra. In addition, WUESTHOFF already serves some patients, residing in south Brevard County, and so does Sebastian River Medical Center, located in the adjacent county to the south. The evidence also is clear that there already is competition for inpatient hospital services in south Brevard County. HRMC serves a much greater percentage of those patients primarily due to its location and the high quality and low costs of HRMC’s services. In view of the excess capacity of hospital beds in the county, it does not make sense to add a satellite WUESTHOFF hospital in south Brevard County that would duplicate the services of the existing providers. WUESTHOFF also attempted to show that its proposed acute care hospital was needed in order to provide services for managed care participants. However, WUESTHOFF failed to offer any competent evidence to show that participants in managed care programs are a traditionally underserved population group and did not prove that WUESTHOFF’s ability to participate in managed care networks is a valid basis for determining the need of additional acute care services in south Brevard County. To the contrary, the evidence tended to show that the expansion of managed care programs would result in a decrease in the utilization of inpatient acute care services. Furthermore, there is no barrier to WUESTHOFF’s participating in managed care programs with one or more facilities in the southern portion of Brevard County, and in fact WUESTHOFF has aligned itself with Sebastian River Medical Center in a number of managed care contracts serving residents of southern Brevard County. While WUESTHOFF is offering a larger discount to managed care payers, its charges are higher, resulting in net revenue per managed care case that is still higher than HRMC’s. The price the managed care providers pay to HRMC is actually 14 percent lower than what they pay to WUESTHOFF. Not only does HRMC provide a better “deal” to managed care payers, but HRMC’s managed care volume is also greater than WUESTHOFF’s, indicating HRMC’s willingness to negotiate and work with managed care companies. At the time WUESTHOFF submitted its CON application, the penetration of managed care in Brevard County was approximately 8.6 percent. However, more recent data from 1996 shows a significant increase in the penetration of managed care to 15 percent, without the allegedly needed new hospital. A primary thrust of WUESTHOFF’s case for the need for its proposed project was that patients in the southern portion of Brevard County cannot be admitted into HRMC’s Palm Bay facility because its physicians do not enjoy staff privileges at that facility. Each hospital establishes criterion for staff privileges. In order to be eligible for staff privileges, it is normally required that the physician reside or have his or her office within certain geographic boundaries surrounding the hospital. The primary reason for such requirement is to ensure that the physician is capable of responding to patient needs within a time certain and that the physician will be able to provide coverage for his or her patients admitted into a facility. Dr. Arnold, a physician with staff privileges at WUESTHOFF who operates an office in West Melbourne, conceded that if his physician group associated with a physician living within HRMC’s geographic boundaries who was able to meet response time criteria, the physician group could admit patients into HRMC. Dr. Arnold also conceded that his physician group is not eligible for staff privileges at other Brevard hospitals, based on geographic considerations. The Availability, Quality Of Care, Efficiency, Appropriateness, Accessibility, Extent Of Utilization, And Adequacy Of Like And Existing Health Care Services In The Service District: Section 408.035(1)(b), Florida Statutes. There is no need for another hospital in South Brevard County. The county already has more than enough hospitals. Even in light of a 27-29 percent increase in population, utilization of Brevard County hospitals has dropped 10 percent in the last five years. There has been a marked shift in the Brevard County area away from inpatient services toward outpatient services. That shift is still growing. HRMC is the only hospital in Brevard County which has been nationally recognized for quality care by the National Research Corporation. According to AHCA’s hospital report card, HRMC was shown to be a consistent, low-charge provider, operating within the expected range of outcomes. According to a study done by AHCA, HRMC performs as one of the top five hospitals in Florida for reducing overall C-section births and increasing vaginal births after Cesarean (“VBAC”). This is important because vaginal births are safer for both mother and baby and save approximately $3,000 per delivery when compared with Cesarean births. HRMC has the lowest Cesarean Section rate and the highest VBAC rate in Brevard County and is one of the five lowest charging hospitals in the State for these services. Wuesthoff, on the other hand, has some of the highest costs in the county for these services. HRMC is providing efficient hospital services when compared with WUESTHOFF and other markets where competition is a factor. Of the zip codes addressed in WUESTHOFF’s travel study, there is no zip code in Brevard County that is more than 30 minutes from an existing hospital. Of the fourteen intersections tested, the addition of the proposed project would decrease travel times from only three intersections, with the greatest decrease in travel time being only nine minutes. Thus, the construction of WUESTHOFF’s proposed facility would not significantly increase access for Brevard County patients. HRMC delivers the majority of Medicaid babies in the county and is also a contract provider for Children’s Medical Services. HRMC worked with the Public Health Department to develop a better system for giving prenatal care and delivery to Medicaid and indigent mothers. HRMC offered to subsidize the salary of a doctor, and eventually two midwives, to work with the Public Health Department for this purpose. HRMC’s HOPE programs provides access to Medicaid and indigent patients. HOPE clinic and HOPE van expenses are direct expenses of HRMC. In addition to medical care, the HOPE program also provides free medication to those who cannot afford it. HRMC’s HOPE van provides services to the homeless every Tuesday, seeing as many as 40 patients each visit. Patients are provided with an examination, medications, and referrals to specialists or the hospital, if necessary. This care is provided at no charge to the patient. HRMC’s HOPE program was given the Nova award by the American Hospital Association for its ground-breaking effort in community health improvement. It is the only program in Florida which has been so recognized. The HOPE program has also received the Heartland Award from Governor Chiles for its work at improving the status of life in Florida. HRMC supports a variety of agencies to provide care to indigent AIDS patients. HRMC provides services to a nonprofit outpatient AIDS services organization, which offers reduced-rate and free lab services. HRMC, along with the Public Health Unit, funded a dental clinic for the AIDS organization. The hospitals in Brevard County do a good job in regard to taking care of the patients who are incapable of paying, with HRMC going the extra mile to provide services to the poor. There was no evidence that persons in need of quality, general acute care services are not able to access those services at any existing provider in Brevard County. There is no lack of availability or access to general acute care services based on either geographic or financial grounds. WUESTHOFF’s proposed 50- bed general acute care hospital is not needed to accomplish this. The Ability Of The Applicant To Provide Quality Of Care And The Applicant’s Record Of Providing Quality Of Care: Section 408.035(1)(c), Florida Statutes. It is clear that WUESTHOFF is capable of providing quality inpatient health care services. However, it is found that HRMC is providing higher quality services (and at a lower cost). As shown in AHCA’s hospital report card, WUESTHOFF performed in the lowest 15 percent in the State in 5 of 6 serviced lines where mortality was measured. On the other hand, HRMC was indicated to be consistently a low-charge provider, operating within expected outcomes. HRMC’s C-section rate is significantly lower than WUESTHOFF’s, and its VBAC rate much higher. The results of a low C-section rate are lower lengths of stay and less risk to both mom and baby. The Availability And Adequacy Of Other Health Care Facilities And Services In The District Which May Serve As Alternatives For The Services To Be Provided By The Applicant: Section 408.035(1)(d), Florida Statutes. WUESTHOFF already has three home health locations, 8 or walk-in clinics, a hospice, a durable medical equipment business, an ambulatory surgery center, 2 freestanding diagnostic centers, and outpatient labs in Brevard County. In addition, WUESTHOFF plans to construct a new outpatient and diagnostic center in south Brevard County. In addition, inpatient surgeries have shifted to private, for-profit outpatient centers and ambulatory surgery centers that have opened in the last five years in Brevard County. The competent, substantial evidence presented at the final hearing demonstrates that within Brevard County, there are available and adequate alternatives to the inpatient services proposed by WUESTHOFF. First, as discussed above, the existing providers of acute inpatient health care services have capacity to absorb any increase in the utilization of acute care services in the County. Second, data introduced at the final hearing demonstrate that overall utilization for the types of services WUESTHOFF proposes to offer are declining and demonstrate that residents are seeking out alternatives to inpatient hospital services. For example, from 1993-1996, inpatient surgery services in Brevard County showed a marked decline of approximately 20 percent, both in number of patients and procedures. This trend is not unique to Brevard County, but is occurring throughout the state. Health care providers are seeking alternatives to hospitalization, with procedures being performed in physician offices and ambulatory surgical centers. Likewise, there has been a decline in utilization of several other services WUESTHOFF is proposing for its 50-bed hospital. During the period 1993-1996, while the population of Brevard County was growing at a rate of approximately 2.4 percent per year, the rate of obstetric admissions as a percentage of admissions to Brevard hospitals declined. There is excess capacity for pediatric and obstetrical services in Brevard County. The average daily census in obstetrical beds has dropped from approximately 34 patients per day to approximately 29 per day. With 66 reported available obstetrical beds in Brevard County, that means that on any day only 44 percent of the available capacity is being utilized. Likewise, pediatric census has gone from approximately 32 patients per day to only about 25. With 78 reported pediatrics beds, a demand for only 25 beds means that approximately 32 percent of available capacity is utilized. Probable Economies And Improvements In Service That May Be Derived From Operation Of Joint, Cooperative, Or Shared Health Care Resources: Section 408.035(1)(e), Florida Statutes. WUESTHOFF does not propose the operation of a joint, cooperative, or shared program with any other entity. WUESTHOFF contends that its application is consistent with this criterion because it proposes the sharing of certain resources with its main facility. But the construction of a satellite facility will result in the duplication of certain services. It is actually less efficient for a hospital to operate two campuses. The Need in the Service District for Special Equipment and Services Which Are Not Reasonably and Economically Accessible in Adjoining Areas: Section 408.035(1)(f), Florida Statutes. WUESTHOFF’s CON application does not propose to provide special equipment. This criterion is not met. The Need For Research And Educational Facilities, Health Care Practitioners, And Doctors Of Osteopathy And Medicine At The Student, Internship, And Residency Training Levels: Section 408.035(1)(g), Florida Statutes. This need is already being met in the community. WUESTHOFF, HRMC, and other Brevard County hospitals are already active in community training programs through their links with Brevard Community College and the University of Central Florida. HRMC has institutional training programs with the University of Florida, all Children’s Hospital, the local vo- tech, and University of Central Florida, in addition to other community programs. The Immediate And Long-Term Financial Feasibility Of The Proposal: Section 408.035(1)(i), Florida Statutes. The immediate financial feasibility of a proposed project is satisfied by showing that the applicant has adequate financial resources to fund the capital costs of the project and the financial ability to fund short-term operating losses. WUESTHOFF has demonstrated that its proposed project is financially feasible in the short-term. Long-term financial feasibility is established by demonstrating that projected revenues can be attained in light of the projected utilization of the proposed service and average length of stay. WUESTHOFF has not demonstrated that it can achieve its projected revenues by the second year of operation and has, therefore, failed to demonstrate long-term financial feasibility. It is impossible to tell from the information contained in WUESTHOFF’s CON application 8597 what the revenues and expenses of the new hospital will be. Staffing and supply costs associated with the ancillary building, but which will be used by the hospital when constructed and which amount to millions of dollars, are not broken out in the application. The application also does not show the totality of the costs associated with the 50-bed hospital WUESTHOFF seeks to establish. For example, provision for bad debt expense does not appear in the application, nor does the indigent care tax expense. Furthermore, the application does not provide for any administrative staff for the new hospital, nor has all other necessary staff been provided for. If these positions are included under “other,” then the salary expense projected is not enough. Also, the salaries listed on Schedule 6 do not include benefits. The preopening expenses figure shown in WUESTHOFF’s application is reasonable only if the entire facility, the ancillary, outpatient, and inpatient tower would open all at the same time. It is very difficult to analyze the reasonableness of the financial projections because the revenues and expenses do not match. All the revenue from the proposed new facility appears to be included, but not all of the expenses. Schedule 8A shows that daily ancillary expenses are $470 at WUESTHOFF’s existing hospital but only $82 at the new, proposed hospital. It is implausible that the new hospital would have costs this much lower than the existing hospital. WUESTHOFF’s staffing projections do not account for a significant number of nursing and other staff necessary for the operation of the facility as a hospital. The projections only address nursing positions for the 50-bed, inpatient tower. The schedule fails to show those nurses assigned to the ancillary services areas in the outpatient diagnostic center who will be working with inpatients. For example, the scrub nurses in the emergency department who will be working on inpatients are not included in the schedule, and the nurses working in radiology who will be caring for inpatients are not shown. The schedule fails to include a director of nursing at the proposed hospital facility. Although WUESTHOFF claimed that it will assign a director of nursing when patient volumes reach 50%, it failed to include projections for that position in this second year projections, even though patient volumes are projected to reach 50% in the second year. Wuesthoff also failed to include benefits in its computation of salaries on Schedule 6, even though it expects to pay benefits at a rate of 20% of salary. Interest expenses are also significantly understated. The project is financed with 100 percent debt, which should amount to an interest expense of approximately $850,000.00 per year. However, the application shows interest in year one as $197,000.00 and for year two, $393,000.00. It is unusual that interest would be higher in year two than year one. There is no way to tell from looking at the schedules or assumptions in the application what the utilization of the new hospital will be, or how the patient days break out by payor. Therefore, reasonableness of the financial projections cannot be tested. Without additional information, one cannot determine if the average charges projected are reasonable. There are unusual projections, such as the charges during construction, year one, and year two, in the application which without explanation are not reasonable. The financial projections as to the whole facility are unreasonable. They show that WUESTHOFF, which currently makes $7 or $8 million dollars each year, will lose money once the new facility is open but that, in its second year, the new facility will make $6.9 million. Such a projection is unreasonable. By focusing only on the incremental effect of adding an inpatient tower to a presumed existing DTC, WUESTHOFF’s financial projections are not sufficient to allow a conclusion to be drawn as to the financial feasibility of the new 50-bed hospital. However, it would appear that, if those schedules had been presented, they would have shown the new satellite hospital, taken in its entirety, not to be financially feasible in the long term. The Special Needs Of Health Maintenance Organizations: Section 408.035(1)(j), Florida Statutes. The application is not made on behalf of an HMO, and this criterion is not applicable. The Needs And Circumstances Of Those Entities Which Provide A Substantial Portion Of Their Services Or Resources, Or Both, To Individuals Not Residing In The District: Section 408.035(1)(k), Florida Statutes. The CON application does not address serving a substantial number of persons or providing a substantial portion of services to individuals residing outside the district, and this criterion is not applicable. The Probable Impact Of The Proposed Project On The Costs Of Providing Health Services Proposed By The Applicant, Including The Effect On Competition: Section 408.035(1)(l), Florida Statutes. There is significant competition for managed care services in Brevard County. HRMC seeks and desires to enter into managed care contracts and is as competitive in the managed care arena as WUESTHOFF is. In fact, HRMC’s managed-care, patient volume is higher than WUESTHOFF’s. Managed care penetration in Brevard County has increased over the last five years and especially in the last two years. One particular HMO in Brevard County that is just getting started has received an acceptable managed care offer from HRMC. If they did not receive an acceptable offer from WUESTHOFF. Brevard County does not need another inpatient facility to allow the County to achieve higher levels of managed care penetration. There are no barriers in Brevard County to increasing HMO and other managed care penetration. Even though HRMC has an 82 percent market share in South Brevard County, that by itself does not indicate HRMC is charging non-competitive prices. In fact, HRMC’s charges are much lower than WUESTHOFF’s. Both the State of Florida and the FTC found that HRMC’s merger with Cape Canaveral when Health First was formed did not create an adverse, competitive effect on the marketplace. Because HRMC’s charges are so much lower than WUESTHOFF’s, the addition of the proposed hospital would not introduce price competition into the market. The majority of the proposed hospital’s patients are likely to come from South Brevard County-–an area where HRMC has an 82.5 percent market share. Thus, the bulk of the proposed hospital’s patients will come from HRMC. If the proposed hospital meets its projected utilization, HRMC stands to lose somewhere between $4 and $5 million a year. While that loss may not put HRMC into bankruptcy, it will have a significant adverse effect. The Costs And Methods Of The Proposed Construction And The Availability Of Alternative, Less Costly, Or More Effective Methods Of Construction: Section 408.035(1)(m), Florida Statutes. WUESTHOFF’s proposal to establish a 50-bed, general, acute care hospital entails the construction of a 3-story, 50-bed patient tower adjoining an outpatient diagnostic center. The outpatient diagnostic center, and not the inpatient tower, will encompass virtually all of the ancillary services necessary for WUESTHOFF to obtain a license to operate its facility as a hospital. As more fully discussed below, WUESTHOFF’s proposed 50- bed inpatient hospital will require substantial design modification and increased square footage in order to obtain licensure as a general, acute care hospital. The Applicant’s Past And Proposed Provision Of Health Care Services To Medicaid Patients And The Medically Indigent: Section 408.035(1)(n), Florida Statutes. The evidence showed that all acute care hospitals in Brevard County provide a fair level of Medicaid and indigent care in comparison to the remainder of the state. In its CON application, WUESTHOFF proposes to condition approval of its 50- bed, general, acute care hospital on providing 15 percent Medicaid and charity care, but did not provide a breakdown of each. There was no documented access problems for Medicaid or indigent patients that would warrant a new health care facility. Because indigent care is reported to the State based on a hospital’s charges, WUESTHOFF and HRMC could be doing the same amount of indigent care, but WUESTHOFF could appear to be doing more because its charges are higher. Whether Less Costly, More Efficient, Or More Appropriate Alternatives To The Proposed Inpatient Services Are Available: Section 408.035(2)(a), Florida Statutes. HRMC’s average charges are significantly lower than WUESTHOFF’s on both a per case and per patient day basis. HRMC’s costs are also lower, indicating it is more efficient. Therefore, the addition of another less-efficient, higher- charging WUESTHOFF hospital into the market would be more costly and less efficient than what it is there now. The greater weight of the evidence establishes that denial of WUESTHOFF’s proposed 50-bed, general acute care hospital is the least costly, more efficient, and appropriate alternative. The existing providers of acute care services in Brevard County are operating efficiently and have unused capacity that is available to serve Brevard residents. Data suggests that while the population of Brevard County is growing, there is no corresponding increase in utilization of general, acute care services. While Brevard enjoys a proportionately higher growth rate than the rest of the State, the growth does not translate into higher utilization of general acute care services. Further, the age 65+ population, those most likely to use hospital services, has experienced an annual growth of approximately 3.7 percent between 1990-1996, which is higher than the overall rate of growth for Brevard. While there has been a significant growth in the number of elderly and Medicaid eligible population, only approximately percent of those eligible for Medicaid in the 14 zip codes targeted as the service area of WUESTHOFF’s proposed hospital actually use hospital services. In 1993, the last year of available data, the actual county-wide use rate for Medicaid eligible residents was only 8.4 percent. This is expected to remain constant in subsequent years, as the demand for inpatient acute care services has not increased, but has in fact decreased. There is insufficient utilization of the inpatient acute care services which already exist in Brevard County, with approximately 50 percent of the available beds unoccupied. The addition of another health care facility will not improve access, improve delivery of services, or make services available to a population that is not presently being adequately and appropriately served by existing providers. In a market where inpatient volume is going down, length of stay is going down, and utilization is going down, it does not make sense to spend scarce dollars on new inpatient services. Whether The Existing Facilities Providing Similar Inpatient Services Are Being Used In An Appropriate And Efficient Manner: Section 408.035(2)(b), Florida Statutes. The greater weight of the evidence established that there is available capacity for inpatient services like those proposed by WUESTHOFF at the existing, general, acute care facilities in Brevard County. WUESTHOFF did not demonstrate that any provider is suffering from over utilization or that any patient has not been able to access general acute care services when such services were necessary. On the contrary, there was a consensus among the experts, even WUESTHOFF’s experts, that there is no problem with geographic or financial access to existing providers. Between 1993 and 1996, hospital utilization dropped from 63 percent to 52 percent. AT WUESTHOFF’s Rockledge campus, utilization fell from a high of 63 percent in 1993, to approximately 46 percent in 1996. During this same period, the population of Brevard County grew at a rate of approximately 2.4 percent per year, which was proportionately higher than for the rest of the state. At HRMC, its occupancy dropped, but not quite as dramatically. Between 1993 and 1996, HRMC’s occupancy went from 67 percent to approximately 62 percent. The satellite facility, operated by HRMC in Palm Bay and located in the same service area where WUESTHOFF proposes to construct its 50-bed general acute care hospital, has never experienced occupancy above 31 percent. That Patients Will Experience Serious Problems In Obtaining Inpatient Care Of The Type Proposed, In The Absence Of The Proposed New Service: Section 408.035(2)(d), Florida Statutes. There was no evidence to show that any population group in Brevard County is unable to access quality health care services at any of the subdistrict’s existing facilities. Further, WUESTHOFF failed to establish that its proposed facility was needed to provide general acute care services not currently provided or currently accessible to residents of south Brevard County. WUESTHOFF maintains that participants in managed care contracts may not be able to access WUESTHOFF’s general acute care services without approval of the proposed project, but there was not demonstration that those individuals would not otherwise have access to quality affordable health care in Brevard County. WUESTHOFF also failed to demonstrate that participants in managed care programs are a “traditionally underserved” population group for a determination of need under not normal circumstances. CON Application Content And Procedures: Section 408.037, Florida Statutes And Rule 59C-1.008, Florida Administrative Code. The parties stipulated as to the timeliness of the submission of WUESTHOFF’s Letter of Intent, initial CON application and response to omissions. However, the board resolution required by Section 408.037, Florida Statutes, and Rule 59C-1.008, Florida Administrative Code, is fatally defective. The applicant is required to provide certification that its governing board enacted a resolution to license and operate the proposed facility. In this case, the proposed 50- bed, inpatient tower cannot be licensed by the applicant as a hospital. In order to obtain hospital licensure, the proposed project would necessarily include the $35+ million that WUESTHOFF proposes to spend on its outpatient diagnostic center. WUESTHOFF’s CON application also fails to comply with Section 408.037(2)(c), which requires detailed financial projection including a statement of the revenues and expense for the period of construction and the first two years of operation after completion of the project. The proposed project is a “hospital.” The hospital will report all of the revenues and expenses of the inpatient and outpatients to the state in its actual report, and those same projected revenues and expenses should be in the pro forma of a certificate of need application for a new hospital project. Instead, the projected revenues and expenses in the pro formas take an “incremental” approach and focus only on the 50-bed tower and an unspecified portion of the diagnostic center. WUESTHOFF’s own financial expert admitted that one cannot determine the revenues and expenses of the new hospital from the information contained in the application. AHCA does not have sufficient information with respect to revenues and expenditures in the pro formas to determine the financial feasibility of the hospital project. The pro formas do not meet the statutory requirement contained in 408.037(2)(c), Florida Statutes, and are fatally defective. Neither AHCA nor its predecessor agency ever have approved a CON to establish a hospital without ever seeing projections of the revenues and expenses of the hospital as a whole. Additions to hospitals have been approved on a strictly incremental basis; but, in those cases, the revenues and expenses of the hospital as a whole already had been reviewed and approved. Inpatient cardiac catheterization programs also have been approved, based on a strictly incremental review of the financial impact of converting from an existing outpatient to an inpatient program. But there is a meaningful difference between the approval of a program in a hospital facility that already has been reviewed and approved as a whole and what WUESTHOFF is seeking to have done in this case. There also is a difference between treating the costs of an existing and operating facility or program as being “sunk” and treating the $35 million capital cost and additional operating costs of the proposed DTC in this case as being “sunk.” In the former, the costs have been or are being spent and truly are “sunk”; in the latter, despite WUESTHOFF’s assurances, the DTC money has not been spent, and the DTC has not been established. Indeed, the decision properly before AHCA in this case is whether those expenditures should be made for purposes of establishing a hospital. If not, the hospital should not be approved. If WUESTHOFF still wants to build and operate its proposed $35 million anyway, as it has assured AHCA that it will do, it is free to do so. Criteria Used In Evaluation Of CON Applications: Rule 59C-1.030, Florida Administrative Code. AHCA’s rules set forth additional criteria used to evaluate CON applications which focus on whether there is a need for the proposed service in the population to be served and whether the proposed project is accessible to those in need of the service. The evidence in this case showed that there was no unmet need in Brevard County for inpatient, general, acute care services and that the target population is adequately served by the existing providers of general acute care services. Furthermore, the evidenced showed that the anticipated population growth in Brevard County is not likely to generate additional numbers of inpatient admissions, based on the decline in utilization during a period when Brevard County was experiencing unprecedented annual growth at a rate of 2.4 percent overall and 3.7 percent in the 65+ population. Any attendant increase in demand for inpatient general acute care services can be easily accommodated by the existing providers in Brevard County. The rule also examines the extent to which an applicant provides services to Medicare, Medicaid, and the medically indigent patients. The evidence showed that WUESTHOFF provides a fair amount of general acute care services to Medicare, Medicaid, and charity patients, as do the other existing providers in Brevard County. Hospital Physical Plant Requirements For Licensure: Rule 59A-3, Florida Administrative Code. WUESTHOFF’s 50-bed, general, acute care hospital, as proposed, cannot meet licensure standards without significant adjustment to the design to bring it into compliance with the licensure rules. Rule 59A-3.081(4)(c), Florida Administrative Code, specifically requires that the critical care nurse’s station be situated so that nurses have visual control of each patient from common spaces. The schematics provided by WUESTHOFF indicate that there is no visual control of two patient rooms located in the northwest end of the unit. As to functionality of the space, there is no observation from the nurses station to trauma rooms located at the end of the unit and inadequate proximity to support spaces, such as soiled and clean utility and med prep, to the trauma rooms. Seriously injured patients would necessarily be transported up to surgery through what would be public corridor spaces in order to access elevators and then through additional public spaces on the second floor. Inpatient access to the CT scan room and MRI room appears to be made through a narrow, 5-foot wide corridor. Hospital licensure regulations require inpatient access through an 8-foot corridor. The only 8-foot corridors available for inpatient use, the service corridor off the housekeeping and staff facilities area to the rear of the unit and the corridor located between radiology and dietary, do not appear to be appropriate means for inpatients to access these rooms. On the third floor of the facility, WUESTHOFF proposes to locate an aerobics and exercise room, directly above the second floor patient recovery area and two of the operating rooms. With an exercise area located above such critical areas, there is the possibility that vibrations would transmit to operating room lights, ceiling mounted microscopes, and other instruments. It would be costly to sufficiently stiffen the structure to minimize vibrations. In order to bring the proposed project into compliance with hospital licensure regulations, material changes to the plans must be made, which will necessarily increase the square footage of the facility. The square footage of the facility would likely be increased by approximately 5,000 square feet, and many of the areas would have to be significantly redesigned to accommodate concerns with compliance to ADA and hospital licensure regulations.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter the final order denying WUESTHOFF’s CON 8597. RECOMMENDED this 18th day of July, 1997, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax FILING (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1997. COPIES FURNISHED: David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli and Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301 Mark Thomas, Esquire Agency for Health Care Administration Office of the General Counsel 2727 Mahan Drive Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone and Hines, P.A. Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Blank, Rigsby & Meenan 204 South Monroe Street Tallahassee, Florida 32301 Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308
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 Certificate of Need Application No. 8614, filed by Vencor Hospitals South, Inc., meets, on balance, the applicable statutory and rule criteria. Whether the Agency for Health Care Administration relied upon an unpromulgated and invalid rule in preliminarily denying CON Application No. 8614.
Findings Of Fact Vencor Hospital South, Inc. (Vencor), is the applicant for certificate of need (CON) No. 8614 to establish a 60-bed long term care hospital in Fort Myers, Lee County, Florida. The Agency for Health Care Administration (AHCA), the state agency authorized to administer the CON program in Florida, preliminarily denied Vencor's CON application. On January 10, 1997, AHCA issued its decision in the form of a State Agency Action Report (SAAR) indicating, as it also did in its Proposed Recommended Order, that the Vencor application was denied primarily due to a lack of need for a long term care hospital in District 8, which includes Lee County. Vencor is a wholly-owned subsidiary of Vencor, Inc., a publicly traded corporation, founded in 1985 by a respiratory/physical therapist to provide care to catastrophically ill, ventilator-dependent patients. Initially, the corporation served patients in acute care hospitals, but subsequently purchased and converted free-standing facilities. In 1995, Vencor merged with Hillhaven, which operated 311 nursing homes. Currently, Vencor, its parent, and related corporations operate 60 long term care hospitals, 311 nursing homes, and 40 assisted living facilities in approximately 46 states. In Florida, Vencor operates five long term care hospitals, located in Tampa, St. Petersburg, North Florida (Green Cove Springs), Coral Gables, and Fort Lauderdale. Pursuant to the Joint Prehearing Stipulation, filed on October 2, 1997, the parties agreed that: On August 26, 1996, Vencor submitted to AHCA a letter of intent to file a Certificate of Need Application seeking approval for the construction of a 60-bed long term care hospital to be located in Fort Myers, AHCA Health Planning District 8; Vencor's letter of intent and board resolution meet requirements of Sections 408.037(4) and 408.039(2)(c), Florida Statutes, and Rule 59C-1.008(1), Florida Administrative Code, and were timely filed with both AHCA and the local health council, and notice was properly published; Vencor submitted to AHCA its initial Certificate of Need Application (CON Action No. 8614) for the proposed project on September 25, 1996, and submitted its Omissions Response on November 11, 1996; Vencor's Certificate of Need Application contains all of the minimum content items required in Section 408.037, Florida Statutes; Both Vencor's initial CON Application and its Omissions Response were timely filed with AHCA and the local health council. During the hearing, the parties also stipulated that Vencor's Schedule 2 is complete and accurate. In 1994, AHCA adopted rules defining long term care and long term care hospitals. Rule 59C-1.002(29), Florida Administrative Code, provides that: "Long term care hospital" means a hospital licensed under Chapter 395, Part 1, F.S., which meets the requirements of Part 412, Subpart B, paragraph 412.23(e), [C]ode of Federal Regulations (1994), and seeks exclusion from the Medicare prospective payment system for inpatient hospital services. Other rules distinguishing long term care include those related to conversions of beds and facilities from one type of health care to another. AHCA, the parties stipulated, has no rule establishing a uniform numeric need methodology for long term care beds and, therefore, no fixed need pool applicable to the review of Vencor's CON application. Numeric Need In the absence of any AHCA methodology or need publication, Vencor is required to devise its own methodology to demonstrate need. Rule 59C-1.008(e) provides in pertinent part: 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, subdistrict, or both; Medical treatment trends; and Market conditions. Vencor used a numeric need analysis which is identical to that prepared by the same health planner, in 1995, for St. Petersburg Health Care Management, Inc. (St. Petersburg). The St. Petersburg project proposed that Vencor would manage the facility. Unlike the current proposal for new construction, St. Petersburg was a conversion of an existing but closed facility. AHCA accepted that analysis and issued CON 8213 to St. Petersburg. The methodology constitutes a use rate analysis, which calculates the use rate of a health service among the general population and applies that to the projected future population of the district. The use rate analysis is the methodology adopted in most of AHCA's numeric need rules. W. Eugene Nelson, the consultant health planner for Vencor, derived a historic utilization rate from the four districts in Florida in which Vencor operates long term care hospitals. That rate, 19.7 patient days per 1000 population, when applied to the projected population of District 8 in the year 2000, yields an average daily census of 64 patients. Mr. Nelson also compared the demographics of the seven counties of District 8 to the rest of the state, noting in particular the sizable, coastal population centers and the significant concentration of elderly, the population group which is disproportionately served in long term care hospitals. The proposed service area is all of District 8. By demonstrating the numeric need for 64 beds and the absence of any existing long term care beds in District 8, Vencor established the numeric need for its proposed 60-bed long term care hospital. See Final Order in DOAH Case No. 97-4419RU. Statutory Review Criteria Additional criteria for evaluating CON applications are listed in Subsections 408.035(1) and (2), Florida Statutes, and the rules which implement that statute. (1)(a) need in relation to state and district health plans. The 1993 State Health Plan, which predates the establishment of long term care rules, contains no specific preferences for evaluating CON applications for long term care hospitals. The applicable local plan is the District 8 1996-1997 Certificate of Need Allocation Factors Report, approved on September 9, 1996. The District 8 plan, like the State Health Plan, contains no mention of long term care hospitals. In the SAAR, AHCA applied the District 8 and state health plan criteria for acute care hospital beds to the review of Vencor's application for long term care beds, although agency rules define the two as different. The acute care hospital criteria are inapplicable to the review of this application for CON 8614 and, therefore, there are no applicable state or district health plan criteria for long term care. (1)(b) availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the district; and (1)(d) availability and adequacy of alternative health care facilities in the district. Currently, there are no long term care hospitals in District 8. The closest long term care hospitals are in Tampa, St. Petersburg, and Fort Lauderdale, all over 100 miles from Fort Myers. In the SAAR, approving the St. Petersburg facility, two long term care hospitals in Tampa were discussed as alternatives. By contract, the SAAR preliminarily denying Vencor's application lists as alternatives CMR facilities, nursing homes which accept Medicare patients, and hospital based skilled nursing units. AHCA examined the quantity of beds available in other health care categories in reliance on certain findings in the publication titled Subacute Care: Policy Synthesis And Market Area Analysis, a report submitted to the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, on November 1, 1995, by Levin-VHI, Inc. ("the Lewin Report"). The Lewin Report notes the similarities between the type of care provided in long term care, CMR and acute care hospitals, and in hospital-based subacute care units, and subacute care beds in community nursing homes. The Lewin Report also acknowledges that "subacute care" is not well-defined. AHCA has not adopted the Lewin Report by rule, nor has it repealed its rules defining long term care as a separate and district health care category. For the reasons set forth in the Final Order issued simultaneously with this Recommended Order, AHCA may not rely on the Lewin Report to create a presumption that other categories are "like and existing" alternatives to long term care, or to consider services outside District 8 as available alternatives. Additionally, Vencor presented substantial evidence to distinguish its patients from those served in other types of beds. The narrow range of diagnostic related groups or DRGs served at Vencor includes patients with more medically complex multiple system failures than those in CMR beds. With an average length of stay of 60 beds, Vencor's patients are typically too sick to withstand three hours of therapy a day, which AHCA acknowledged as the federal criteria for CMR admissions. Vencor also distinguished its patients, who require 7 1/2 to 8 hours of nursing care a day, as compared to 2 1/2 to 3 hours a day in nursing homes. Similarly, the average length of stay in nursing home subacute units is less than 41 days. The DRG classifications which account for 80 percent of Vencor's admissions represent only 7 percent of admissions to hospital based skilled nursing units, and 10 to 11 percent of admissions to nursing home subacute care units. Vencor also presented the uncontroverted testimony of Katherine Nixon, a clinical case manager whose duties include discharge planning for open heart surgery for patients at Columbia-Southwest Regional Medical Center (Columbia-Southwest), an acute care hospital in Fort Myers. Ms. Nixon's experience is that 80 percent of open heart surgery patients are discharged home, while 20 percent require additional inpatient care. Although Columbia-Southwest has a twenty-bed skilled nursing unit with two beds for ventilator-dependent patients, those beds are limited to patients expected to be weaned within a week. Finally, Vencor presented results which are preliminary and subject to peer review from its APACHE (Acute Physiology, Age, and Chronic Health Evaluation) Study. Ultimately, Vencor expects the study to more clearly distinguish its patient population. In summary, Vencor demonstrated that a substantial majority of patients it proposes to serve are not served in alternative facilities, including CMR hospitals, hospital-based skilled nursing units, or subacute units in community nursing homes. Expert medical testimony established the inappropriateness of keeping patients who require long term care in intensive or other acute care beds, although that occurs in District 8 when patients refuse to agree to admissions too distant from their homes. (1)(c) ability and record of providing quality of care. The parties stipulated that Vencor's application complies with the requirement of Subsection 408.035(1)(c). (1)(e) probable economics of joint or shared resources; (1)(g) need for research and educational facilities; and (1)(j) needs of health maintenance organizations. The parties stipulated that the review criteria in Subsection 408.035(1)(e), (g) and (j) are not at issue. (f) need in the district for special equipment and services not reasonably and economically accessible in adjoining areas. Based on the experiences of Katherine Nixon, it is not reasonable for long term care patients to access services outside District 8. Ms. Nixon also testified that patients are financially at a disadvantage if placed in a hospital skilled nursing unit rather than a long term care hospital. If a patient is not weaned as quickly as expected, Medicare reimbursement after twenty days decreases to 80 percent. In addition, the days in the hospital skilled nursing unit are included in the 100 day Medicare limit for post-acute hospitalization rehabilitation. By contrast, long term care hospitalization preserves the patient's ability under Medicare to have further rehabilitation services if needed after a subsequent transfer to a nursing home. (h) resources and funds, including personnel to accomplish project. Prior to the hearing, the parties stipulated that Vencor has sufficient funds to accomplish the project, and properly documented its source of funds in Schedule 3 of the CON application. Vencor has a commitment for $10 million to fund this project of approximately $8.5 million. At the hearing, AHCA also agreed with Vencor that the staffing and salary schedule, Schedule 6, is reasonable. (i) immediate and long term financial feasibility of the proposal. Vencor has the resources to establish the project and to fund short term operating losses. Vencor also reasonably projected that revenues will exceed expenses in the second year of operation. Therefore, Vencor demonstrated the short and long term financial feasibility of its proposal. needs of entities serving residents outside the district. Vencor is not proposing that any substantial portion of it services will benefit anyone outside District 8. probable impact on costs of providing health services; effects of competition. There is no evidence of an adverse impact on health care costs. There is preliminary data from the APACHE study which tends to indicate the long term care costs are lower than acute care costs. No adverse effects of competition are shown and AHCA did not dispute the fact that Vencor's proposal is supported by acute care hospitals in District 8. costs and methods of proposed construction; and (2)((a)-(c) less costly alternatives to proposed capital expenditure. The prehearing stipulation includes agreement that the design is reasonable, and that proposed construction costs are below the median in that area. past and proposed service to Medicaid patients and the medically indigent. Vencor has a history of providing Medicaid and indigent care in the absence of any legal requirements to do so. The conditions proposed of 3 percent of total patient days Medicaid and 2 percent for indigent/charity patients proposed by Vencor are identical to those AHCA accepted in issuing CON 8213 to St. Petersburg Health Care Management, Inc. Vencor's proposed commitment is reasonable and appropriate, considering AHCA's past acceptance and the fact that the vast majority of long term care patients are older and covered by Medicare. services which promote a continuum of care in a multilevel health care system. While Vencor's services are needed due to a gap in the continuum of care which exists in the district, it has not shown that it will be a part of a multilevel system in District 8. (2)(d) that patients will experience serious problems obtaining the inpatient care proposed. Patients experience and will continue to experience serious problems in obtaining long term care in District 8 in the absence of the project proposed by Vencor. Based on the overwhelming evidence of need, and the ability of the applicant to establish and operate a high quality program with no adverse impacts on other health care providers, Vencor meets the criteria for issuance of CON 8614.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue CON 8614 to Vencor Hospitals South, Inc., to construct a 60-bed long term care hospital in Fort Myers, Lee County, District 8. DONE AND ENTERED this 3rd day of March, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Kim A. Kellum, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301
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 in this case is whether the Certificate of Need (CON) application No. 9757 filed by Select Specialty Hospital - Marion, Inc. (Select) for the establishment of a 44-bed free standing Long-Term Care Hospital (LTCH) in Agency for Health Care Administration (Agency or AHCA) Service District 6, in Polk County, should be approved.
Findings Of Fact The Parties AHCA. The Agency for Health Care Administration is the state agency authorized to evaluate and render final determinations on CON applications pursuant to Section 408.034(1), Florida Statutes.2 Select. Select Specialty Hospital-Marion, Inc. is the applicant in this proceeding. Select is a wholly-owned subsidiary of Select Medical Corporation, which operates approximately 99 LTCHs in 27 states. LTCH Services Generally. An LTCH is defined by statute and Agency rule as "a hospital licensed under chapter 395 which meets the requirements of 42 C.F.R. s. 412.23(e) and seeks exclusion from the Medicare prospective payment system for inpatient hospital services." LTHCs are licensed as acute care hospitals, but are clearly different. In Florida, existing LTCHs can add beds without undergoing CON review. Approximately 93 to 96 percent of LTCH patients are admitted from short-term acute care hospitals. LTCHs are a part of the continuum of care that runs from hospitals to post-acute care facilities such as nursing homes, skilled nursing facilities (SNFs), hospital-based skilled nursing units (SNUs), and comprehensive medical rehabilitation (CMR) facilities. LTCHs are designed to serve patients that would otherwise have to be maintained in a traditional acute care hospital (often in the ICU), or be moved to a traditional post- acute care facility where the patient may not receive the level of care needed. Patients with co-morbidities, complex medical conditions, severe injuries due to trauma, or frailties due to age are typically appropriate LTCH patients, particularly if the patient would otherwise remain in the ICU of a traditional acute care hospital. For such patients, an LTCH is likely the most appropriate setting from both a financial and patient-care standpoint. There is a distinct population of patients who, because of the complexity or severity of their medical condition, are best served in an LTCH. However, there is an overlap between the population of patients that can be served in an LTCH and the population of patients that could also be well-served in the ICU of an acute care hospital or a traditional post acute care setting with ventilator capability. SNFs, SNUs, CMR facilities, and home health care are not appropriate for the typical LTCH patient because the patient's acuity level and medical/therapeutic needs are higher than those generally treated in those settings. Unlike traditional post- acute care settings, which typically do not admit patients who still require acute care, the core patient-group served by LTCHs are patients who require considerable acute care through daily physician visits and intensive nursing care in excess of seven hours of direct nursing care per patient day and remain at an LTCH for an average length of stay (ALOS) of 25 days or greater. (Depending on the Diagnostic Related Group (DRG) category for a particular diagnosis, generally, the ALOS for a short-term acute care hospital patient is between three and five days.) It is important for an LTCH patient that the family be involved in the treatment and the continued care of the patient after the patient has been discharged to home or to another level of care on the continuum, such as an SNF/SNU or CMR. Select offers four basic care programs: pulmonary, wound care, neurotrauma, and medically complex. At Select facilities, patients are screened prior to admission to an LTCH to determine whether they are appropriate for admission. InterQual is a set of proprietary criteria used by Select to determine whether patients are suitable candidates for admission to an LTCH or another form of care. CON Application and Preliminary Agency Action Select applied for a CON to establish a 44-bed free- standing LTCH in Polk County, one county located in District 6. The facility will consist of 48,598 GSF of new construction. The total project cost is estimated at $14,373,624. The application was complete, and according to prehearing stipulations, the only reason that the application was denied and the issue in the case at hand is need. Select has the burden of proving that there is a need for the LTCH in District 6. Select agreed, as a condition for approval of its application, to provide 2.8 percent of patient days for Medicaid and charity care. The Agency's review of CON application No. 9757 complied with statutory and regulatory requirements. The Agency's review of CON application No. 9757 resulted in the issuance of a State Agency Action Report (SAAR) on June 10, 2004, which recommended the denial of CON application No. 9757 based on Select's failure to demonstrate a need for the proposed facility. District 6 and Polk County Demographics The population of District 6 as of July 2005 was 2,084,339 and is projected to increase nine percent to 2,272,017 by July 2010. This population is dispersed throughout five counties comprising District 6: Polk, Hillsborough, Hardee, Manatee, and Highlands. This includes a population of 354,327 in the age cohort 65+ (the age group eligible for Medicare) and is projected to increase by 15.94 percent by July 2010. This age group contains the patients that are mainly served by LTCHs, as more than 75 percent of admissions to an LTCH are elderly (65+). The population of Polk County in July 2005 was 532,100, projected to increase by eight percent by July 2010 and 103,257 for the 65+ age cohort, projected to increase by 15.13 percent by July 2010. There are two LTCHs that currently serve District 6. Both are operated by Kindred and have a combined 175 LTCH beds.3 According to AHCA data, Polk County residents were discharged from an LTCH in Florida 505 times in the years 2000 to 2005 (first three quarters). Of those 505 LTCH discharges, a total of 452, or 89.5 percent, were from a Kindred facility4 in Hillsborough County. AHCA 3.5 However, this data does not indicate which hospital or other facility the patient may have been referred from, which may be significant. For example, the patients could have been discharged from hospitals or other facilities other than a Polk County hospital/facility. Notwithstanding, this data shows that from year 2002 to 2005, Polk County residents have accessed the LTCHs in Hillsborough County. Also, aside from an upward, unexplained spike in 2002, the utilization numbers are relatively flat. Kindred Hospital - Bay Area - Tampa (Kindred Bay Area) operates 73 licensed LTCH beds and is located one county west of Polk County, in Hillsborough County. It is located approximately one (1) hour away from Winter Haven, which is Select's proposed site in the central area of Polk County. From July 2004 through June 2005, the total occupancy of Kindred Bay Area was at 62.20 percent. From July 2002 to June 2003, the total occupancy for this facility was 67.15 percent. Kindred Hospital - Central Tampa (Kindred Central Tampa) is also located in Hillsborough County, approximately one (1) hour away from Winter Haven.6 From July 2004 through June 2005, the total occupancy of Kindred Central Tampa was 67.37 percent. From July 2002 thru June 2003, the total occupancy for this facility was 77.03 percent. Select's sister facility, Select-Orlando, approved for 40 LTCH beds, is located in AHCA Service District 7 in Orange County, which is northeast of Polk County. (Select Specialty Hospital - Orlando is also located in District 7, operating 35 licensed LTCH beds with occupancy for the year ending June 2005 of 75.83 percent.) In the years 2003-2005 (2003 was the first year the facility was operational), Polk County residents were discharged from the Select-Orlando facility 38 times. This is approximately 7.5 percent of the total Polk County patients discharged. In 2005, only one Polk County resident was discharged from a facility other than the two Kindred facilities or the Select Orlando facility. For July 2004 to June 2005, the occupancy for all LTCHs in the State of Florida was 66.91 percent and 65.21 percent for District 6. From July 2002 to June 2003, the occupancy for all LTCHs in the State of Florida was 73.23 percent and 72.91 percent for District 6. There has been a decline in utilization of LTCHs on a statewide and district-wide (District 6) basis. Select presented letters of support for the LTCH facility in Polk County, including letters from local hospital administration and physicians. See, e.g., S 2, Volume I, Tab 2 at 38-43 and Tab 4; S 2, Volume II, Tabs 7 and 8. Select's Analysis of Need The Agency has not adopted a need methodology for LTCH services. There is no published fixed need pool for LTCHs. Select examined population estimates for Polk County and surrounding areas; the number of acute care hospital beds in the area; the number of LTCH beds in the area; discharge data from area acute care hospitals; the types of patients treated at acute care hospitals; the lengths of stays of the patients treated at those hospitals; and input from local hospital personnel and physicians. Select started its analysis of need on a district-wide basis, but ultimately defined its primary service area as Polk County. T 131-134, 156-157. (Select defined its primary service areas as an area within a 20 mile radius.) Select used four methods to establish the need for the LTCH in Polk County: Extended length of stay analysis GMLOS (Geometric Mean Length of Stay) + 15 days analysis Long-stay short-term acute care versus LTCH penetration analysis UB-92 patient discharge analysis (Polk County) An extended length of stay analysis involves analyzing discharges by DRG from Polk County hospitals to arrive at the top DRGs experienced by these hospitals. This analysis will exclude lengths of stays under 25 days, patients under the age of 14, substance abuse diagnosis, obstetric diagnosis, newborn diagnosis, psychiatric diagnosis, and rehabilitation diagnosis. The total amount of discharges is multiplied by the anticipated length of stay for an LTCH patient (the analysis can be done statewide or using a national average) and then divided by 365 to arrive at an average daily census of patients. Select analyzed Polk County discharges that matched the criteria above and came up with 644 patients, which was multiplied by 40.6 (Florida average LTCH stay at time of application) in one calculation and 33 (national average LTCH stay at time of application) in a second calculation, before dividing by 365 in both to arrive at an average daily census (ADC). Using 40.6 as the average length of stay (ALOS), there is an ADC of 72. With an average occupancy of 72 percent, there is a need for 96 beds in Polk County. Using 33 as the ALOS, there is an ADC of 58 and a need for 77 beds in Polk County at 75 percent occupancy. Select LTCHs have a 28-day ALOS, which yields an average daily census of 49.4 with a bed need for 66 beds in Polk County at 75 percent occupancy. The GMLOS + 15 analysis involves looking at geometric mean lengths of stays for individual DRGs that begin at eight (8) days, excluding obstetrics, psychological, substance abuse, and rehab patients, and then calculating how many of these patients stayed 15 days past their GMLOS for the particular DRG. The number of patients is then multiplied by the ALOS for Florida and the nation and a bed need is determined.7 Using this analysis and data for the 12 months ending September, 2003, Select contends that there were 823 patients who would have exceeded their GMLOS by 15 days. Using 40.6 as the Florida average LTCH stay, results in an ADC of 92. Operating at 75 percent occupancy yields a need for 122 beds. Using 33 days as the national average LTCH stay, results in an ADC of 74. Operating at 75 percent occupancy, yields a net need for 99 beds in Polk County. (Using calendar year 2004 data and the same ALOS of 33 days and occupancy of 75 percent, yields a net need in Polk County for 130 beds. Select's GMLOS + 15 analysis also yields a positive net bed need for Polk County exceeding the 44-beds requested, using an ALOS of 30 and 28 and either 2003 or 2004 data.) S 6 at pages 8-10; T 149-151. Select also used the GMLOS + 15 methodology to predict need for additional LTCH beds on a county-wide basis (for the five counties within District 6) and a district-wide basis. Using 2003 data and 33 days as the average LTCH stay, there is a projected net need for 305 beds district-wide operating at 75 percent occupancy. (A net need for additional LTCH beds is also shown when either 2003 or 2004 data is used with ALOSs of 30 and 28.) S 6 at 8-10. When applied to Hillsborough County, using different patient days and GMLOS + 15 case numbers, but the same occupancy percentages, the GMLOS + 15 methodology reflects a net LTCH bed need for Hillsborough County. For example, using 2003 and 2004 data, a 28 ALOS, and a 75 percent occupancy level, the methodology yields a net bed need of 99 beds in Hillsborough County. Id. A net bed need also is calculated for Hillsborough County when an adjustment is made to the data for severity. S 6 at 11-13. (Select's "most conservative position", using a "capture rate analysis of severity adjusted matters," yields a negative bed need for Hillsborough County and a much lower district-wide net bed need than the other GMLOS + 15 analyses described herein. Select suggests that this analysis understates need. S 6 at 14.) Notwithstanding the overall favorable bed need analysis discussed above, as noted herein, the occupancy levels at the Kindred facilities in Hillsborough County have been declining in recent years and are below the 75 percent occupancy level. Absent persuasive evidence that residents of Hillsborough County are being deprived of access to LTCH services, it appears that Select's net bed need projections for Hillsborough County and District 6 are overstated. Select did not prove (by use of its GMLOS + 15 analysis or otherwise) that there is a need for additional LTCH beds in District 6. GMLOS + 7 was also discussed by Select, but is too aggressive for purposes of LTCH planning. The third method of comparing patients in Polk County who had a long stay (24+ days) in a Short Term Acute Care (STAC) facility versus those who went to an LTCH does not produce an actual bed need number, but instead provides evidence of a need for an LTCH in a particular area. Select contends that the application of this method shows that there is a lack of access to the other facilities in District 6 and there is a need for an LTCH facility in Polk County. An analysis of UB-92 patient discharge data involves pulling the uniform billing records for each patient and looking at the severity adjustment of the long stay patients. The information is available on the AHCA database. (According to Mr. Gregg, UB-92 data "would be one of the best sources that one could use to define severity and eliminate some patients from this length of stay group." T 382.) The DRG alone will not take into account co-morbidities, but the UB-92 will. The analysis of UB-92 data does not compute a specific bed need, but may show that the existence of need. Both parties contend that using the GMLOS + 15 method is the most accurate. Using the GMLOS + 15 method quoted above, Select determined that there was a need for a 44-bed LTCH facility in Polk County and District 6. Issues Regarding Need Analysis There are some problems with the GMLOS + 15 method for determining need. One problem is the inflated length of stay of 40.6 days used in the application. Other problems include the assumption of 100 percent capture of eligible patients and the assumption that any patient who stays 15 days over their GMLOS would be eligible for LTCH services, which is not necessarily true. There have been numerous recent approvals for LTCHs in the State of Florida, and some of these new facilities will impact the capacity numbers of the already existing facilities.8 Proper patient identification is a concern of the Agency with regard to overlap with other suitable services. The Agency contends that using the UB-92 forms is a more accurate way of determining which patients are most suitable for LTCH services. LTCH patients cost Medicare more than patients in other settings. The Medicare Payment Advisory Commission (MedPAC) was established to advise Congress on issues that affect the Medicare program. The Agency introduced into evidence Chapter 5 of the June 2004 MedPAC report into evidence, which concentrated on "Defining long-term care hospitals". AHCA 5; see also AHCA 6 and 7. The Agency has been concerned with the identification of patients who are in need of LTCH services as compared with patients who would be better suited in a post-acute care setting, such as a SNU/SNF or CMR facility. The June 2004 MedPAC report stated in part that LTCH services are for a small number of medically complex patients and that acute hospitals and SNFs are the principal alternatives to an LTCH. The report also contends that LTCH supply is a strong predictor of their use. In other words, according to Mr. Gregg, LTCHs "are a supplier-induced demand." T 317. Travel Patterns and Family/Physician Involvement Patient, family, and physician preferences have always been a part of health care planning. They affect both availability and accessibility. Families and other care givers play a critical role regarding the delivery of care to LTCH patients. The elderly are a special population with special needs. They commonly have to manage multiple problems, including financial difficulties, drug management, transportation logistics, and sometimes fragile mental and physical conditions. Older patients, as care givers, also have a more difficult time driving, especially over longer distances. Medical experts have opined that having an LTCH over one hour away from the patient population in Polk County (the Winter Haven area) is not geographically accessible for the elderly needing LTCH services in Polk County. Further, while primary care physicians may choose to travel to an LTCH to continue to serve their patients, in reality, this does not generally occur when the LTCH is a fair distance from their usual practice area. Select believes the travel patterns from Polk County to Hillsborough County, where the two LTCHs in District 6 are located, show that there is a need for one in the Winter Haven area of Polk County. Although the travel patterns and the travel time to the current facilities may make it inconvenient for the patient or the families, the benefits of LTCH care greatly outweigh this inconvenience. Need on a Subdistrict vs. District Level The Agency reviews the need for additional LTCHs on a district-wide basis. S 12 at 52-54. The fact that there are existing facilities already in District 6 that are being underutilized is a counterargument for "need" in District 6. Select conducted the majority of its needs analysis on a subdistrict level. If a CON application for an LTCH could be reviewed and approved on a subdistrict level, here using Polk County alone, Select would be able to satisfy the need requirement, based, in part, on the number of acute care beds in Polk County, the lack of any LTCH beds in Polk County, travel and accessibility-related issues, population trends, and the county-wide health care provider support for the facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency issue a final order denying Select Specialty Hospital - Marion, Inc.'s CON application No. 9757. DONE AND ENTERED this 11th day of July, 2006, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of July, 2006.
