The Issue This case arises out of a petition filed by Humana, Inc., Humedicenters, Inc., and Humhosco, Inc., challenging the validity of Respondent's Rule 10- 5.11(23), Florida Administrative Code. The challenged rule was promulgated by the Department of Health and Rehabilitative Services to provide a uniform methodology for determining the need for acute care beds in the various IRS districts in Florida. Subsequent to the filing of the petition and the scheduling of this matter for hearing, the Intervenor, University Community Hospital, filed a petition to Intervene and was permitted to intervene upon the same issues raised by the original petition. At the formal hearing, the Petitioners Humana, Inc., Humedicenters, Inc., and Humhosco, Inc., called as witnesses Brad Sexauer, David Petersen, Ira Korman, Richard Alan Baehr, Frank Sloan and James Bruce Ryan. Petitioners offered and had admitted into evidence nine exhibits. The Intervenor, University Community Hospital, called as witnesses Warren Dacus and George Britton. The Intervenor offered and had admitted into evidence three exhibits. The Respondent, the Department of Health and Rehabilitative Services, called as witnesses Stanley K. Smith, Stephen Williams and Phillip C. Rond. The Department offered and had admitted into evidence 36 exhibits. Respondent's Exhibits 5, 6, 14, 15, 16 and 17 were not admitted for all purposes but were admitted as hearsay for the purpose of corroborating or explaining other admissible evidence in the record. Counsel for each of the parties submitted proposed findings of fact and conclusions of law for consideration by the Hearing Officer. To the extent that those proposed findings of fact and conclusions of law are inconsistent with this order, they were rejected as not being supported by the evidence or as unnecessary to the resolution of this cause.
Findings Of Fact STANDING The Petitioners and Intervenor are corporations engaged in the business of constructing and operating hospitals in the State of Florida. Humedicenters, Inc. and Humhosco, Inc., are wholly owned subsidiaries of Humana, Inc. Humana, Inc., and its corporate subsidiaries presently have seven (7) pending applications for Certificates of Need for acute care hospital facilities. At least one of those applications for a facility in Jacksonville, Florida, was denied by HRS on the basis that no need existed under the challenged rule methodology. The Intervenor, University Community Hospital, is located in HRS Service District 6A in northern Hillsborough County. On June 29, 1982, University Community Hospital applied for a Certificate of Need for additional medical surgical beds and on December 1, 1982, HRS denied that application. HRS has taken the position that the challenged rule is applicable to that application and under the rule, there is no need for additional medical-surgical beds in District 6. DEVELOPMENT OF THE RULE As early as 1976, the Department began its effort to identify alternative approaches to acute care bed need determinations and at that time, the Department contracted with a consultant to review and assess various bed need approaches. An analysis was made of the then current methods or models used for projecting short-term bed requirements. This analysis was provided to a Bed Need Task Force which had been formed to consider appropriate bed-need methodologies. In early 1977, the Bed Need Task Force was appointed to review current bed-need methodologies and to recommend necessary changes to the methodologies in use. The Bed Need Task Force was formed for the primary purpose of recommending a general approach to be used in bed need determinations and to identify key policies to be followed in development of an acute care methodology for the State of Florida. This task force was composed of a variety of representatives from various groups including local planning agencies, hospital associations, the statewide health council, and the health industry itself. An outside consultant was used by the Task Force to aid them in their review. In February 1978, the Final Report of the Bed Need Task Force was issued. Subsequent to the Bed Need Task Force, the Task Force on Institutional Needs, (hereafter TFIN) was established. The purpose of the TFIN was to present a recommended methodology and policies related to that methodology for purposes of the initiation of implementation activities. The TFIN issued its final report in December 1978. This report contained a number of policies to be used in conjunction with the methodology. These policies stated that: The population composition should not include tourists but should include seasonal residents who reside in Florida greater than six months and these migrants who were in Florida on April 1, the date of each census. The methodology should deal with the differences in need for acute care services by age and sex. The use rates utilized should be based on a statewide normative standard. These standards should be based on statewide use rates for which data can be obtained and should be subject to periodic review. Methodology should eventually address need for various levels of care. Need determinations should be for specific geographical areas, the area of the Health Systems Agency (hereafter HSA). These areas are new the HRS districts. Patient flows should be taken into account but should not be binding on future determination in terms of expansion or addition of new facilities. The hospital service area concept should be rejected and a temporal accessibility criterion utilized. At the HSA level, a minimum volume standard should be developed for each service. The standards within the methodology should be applied uniformly all over the state in all HRS districts or service areas. The standards should not be applied to individual facilities. In terms of role and responsibility, the Department of HRS should be responsible for the need methodology with the local health agencies having responsibility for the facilities configuration model for its district. Having developed a recommended methodology and a set of policies to be used in conjunction with that methodology, the Department contracted with Research Triangle Institute (RTI) to develop a sampling design to be used in the data collection activity so that the methodology could be operationalized. A second contract was let to implement the data collection necessary to the methodology and to develop statewide estimates based on the data collected. The 1978, 1979, 1980, and 1981 State Health Plans each discussed the objective of achieving a certain ratio of nonfederal licensed acute care beds per 1,000 population in Florida. The 1981 State Health Plan adopted a goal to ensure a supply of licensed nonfederal, short-stay beds (including psychiatric beds) in Florida equivalent to 4.24 beds per 1,000 residents. Also, in 1981, the State Health Council adopted a "normative" bed-to-population ratio of 4.24 beds per 1,000 population. "Normative" means a statement of what "ought to be" as opposed to some historical standard. In the Spring of 1982, HRS actually began drafting the rule and in the September 3, 1982, issue of the Florida Administrative Weekly, HRS gave notice of its intent to adopt Rule 10-5.11(23) relating to acute care hospital beds. That notice also set a time, date and place for a public hearing on that proposed rule. Before a public hearing on that proposed rule was held, however, Petitioners Humana of Florida, Inc., Humedicenters, Inc., and Humhosco, Inc., and others, challenged it in D.O.A.H. Case 82-2561R. The intervenor in this proceeding was also an intervenor in that challenge. A public hearing on that initial rule was held September 20, 1982. Neither the Petitioner nor the Intervenor made any statement at the public hearing in opposition to the rule or in opposition to the expected economic impact. No written comment was submitted by these two parties following the public hearing. At the public hearing, there were eight oral presentations made by interested parties and 14 written comments were received. From the time the initial rule was promulgated until the time it was finally adopted, there were numerous other comments that were received. Two sets of changes were subsequently made to the proposed rule which reflected discussion and input the Department received both from the public hearing process and from challenges to the rule. The first set of changes was published April 1, 1983 in the Florida Administrative Weekly. Several issues were raised which were dealt with by the Department. Psychiatric bed need was removed and placed in a separate rule, the methodology was incorporated into the rule, language regarding the use of the formula was clarified, data updating provisions were added, a provision was made to consider peak demand, the district utilization adjustment procedure was changed and subdistrict bed allocation procedures were changed. Although there was also objection to the use of statewide use rates, the Department because of strong policy considerations, made no change in the statewide use rates. These changes were made in response to the comments at the public hearing, written comments submitted, and other input from the health industry. After the Department published its first set of changes to the initial rule, but before the publication of the second set of changes, Petitioners voluntarily dismissed their rule challenge in D.O.A.H. Case No. 82-2561R. The second set of changes was published in the Florida Administrative Weekly on May 13, 1983. At the time of their voluntary dismissal of their rule challenge and prior to the adoption of the challenged rule, Humana, Inc., and its subsidiaries, Humedicenters, Inc. and Humhosco, Inc. were aware of the economic impact the proposed rule would have on their operations in Florida. THE RULE Rule 10-5.11(23), Florida Administrative Code, is founded on a basic methodological approach to projecting the need for health care services which is commonly accepted and utilized among health planners. In its most generic form, this methodological approach may be expressed as follows: The population of the geographic planning unit is projected for some point in the future (usually five years); i.e., how many people will live in the planning area at the end of five years. The projected population is multiplied by a utilization rate in order to project how many days of hospital care the projected population is likely to need during the target year. A utilization rate is the measure by which hospital services are consumed within a given geographic entity and is determined by dividing the total number of hospital patient days in a year in a given area by the total population of that area for that year. Restated, a utilization rate is equivalent to the ratio of the number of days of care received by the population to the population as a whole. As noted above, multiplying a projected population by a utilization rate produces the projected number of-patient days during the target year. This number is then divided by 365 to derive an average daily census i.e., the average number of patients which one would expect to be in area hospitals on any given day of the year. The average daily census is then converted into beds by dividing the average daily census by an optimal occupancy standard for a given service. The optimal occupancy standard contemplates that hospitals cannot and should not operate at 100 percent occupancy in that some reserve capacity is necessary to meet seasonal or even weekly fluctuations and variations in patient characteristics and mix. The product of this generic methodology is the total number of beds needed in the planning area at the end of the planning horizon. Application of the methodology set forth in the rule is basically a three-step process. The initial step is the forecast of the District Bed Allocation (DBA), which is accomplished as follows: The population of each Department service district is forecast by age cohort (a cohort is a given subgroup of the total population) five years into the future. The age cohorts utilized in the rule are: (1) under 65; (2) 65 and older; (3) under 15; and (4) females 15-44. Total patient days are then forecast for each age cohort. Patient days are forecast by applying statewide, service-specific discharge rates and average lengths of stay to the age cohort projections. The specific hospital services included in the Rule are medical/surgical, intensive care, coronary care, obstetrical and pediatric. Projected patient days for persons age 65 and older are adjusted to account for the migration flew of elderly patients both to and from Florida and to and from Department districts within Florida. This flew adjustment is based upon historical migration patterns derived from 1977 Medicare data. The service-specific patient days by age cohort is then converted to projected bed need by dividing each component by 365 to arrive at an average daily census and then by applying a service-specific occupancy standard to derive the total bed need for each given service and age cohort. The sum of the bed need forecasts for each service/cohort is the DBA. The second step is an adjustment to the DBA under certain circumstances based on the projected occupancy of the beds allocated to a given district. This is known as the Adjusted District Bed Allocation (ADBA), and it is composed of the following steps: A Projected Occupancy Rate (FOR) for each district is calculated by multiplying the entire forecast population of the district by a Historic Utilization Rate (HUR), which is derived over the most recent three year period. The product is then divided by 365 times the DBA. The product of this computation is the POR which would result if the district contained the number of beds projected by the DBA and the population continued to utilize hospital services in accordance with the HUR. If the POR is less than 75 percent, the ADBA is determined by substituting a 90 percent occupancy standard in the formulation of DBA instead of the service-specific occupancy standards which would otherwise be applied (ranging from 65 percent for obstetrics to 80 percent for medical/surgical). If the POR is greater than 90 percent, the ADBA is determined by substituting a 75 percent occupancy standard in the calculation of DBA instead of such service- specific standards. In other words, when the POR is less than 75 percent, a a downward bed need adjustment results. When POR is greater than 90 percent, an upward need adjustment results. This part of the methodology is used to make an adjustment for those districts which for whatever reason lie outside the range of-expected utilization. The 75 percent and 90 percent thresholds are based upon an ideal operating range of 80 to 85 percent. The actual standard utilized by HRS is 80 percent, at the low or conservative end of that range. The third step involves the calculation of a Peak Demand Adjustment (PDA) which is accomplished as fellows: The average daily census for a given district is calculated by dividing the total number of projected days by 365. Peak demand is calculated by adding the average daily census to the square root of tic average daily census multiplied by a given standard deviation (1.65 for low peak demand districts or 2.33 for high peak demand districts) referred to as a "Z" value in the methodology: Peak demands utilized as the projected district acute care bed need if it is greater than the bed need for the district reflected by DBA or ADBA as calculated in steps one and two above. The purpose of this peak demand adjustment is to ensure that each district will have sufficient bed capacity to meet service-specific peak demands. Each subdistrict is to be identified by the Local Health Council as having high or low peak demand. These designated as high peak demand utilize a "Z" value; of 2.33 in the methodology in order to assure sufficient capacity to meet 99 percent of their peak capacity. These subdistricts designated as low peak demand areas utilize a "Z" value in the methodology of 1.65 and this assures sufficient total bed capacity to meet 95 percent of the peak demand. The rule also includes an accessibility standard which provides that in each district acute care hospital beds should be available and accessible to 90 percent of the residents within 30 minutes driving time and 45 minutes driving time in urban and rural areas respectively. The rule provides for periodic updating of the statewide discharge rates, average lengths of stay and patient flow factors as data becomes available. The historical use rate used in arriving at the adjusted district bed allocation is updated annually through the use of the most recent three years. Although the rule provides that a Certificate of Need will not "normally" be granted unless need is shown to exist under the methodology in the rule, this need calculation is not determinative of the issue of whether a Certificate of Need should be granted. The rule also provides that even if no bed need is shown to exist under the methodology a Certificate of Need may still be granted if the criteria, other than bed need, under Section 381.494(6)(c), Florida Statutes, demonstrate need. Likewise, the rule states that a Certificate of Need may be denied, where bed need is shown to exist under the rule, but other criteria in Section 381.494(6) are not met. The rule also specifically permits the approval of additional beds in a subdistrict where the accessibility requirements of the rule are not being met. Additional beds may also be approved where there is a need in a subdistrict but a surplus in the district as a whole. The rule utilizes population projections by age cohort in determining the number of hospital patient days by service which will be needed five years in the future. These population projections are based upon the projections made by the Bureau of Economic and Business Research (hereafter BEBR) at the University of Florida. BEBR makes three projections--low, midrange, and high-- for each year. The rule utilizes the midrange projection and the inherent margin of error in these projections is typically plus or minus 5 percent. Although these projections have systematically been low in the past, BEBR now uses a different method which utilizes six different techniques in arriving at ten projections which are then averaged. The flow adjustment used in arriving at the DBA is based upon 1977 MEDPAR data. This data was for Medicare recipients 65 years of age and elder and therefore the flow adjustment is only for that portion of the population over 65 years of age. No data was available from which flow factors could be determined for age cohorts or groups from o to 64 years of age. No data for either age group was available after 1977. ECONOMIC IMPACT STATEMENT An economic impact statement (EIS) was prepared for the challenged rule. The EIS contains an estimate of the Department's printing and distribution cost. The EIS was-- prepared by Phillip Rond, an employee of the Department of Health and Rehabilitative Services. In preparing the EIS, Mr. Rond did a comparison of the health system plans (HSP) with the results under the rule. This comparison was for projected need for the year 1987 and was done for each HRS District. The comparison generated the following results: HRS DISTRICT HSP RULE 1 0 0 2 3 0 3 0 0 4 0 0 5 0 0 6 0 0 7 0 0 8 0 87 9 0 137 10 0 0 11 0 0 3 224 The need calculations under the rule do not change substantially the short term projections under prior methodologies. The rule calculations for 1987 showed need for 221 more beds than was shown to exist under the methodologies used in the health systems plans. Mr. Rond also reviewed the background literature that led to the analysis contained in the state health plan as well as the reports from the Hospital Cost Containment Board. With regard to the rule's affect on competition and the open market the EIS notes that the rule will restrain the development of costly excess acute care bed capacity and in doing so will foster cost containment. Where need is indicated by the methodology or other criteria within the rule then competitive new beds will be allowed. In terms of economic benefit to persons directly affected the EIS points out that there will be a positive impact for some facilities and a negative impact for others. The rule will negatively impact facilities which wish to expand or add new beds if no need for those beds exists under the methodology of the rule. Existing facilities, however, will not be exposed to expansion of the bed supply in those districts where no need for additional beds exist. This benefit will be particularly positive for those facilities providing indigent care. It is a general estimate that operating costs for a health facility will be approximately 22 cents for each dollar of capital expenditure. The rule is intended to support a supply of beds to meet need while preventing excess or unused beds, thus reducing annual operating costs. The EIS notes that by reducing operating costs, the operating cost per bed will be lower and should result in a slower escalation of costs to consumers as well as third party payers such as insurers, taxpayers, and employers. Prior to adoption of the challenged rule, the Department considered and evaluated each of the factors listed in Section 120.54(2), Florida Statutes. There has been traditionally in Florida a surplus of acute care beds. The 1977 medical facilities plan indicated a surplus of beds ever need of 7,253 beds. Using the rule methodology and projecting to 1987, there is a surplus ? 5,562 beds and for 1988, a surplus of 4,044 beds. In both 1980 and 1982, there were significant numbers of licensed beds in the state which were not in use. In 1980, there were 4,923 beds out of the total bed stock in acute care hospitals not in use. This was about 10.7 percent of the total licensed in bed stock. In 1982, there were 5,093 or about 10.6 percent of such beds licensed and not in use. In 1976, the occupancy rate for acute care hospitals in Florida was 60.3 percent. In 1982, the occupancy rate in such facilities was 67 percent. The target occupancy rate under the challenged rule and its methodology is 80 percent.
The Issue Whether, under Section 381.494-381.499, Florida Statutes, Humana, Inc., d/b/a Kendall Community Hospital, is entitled to a Certificate of Need to construct a 150-bed acute care hospital in the west Kendall area of south Dade County, Florida.
Findings Of Fact HUMANA is an investor-owned, multi-institutional hospital system which owns and operates more than 90 hospitals, most of which are medical/surgical facilities. (DHRS Ex.1, p.10). HUMANA applied for a Certificate of Need from DHRS to construct a 150- bed acute care community hospital in the west Kendall area of south Dade County, Florida. The specific area to be served is bounded on Miller Drive to the north, southwest 177th Avenue to the west, Coral Reef Drive to the south, and Calloway Road to the east. The proposed 150-bed hospital includes 100 medical/surgical beds, 20 pediatric beds, 20 Level II obstetric beds, 10 intensive care/critical beds, and a Level II nursery in conjunction with the obstetric unit. (TR 277). The proposal includes a 24-hour, physician-staffed emergency room and a "dedicated" outpatient surgery department, with separate recovery room. Surgery suites are specifically designed and reserved only for outpatient surgery, thereby facilitating outpatient scheduling and efficient operations. (TR 279). The outpatient surgery unit is intended to reduce the costs of health care by providing a cost-effective alternative modality of health care delivery. (TR 278). Finally, the proposal contemplates a full-body CT Scanner, digital radiography and general state-of-the-art ancillary equipment. (TR 278). If built, it would be the westernmost hospital in south Dade County. It is a "community" hospital, designed to provide hospital care to the rapidly growing population of the west Kendall area, but not serve as a major referral center for patients living elsewhere. (DHRS Ex. 1, pp. 32-34; TR 250, 280). The local health planning agency, then the Health Systems Agency ("HSA") of South Florida, Inc., 1/ reviewed HUMANA's application for a Certificate of Need, along with four other similar applications, and recommended that all five be denied because of asserted inconsistency with the HSA's Health System Plan. ("HSP") 2/ (DHRS Ex. 1, TR 77). The applications were then submitted to DHRS, the single state agency empowered to issue or deny Certificates of Need. 381.493(3)(a) and 381.494(8), Fla.Stat. (Supp. 1982). DHRS reviewed the HSA recommendation, conducted its own evaluation, and then denied all five applications, including HUMANA's. DHRS concluded: None of the five proposed projects are in compliance with the adopted Goals, Criteria, Standards and Policies of the Health Systems Agency of South Florida, as stated in the Health Systems Plan (HSP) and Annual Implementation Plan (AIP). A need to add acute care hospital beds to Dade County does not exist at the present time. The proposed projects would add to excess capacity and underutilization of hospital beds that now exist in Dade County. There are only five hospitals in Dade County that are at the recommended occupancy level of 80 percent based on licensed beds (none of which are located in South Dade), and the number of beds per 1000 population. The primary alternative would be not to construct any of the proposed projects. While all of the proposed projects represent some degree of financial feasibility, none are felt to be cost effective because increased bed capacity would result in costs and revenue higher than those projected for existing "High Cost" hospitals in 1984 as determined by the Hospital Cost Containment Board. (DHRS Ex. 1, p. 404) Thereafter, HUMANA timely instituted Section 120.57(1) proceedings challenging DHRS's denial; HUMANA's standing to do so is uncontested. HUMANA's position, maintained throughout, is that its proposed 150-bed hospital satisfies every legal criterion for the issuance of the applied-for Certificate of Need. Intervenor Baptist Hospital Intervenor BAPTIST HOSPITAL will be substantially affected if HUMANA is granted a Certificate of Need. BAPTIST is a fully licensed and accredited 513- bed, general acute care hospital located within HUMANA's proposed service area, at 8900 North Kendall Drive, Miami, Florida. (STIP-para. 8). If the proposed hospital is built, it would significantly and adversely affect the patient census and revenues of BAPTIST HOSPITAL. (TR 16, VOL 4). In 1982, BAPTIST drew 36.7 percent of its patients from HUMANA's proposed service area. (TR 15, 16, VOL 4). Fifty percent of the residents of the proposed service area (who were admitted to hospitals in Dade County) were admitted to BAPTIST HOSPITAL. (TR-440). It is estimated that BAPTIST would lose 15,047 patient days to the new HUMANA hospital and would experience significant adverse economic impacts. (TR 88-89, VOL 5). The proposed hospital would also adversely impact BAPTIST's ability to hire and retain nursing and technical personnel. BAPTIST has experienced difficulty in hiring and retaining these personnel. (TR 18, 60-73, VOL 4). Historically, the opening of a new hospital has adversely affected the hiring and retention of such personnel in nearby hospitals. (TR 72-73, VOL 4). Here, approximately 84 percent of BAPTIST's nurses live near HUMANA's proposed cite, thus increasing the likelihood that BAPTIST will be adversely affected in this manner. (TR 135, VOL 5). BAPTIST opposes the issuance of a Certificate of Need for HUMANA's proposed hospital, and supports DHRS's initial denial. Intervenor American Hospital Similarly, intervenor AMERICAN HOSPITAL would be significantly affected if the proposed HUMANA hospital is built. AMERICAN is a fully licensed and accredited 513-bed, general acute care hospital located and operated within HUMANA's proposed service area, at 11750 Bird Road, Miami, Florida, (STIP-para 8). AMERICAN currently draws 41 percent of its patients from HUMANA's proposed service area. The proposed hospital will cause AMERICAN to lose an estimated 5,300 patient days. (TR 76, VOL 5). This translates into an approximate loss of $4.1 million in potential revenues, based upon HUMANA's achieving a 75 percent occupancy rate and 41,000 patient days. (TR 75-76, VOL 5). Such a revenue loss may result in higher costs, which in the health care system, are normally translated into higher patient charges. (TR 86, VOL 5) HUMANA's proposed hospital would also aggravate AMERICAN's continuing shortage in nursing personnel. (Currently AMERICAN has approximately 50 full- time registered nurse vacancies.) (TR 134, VOL 5). It is reasonable to expect that HUMANA will hire a significant number of its nurses away from nearby hospitals. Over a six-month period, HUMANA's four existing hospitals in south Florida hired 112 registered nurses, 32.1 percent of whom were hired away from other hospitals in the area. (TR 783). AMERICAN, likewise, opposes the issuance of a Certificate of Need to HUMANA, and supports DHRS's initial denial. II. STATUTORY CRITERIA FOR CERTIFICATES OF NEED Section 381.494(6)(c) and (d), Florida Statutes (Supp. 1982), prescribes standards for evaluating applications for Certificates of Need. Those standards pertinent to HUMANA's application include: The need for the health care facilities and services . . . being proposed in relation to the applicable district plan, annual implementation plan, and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services . . . in the applicant's health service area. 7. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service area; the extent to which the services will be accessible to schools for health professions in the service area for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service area. 11. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. In considering HUMANA's application, specific consideration must also be given to whether: . . .less costly, more efficient, or more appropriate alternatives to such inpatient services are . . . available and the development of such alternatives has been studied and found not practicable. . . . existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. . . . alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. . . . patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. 381.494(6)(d) Fla.Stat. (Supp. 1982). The controversy here is whether in 1988 (using a five-year planning horizon) there will be a need for HUMANA's proposed 150-bed hospital in the west Kendall area of south Dade County. DHRS, BAPTIST, and AMERICAN say that there will be no need: that existing hospitals serving the area have excess capacity and are underutilized--and that this condition will persist through 1988. HUMANA contends otherwise. As the applicant for a license, the burden of proving entitlement rests squarely upon HUMANA. 3/ The most accurate and reliable method for determining bed-need in this case, the historical demand-based method, requires the following: (1) identify planning area boundaries; (2) from historical population data, project population for the planning area using the five-year horizon for hospital services; (3) calculate a hospital use rate or the rate at which patients in the service area have used hospitals in terms of patient days per thousand; (4) project patient days by multiplying the use rate times the area population, and divide by 365 to yield a projected bed need; (5) compare projected bed-need with the licensed bed capacity of area hospitals and, using an appropriate occupancy standard, determine whether there will be an excess or shortage of hospital beds in the proposed planning area. (TR 55, VOL 5). Selecting a Health Planning Area The first step in determining whether a new hospital will be needed is selection of the appropriate health planning area. In 1982, the now-defunct HSA of South Florida adopted a Regionalization Plan for south Florida dividing HSA IX, a region, into five districts. (AM Ex. 4). Although not specifically mentioning hospitals, this plan implies that hospital bed-need determinations should be made on a district basis. The Kendall area, extending east and west, generally is denominated as "District D," and is, in turn, subdivided into three subdistricts. "D-1" encompasses Coral Gables and South Miami; "D-2" and "D-3" include Weschester, Kendall, Killian, and the west central Dade areas, the boundaries of which are U.S. 1 and the Palmetto Expressway on the east, Coral Reef Drive and Eureka Drive on the south, conservation area on the west, and the East-West Expressway, and Tamiami Trail on the north. (HU Ex. 4). HUMANA chose "D-2" and "D-3" as the appropriate health care planning area for determining need for its proposed hospital. District "D," however, is a more appropriate and reasonable area to use in determining need for the proposed HUMANA hospital. (TR 203, 258; 145-146, VOL 4; 56-57, VOL 5). The entire area of District "D" may be traversed, by car, in approximately 30 minutes, the roads are adequate, and there are numerous hospitals in the district which are easily accessible to its residents. (TR 57-58, 66, 77-78, VOL 5). Hospitals located in one part of District "D" are readily accessible to patients who reside in other areas of the District. HUMANA's bed-need analysis fails to adequately take into account hospitals within "D-1" or which are outside the District but are readily accessible (within 30-minutes driving time) to the majority of residents in "D- 2" and "D-3." (TR 145-146, VOL 4). Existing hospitals which are readily accessible to residents of a proposed service area cannot be reasonably excluded merely because they are located outside a theoretical boundary line. (TR 145- 146, VOL 4). A health planning area should be the area where most of the residents seek health care. (TR 615; 78-79, VOL. 5). Hence, a proposed health planning area should be tested against the actual hospital use of its residents and the accessibility of existing hospitals to those residents. The residents of District "D" travel freely within District "D" in seeking hospital care. South Florida Hospital Association Utilization and Patient Origin Program ("HUPOP") data show that approximately 60 percent of the patients residing in subdistricts "D-2" and "D-3" seek inpatient hospital care elsewhere. (TR 72, VOL 5; 616; AM Ex. 7 p. 19). 4/ There is a corresponding inflow of residents from outside "D- 2" and "D-3" who seek hospital care within "D-2" and "D-3". (TR 72, VOL 5). In comparison, approximately 70 percent of the residents of District "D" seek hospital care within the boundaries of the District and--of all the districts within the region-- District "D" has the highest percentage of residents who seek in-district hospital care. (TR 72-73, 79, VOL 5; AM Ex. 7, p. 19). In actual practice, then, the residents of District "D" heed the District boundaries but largely disregard subdistrict "D-2" and "D-3" boundaries. The residents of "D-2" and "D-3" have ready access to numerous hospitals providing a broad range of medical services. (TR 78, VOL 5). BAPTIST is a large general hospital with tertiary, secondary, and primary care services. With the exceptions of a burn center and a Level III neotology unit, virtually all health care services are provided. BAPTIST, AMERICAN, Coral Reef, South Miami, and Larkin hospitals provide health care services to residents of "D-2" and "D-3," within a 20-minute travel time. (BH Ex. 10, p. 1-13-19; BH Ex. 5 and 7). The few specialized services not available at these hospitals are provided at Jackson Memorial Hospital, within a 30-minute travel time. (BH Ex. 10, p. 1- 13). Accessibility of Existing Acute Care Hospitals Section 381.494(6)(c)(2), Florida Statutes (Supp. 1982), requires examination of the accessibility of existing health care facilities providing similar services to the same health service. The generally accepted standard for determining accessibility, found appropriate here, is whether general hospital beds are available to the service area's population within 30-minutes travel time by automobile, under average traffic conditions and for non- emergency purposes. This standard is used by HSAs and DHRS is used by federal health care planners, and is widely used by professional health care planners. (DHRS Ex. 1; BH Ex. 10, p. 1-10-13; TR 90, 123, 144, 166, 193; 85, 133-134, VOL 4; 58, 77, VOL 5). Applying this standard, seven hospitals are reasonably accessible to residents of HUMANA's proposed service area: AMERICAN, BAPTIST, Coral Reef Hospital, South Miami Hospital, Larkin Hospital, Doctors' Hospital, and Jackson Memorial Hospital. District "D" contains eleven hospitals, with a total of 2,882 licensed beds. (AM 3, p. 41; 4, p. D-3). Moreover, five of these, AMERICAN, BAPTIST, Coral Reef, Larkin, and South Miami, are even closer, within 20-minutes average travel time. (BH 5, p. 11). There is no evidence that the residents of "D-2/D-3", or District "D," as a whole, have any difficulty using or gaining access to these hospitals. Beds are available. The five hospitals closest to HUMANA's proposed service area, AMERICAN, BAPTIST, Coral Reef, South Miami, and Larkin, have a total of 1,825 licensed beds, 326 of which are not in service; of the 1,499 beds in service, 109 are not used. So there are 435 licensed beds, within 20-minutes of "D-2/D-3," not in service or not in use due to lack of demand. (BH Ex.10, p. I- 26, 5, 7, 10, p. I-26-28). Occupancy Standard for Determining Need The generally accepted occupancy standard for hospitals, used in deciding if additional beds are needed, is the 80 percent average annual occupancy rate. This standard is included in the 1981 Florida State Health Plan, is used by DHRS and HSAs, and is widely used by professional health care planners. Its use is appropriate here. (AM 135, VOL 2; TR 90-91; 95-97, 118, 132, 140, 165, 172, 313, 469; 141, VOL 4). In application, it means that additional hospitals should not be built until existing hospitals providing acceptable care to the proposed service area are operating at or above an 80 percent occupancy rate--the level at which hospitals, generally, operate most efficiently. In 1982, none of the eleven hospitals in District "D" met the 80 percent occupancy standard. (DHRS Ex. 1, AM Ex. 3, p. 7). In 1981, the five hospitals closest to HUMANA's proposed site had an average annual occupancy rate of 60.9 percent. (BH Ex. 10, p. I-24). Moreover, this excess is sufficient to meet the future health care needs of residents of "D-2/D-3" and District "D," as a whole. BAPTIST and AMERICAN will not achieve 80 percent occupancy until after 1988; AMERICAN is projected to have an occupancy of only 63.61 percent in 1990. (AM Ex. 3, p. 8; BH Ex. 10, p. 10, I-24). Availability of Resources to Build and Support Proposed Hospital Section 381.494(6)(c)(7) also requires consideration of whether there will be available adequate resources to support a new hospital, including manpower and financial resources. The evidence establishes, without contradiction, that HUMANA has sufficient funds to construct and operate its proposed hospital. The projected cost of the hospital, including equipment, is $29,175,500--70 percent to be funded by debt, the remainder by equity funds. HUMANA has, on hand, approximately $225 million in cash and cash equivalents. (TR 709, HU Ex. 2). The design of the proposed hospital will be based on HUMANA's "prototype" 150-bed facility, developed from years of experience in hospital design construction, and operation. The design is efficient and economical, and will permit a 50-bed expansion without further construction. (TR 714-716, 720, 719, HU Ex. 9). The parties agree that HUMANA has the ability to enlist or employ sufficient physicians and management personnel to staff the proposed hospital. (STIP, para. 3). HUMANA also has the ability to hire and retain an adequate nursing and technical staff. It recruits such personnel, routinely, on a national basis and transfers employees within its hospital system. Moreover, it has a mobile nurse corps, a group of nurses which are available on an as-needed basis, to help staff its south Florida hospitals during peak winter months. Historically, HUMANA has successfully recruited and retained nurses in its south Florida hospitals. (TR 772, 776-777, 781-782, 801-802, VOL 4). Projected Population of Service Area As already mentioned, under the preferred demand-based bed-need methodology, population is projected over a five-year planning horizon, for hospital facilities. This is because an increase in a service area's population will generate a need for more beds. The population of the Kendall area of south Dade County has been growing rapidly, and is expected to continue to do so through 1990. This population is younger than the population of Dade County or HSA IX, as a whole. The population projections for District "D" (the appropriate health planning area for the proposed hospital) by age groups are: District D 1987 1990 Under 15 92,301 96,506 15 to 64 357,567 327,652 65 and over 52,188 55,822 TOTAL (AM 3; TR 59-61, VOL 5; 488 VOL 3) 502,056 529,980 I. Hospital Use Rate Under the demand-based methodology, found acceptable here, once the planning area is designated and the population projected over a five-year planning horizon, a hospital "use rate" is calculated. The "use rate" is the rate at which people use hospitals, expressed in terms of the number of patient days per thousand residents residing in the health service area. This rate can be derived using various factors. Those factors most appropriate for use in this case are "age" and "service-specific" uses. (TR 66 VOL 5; 497-498 VOL 3). "Age-specific" use rates, reflecting historic hospital use rates by age group, are applied to the projected population to determine total patient days. This factor takes into account the fact that people 65 or older utilize hospitals at a rate three to four times that of people under 65. This is particularly significant here since the Kendall area population is younger than the population of Dade County, HSA IX, or the state, as a whole. (TR 58-59, VOL 5; AM 3, p. 12). In 1981, the age-specific use rate for HSA IX reflects a use rate of 1,524.6 patient days per thousand population. (AM 3, p. 63). "Service-specific" use rates are derived from historical use of particular hospital services, such as psychiatry, obstetrics, pediatrics, and medical-surgical. (AM 3, pp. 14-15, 70-72). The 1981 service-specific use rate, covering all services, for HSA IX was 1,524.6 patient days per thousand--a figure equal to the age-specific use rate. (AM 3, p. 14-15, 71). J. Calculation of Future Bed Need for District "D" In 1982, there were 2,882 licensed non-federal beds in District "D." Taking into account an 80 percent occupancy rate, and applying the HSA age- specific use rate to the projected population of District "D" yields a need for only 2,282 beds per day in 1987, and 2,419 beds per day in 1990. Hence, there will be an excess of 600 beds in District "D" in 1987; 554 in 1988; and 463 in 1990. (AM 3, p. 41, 69; TR 63, VOL 5). Similarly, applying the HSA IX service- specific use rate to the projected District "D" population results in a bed excess of 232 beds in 1987 and 87 in 1990. (AM 3, p. 74). Significantly, these projected bed excesses are, if anything, understated. This is because the HSA IX hospital use rate was utilized. Hospital use is greater in HSA IX, with its older population, than in District "D," where the population is younger and less likely to be hospitalized. (TR 61-62, VOL 5). HUMANA, in its analysis, applied age and service-specific use rates to the projected population of "D-2/D-3," concluding that there would be a need for 238 additional beds in 1988. This conclusion, however, is unconvincing since "D-2/D-3" is unduly restrictive and the 235 unused beds of South Miami and Larkin Hospitals, both located in "D-1," are not fully considered. (DHRS 1, p. 370; AM 3, p. 18). (Both hospitals are within a 20-minute average travel time from selected points in "D-2/D-3.") (TR 544, VOL 3; 612, VOL 4). By failing to properly account for empty beds at nearby hospitals, and by unreasonably limiting its planning area, HUMANA overstates the need for additional hospital beds in District "D." Moreover, even assuming the propriety of "D-2/ D-3," HUMANA failed to properly take into account the 260 beds of Coral Reef Hospital, a "D-2" hospital. If Coral Reef Hospital beds are correctly included within "D-2/D-3," HUMANA's projected bed-need decreases from 238 to 129 beds in 1988. (TR 80, VOL 5). Finally, Thomas W. Schultz, HUMANA's health care planning expert, admitted that a figure of 1,038 patient days per thousand patients would be "useful" in establishing bed-need for "D-2/D-3." (TR 501, VOL 3). Applying that use rate, and correctly including Coral Reef Hospital, results in a projected "D-2/D-3" need of 36 additional beds in 1988. (TR 83-84, VOL 5). HUMANA does not propose to construct a 36-bed hospital and such a hospital has not been shown to be feasible.
Recommendation Based on the foregoing, it is RECOMMENDED: That HUMANA's application for a Certificate of Need to construct a hospital in the west Kendall area of Dade County, Florida, be denied. DONE and ENTERED this 25th day of May, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of May 1983.
Findings Of Fact The Agency is statutorily responsible for administering the Certificate of Need (CON) program and the promulgation of rules pertaining to tertiary health services. Promise Healthcare, Inc., is located at 999 Yamato Road, Third Floor, Boca Raton, Florida. Promise's wholly-owned subsidiary, Promise Healthcare of Florida III, Inc., has received approval to construct and operate an LTCH in AHCA Health Service Planning District (District) 3. See Promise Healthcare of Florida III, Inc. v. State of Florida, Agency for Health Care Administration, Case No. 06-0568CON (DOAH April 10, 2008; AHCA May 16, 2008). Select owns and operates an LTCH in Orlando, Florida, within District 7. Petitioners related corporations are currently and have been applicants in proceedings before the Division of Administrative Hearings (DOAH) seeking to establish LTCHs in the State of Florida. Id. See also Select Specialty Hospital - Marion, Inc. v. State of Florida, Agency for Health Care Administration, Case No. 04-3150CON (DOAH July 11, 2006; AHCA Sept. 23, 2006); Select Specialty Hospital - Broward, Inc. v. Agency for Health Care Administration, Case No. 07-0597CON and Promise Healthcare of Florida X, Inc. v. Agency for Health Care Administration, Case No. 07-0598CON (Consolidated). The Proposed Rule In December 2005 and September 2006, the Agency published separate notices of proposed rule development proposing to include long-term care hospitals within the rule definition of tertiary health service. On June 8, 2007, the Agency published a copy of the proposed rule at issue in this proceeding in the Florida Administrative Weekly. The proposed rule is one of several proposed changes to Florida Administrative Code Rule 59C-1.002, providing definitions. The stated purpose and effect of the entire proposed rule changes to Rule 59C-1.002 is "to amend the rule that defines terms in Chapter 59C-1, F.A.C. due to recent statutory changes " On July 13, 2007, a public hearing was held. Proposed rule 59C-1.002(41)(i) provides: "'Tertiary health service' means a health service. . . . .The types of tertiary services to be regulated under the Certificate of Need Program in addition to those listed in Florida Statutes include: . . . (i) Long-term care hospitals. The Agency relies on Sections 408.034(6) and 408.15(8), Florida Statutes, as the specific authority for all of the changes to Rule 59C-1.002, including subsection(41)(i). All of the proposed rule changes implement Sections 408.033(1)(a), 408.036(1)-(3), 408.037(1), 408.039(1) and (2), and 651.118, Florida Statutes. See also endnote 3. ("'Law implemented' means the language of the enabling statute being carried out or interpreted by an agency through rulemaking." Ch. 2008-104, § 2, Laws of Fla.) Section 408.034(6) authorizes the Agency to adopt rules necessary to implement Sections 408.031-408.045, known as the "Health Facility and Services Development Act." See also § 408.15(8), Fla. Stat., providing similar authority. Section 408.033(1)(a) pertains to Local Health Councils. Section 408.036(1)-(3) include projects that are subject to CON review, including expedited review, and projects that are exempt from CON review. (The new construction or establishment of additional health care facilities, which includes long-term care hospitals by definition, see Section 408.032(8), Florida Statutes, are subject to CON review.) Section 408.037(1) pertains to CON application content. Section 408.039(1) and (2) pertains to CON review cycles and letters of intent, respectively. Section 651.118 pertains generally to the Agency's authority regarding nursing home beds and sheltered nursing home beds. Statutory Definitions "'Health services' means inpatient diagnostic, curative, or comprehensive medical rehabilitative services and includes mental health services. Obstetric services are not health services for purposes of ss. 408.031-408.045." § 408.032(9), Fla. Stat. In 2004, the Legislature amended the definition of "health services" as follows: "'Health services' means inpatient diagnostic, curative, or comprehensive medical rehabilitative services and includes mental health services. Obstetrical services are not health services for purposes of ss. 408.031- 408.045." Ch. 2004-383, § 2, Laws of Fla. (emphasis in original). "'Health care facility' means a hospital, long-term care hospital. . . ." § 408.032(8), Fla. Stat. "'Hospital' means a health care facility licensed under chapter 395." § 408.032(11), Fla. Stat. "Hospital" is defined in Section 395.002(12), Florida Statutes. "'Hospital' means any establishment that" offers "services more intensive than those required for room, board, personal services, and general nursing care, and offers facilities and beds for use beyond 24 hours by individuals requiring diagnosis, treatment, or care for illness, injury, deformity, infirmity, abnormality, disease, or pregnancy. " § 395.002(12)(a)-(b), Fla. Stat. The parties stipulated that the Agency licenses LTCH facilities as Class 1 general hospitals. Generally, a Class 1 general hospital is a "basic multipurpose hospital." Like Class 1 general hospitals, LTCHs are subject to CON review and approval prior to offering those services. Unlike a Class 1 general hospital, a Class I LTCH seeks exclusion from the acute care Medicare prospective payment system for inpatient services. "'General hospital' means any facility which meets the provisions of subsection (12) and which regularly makes its facilities and service available to the general population." § 395.002(10), Fla. Stat. See also § 395.002(28), Fla. Stat. for a definition of "specialty hospital." For example, a freestanding children's hospital is classified as a Class 3 specialty hospital because it provides services to a specialized population related to gender or age. Comprehensive rehabilitation hospitals are classified as Class 2 specialty hospitals. Gregg deposition at 35-39. If a Class 1 general hospital desires to add a tertiary health service, such as pediatric cardiac catheterization, the hospital would need to obtain a CON. Aside from LTCHs and perhaps some referral hospitals, the Agency believes a comprehensive inpatient rehabilitation facility is an example of a facility providing services that are high in intensity, complexity, or a specialized or limited application at a high cost associated with the Medicare program. Gregg deposition at 36-37. The new construction or establishment of additional health care facilities, including an LTCH, is subject to CON review. § 408.036(1)(b), Fla. Stat.1 Conversions from one type of health care facility to another, including the conversion from a general hospital, a specialty hospital, or a long-term care hospital are also subject to CON review. § 408.036(1)(c), Fla. Stat. See endnote 5. Also, unless exempt, all health care-related projects requesting "[t]he establishment of tertiary health services, including inpatient comprehensive rehabilitation services" are subject to CON review. § 408.036(1)(f), Fla. Stat. An LTCH desiring to offer a tertiary health service is required to obtain a CON in order to provide the service. LTCHs, like other general hospitals, can add additional beds without CON review by filing an appropriate notice with the Agency. "'Long-term care hospital' means a hospital licensed under chapter 395 which meets the requirements of 42 C.F.R. s. 412.23(e)[2] and seeks exclusion from the acute care Medicare prospective payment system for inpatient hospital services." § 408.032(13), Fla. Stat. See also Fla. Admin. Code R. 59C- 1.002(28), as amended, which mirrors the statutory definition. In 2004, the Legislature amended the definition of long-term care hospital in Section 408.032(13), adding the terms "acute care" before "Medicare." Ch. 2004-383, § 2, Laws of Fla.3 "'Tertiary health service' means a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service. Examples of such service include, but are not limited to, pediatric cardiac catheterization, pediatric open- heart surgery, organ transplantation, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. The agency shall establish by rule a list of all tertiary health services. § 408.032(17), Fla. Stat.(emphasis added).4 In 2004, the Legislature added "pediatric cardiac catheterization" and "pediatric open-heart surgery" to the statutory list of tertiary health services and deleted "specialty burn units". Ch. 2004-383, § 2, Laws of Fla.(emphasis in original).5 By its terms, the statutory list of tertiary health services is not exhaustive. The Agency reviews this list periodically. To accomplish the legislative purpose stated in the statutory definition of tertiary health service, the Agency includes a list of tertiary health services in Florida Administrative Code Rule 59C-1.002(41)(a)-(j). Like its statutory counterpart, Section 408.032(17), Florida Statutes, all of the items listed in Rule 59C- 1.002(41(a)-(j) are health services, which, by definition, "should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service." Fla. Admin. Code R. 59C- 1.002(41). Over time, the Agency has added several tertiary health services, such as heart, kidney, liver, bone marrow, lung, pancreas, islet cells, and heart/lung transplantation, and adult open heart surgery. The Agency proposes to delete neonatal and pediatric cardiac and vascular surgery, and pediatric oncology and hematology, from the list and add pediatric cardiac catheterization and pediatric open-heart surgery to the list, the latter reflecting the 2004 statutory amendments. See proposed rule 59C-1.002(41)(a)-(j). The Agency's Rationale for the Proposed Rule According to the Agency, Section 408.032(17) provides a broad definition of tertiary health services and the Agency has the authority to decide if certain services, due to their complexity and cost, should be added to or deleted from the list of tertiary health services. Notwithstanding the stated purpose and effect of the proposed rule, see Finding of Fact 6, "[t]he Agency has proposed to include long term care hospital (LTCH) services as a tertiary service in the [CON] program because the services are intense, complex, specialized and costly." See AHCA's Motion for Summary Final Order, "Rationale for Proposing Long Term Care Hospital Services as a Tertiary Service in the CON Program" at 1. In attachments to its Motion for Final Summary Order, the Agency provided information that the Agency believes demonstrates that LTCH services are tertiary health services. The Agency contends that "[t]he undisputed evidence shows that a long term care hospital is a tertiary health service" and further asserts "[t]here are no genuine issues of material fact present in this case." AHCA's Motion at 2, ¶¶ 2 and 3. For the Agency, "[t]here is really no such thing as a tertiary hospital. Tertiary has to do with the services that are provided." Within the Agency's framework, tertiary health services are "a combination of specialized, complicated, complex services that are a high cost." Further, "[t]hey are somewhat unique. They are high-end services that are the most complex, the most technologically advanced, the most difficult to provide, the most resource intensive, and inherently limited as a result." According to the Agency, LTCHs are health services that provide a high level of intensity, treat complex patients, and have a high cost associated with the services provided. Gregg deposition at 30-33, 48-53. By the proposed rule, the Agency proposes to make services that are provided in an LTCH a tertiary health service. But, if those same services are provided in some other type of facility, they are not LTCH services. Gregg deposition at 48- 49.6 The Agency's approach is based in part on several reports published by, for example, MedPAC, which characterize the role of the LTCH to provide post-acute care to a small number of medically complex patients at a high cost and for relatively extended periods. Id. at 21-29, 67-68. (The MedPAC reports relied on by the Agency do not define tertiary services. Id. at 58.) The Agency's approach is also based on the experience of the Agency in reviewing LTCH CON applications and developing an understanding of the complex patient population treated at LTCHs. Id. at 29, 68. See also AHCA's Motion at Gregg affidavit and supporting information. The Agency's rationale for the proposed rule is informative and thoughtful, but not material to the disposition of this rule challenge in light of the facial challenge to the proposed rule as written. See endnotes 7 and 13. If the case was resolved on the current record, none of the parties would be entitled to entry of a final order as a matter of law if the issue was whether LTCH services within an LTCH are tertiary health services because whether LTCH services provided within an LTCH are tertiary health services requires the resolution of genuine issues of material fact. Compare, e.g., Petitioners' Motion for Summary Final Order, Exhibit 9 (Kornblatt affidavit) with AHCA's Motion for Summary Final Order, Gregg affidavit and supporting information. Rather, the challenge is resolved based on an evaluation of the proposed rule in light of the plain meaning of several statutory provisions.
Conclusions For Petitioner Promise Healthcare, Inc.: F. Philip Blank, Esquire Blank & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 For Petitioner/Intervenor Select Specialty Hospital- Orlando, Inc.: Mark A. Emanuele, Esquire Panza, Maurer & Maynard, P.A. Bank of America Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 For Respondent Agency for Health Care Administration: Bart O. Moore, Esquire Shaddrick A. Haston, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate district where the party resides. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.
Conclusions THIS CAUSE comes before the Agency For Health Care Administration (the "Agency") concerning Certificate of Need ("CON") Application No. 10131 filed by The Shores Behavioral Hospital, LLC (hereinafter “The Shores”) to establish a 60-bed adult psychiatric hospital and CON Application No. 10132 The entity is a limited liability company according to the Division of Corporations. Filed March 14, 2012 2:40 PM Division of Administrative Hearings to establish a 12-bed substance abuse program in addition to the 60 adult psychiatric beds pursuant to CON application No. 10131. The Agency preliminarily approved CON Application No. 10131 and preliminarily denied CON Application No. 10132. South Broward Hospital District d/b/a Memorial Regional Hospital (hereinafter “Memorial”) thereafter filed a Petition for Formal Administrative Hearing challenging the Agency’s preliminary approval of CON 10131, which the Agency Clerk forwarded to the Division of Administrative Hearings (“DOAH”). The Shores thereafter filed a Petition for Formal Administrative Hearing to challenge the Agency’s preliminary denial of CON 10132, which the Agency Clerk forwarded to the Division of Administrative Hearings (‘DOAH”). Upon receipt at DOAH, Memorial, CON 10131, was assigned DOAH Case No. 12-0424CON and The Shores, CON 10132, was assigned DOAH Case No. 12-0427CON. On February 16, 2012, the Administrative Law Judge issued an Order of Consolidation consolidating both cases. On February 24, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction based on _ the _ parties’ representation they had reached a settlement. . The parties have entered into the attached Settlement Agreement (Exhibit 1). It is therefore ORDERED: 1. The attached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. 2. The Agency will approve and issue CON 10131 and CON 10132 with the conditions: a. Approval of CON Application 10131 to establish a Class III specialty hospital with 60 adult psychiatric beds is concurrent with approval of the co-batched CON Application 10132 to establish a 12-bed adult substance abuse program in addition to the 60 adult psychiatric beds in one single hospital facility. b. Concurrent to the licensure and certification of 60 adult inpatient psychiatric beds, 12 adult substance abuse beds and 30 adolescent residential treatment (DCF) beds at The Shores, all 72 hospital beds and 30 adolescent residential beds at Atlantic Shores Hospital will be delicensed. c. The Shores will become a designated Baker Act receiving facility upon licensure and certification. d. The location of the hospital approved pursuant to CONs 10131 and 10132 will not be south of Los Olas Boulevard and The Shores agrees that it will not seek any modification of the CONs to locate the hospital farther south than Davie Boulevard (County Road 736). 3. Each party shall be responsible its own costs and fees. 4. The above-styled cases are hereby closed. DONE and ORDERED this 2. day of Meaich~ , 2012, in Tallahassee, Florida. ELIZABETH DEK, Secretary AGENCY FOR HEALTH CARE ADMINISTRATION
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.
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 ultimate issue is whether the application of Petitioner, University Medical Park, for a certificate of need to construct a 130-bed acute care hospital in northern Hillsborough County, Florida should be approved. The factual issues are whether a need exists for the proposed facility under the Department's need rule and, if not, are there any special circumstances which would demonstrate the reasonableness and appropriateness of the application notwithstanding lack of need. The petitioner, while not agreeing with the methodology, conceded that under the DHRS rule as applied there is no need because there is an excess of acute care beds projected for 1989, the applicable planning horizon. The only real factual issue is whether there are any special circumstances which warrant issuance of a CON. The parties filed post-hearing findings of fact and conclusions of law by March 18, 1985, which were read and considered. Many of those proposals are incorporated in the following findings. As indicated some were irrelevant, however, those not included on pertinent issues were rejected because the more credible evidence precluded the proposed finding. Having heard the testimony and carefully considered the Proposed Findings of Fact, there is no evidence which would demonstrate the reasonableness and appropriateness of the application. It is recommended that the application be denied.
Findings Of Fact General Petitioner is a limited partnership composed almost entirely of physicians, including obstetricians/gynecologists (OB/GYN) and specialists providing ancillary care, who practice in the metropolitan Tampa area. (Tr. Vol. 1, pp. 103-104). Petitioner's managing general partner is Dr. Robert Withers, a doctor specializing in OB/GYN who has practiced in Hillsborough County for over thirty years. (Tr. Vol. 1, pp. 24- 26, 28-29.) Dr. Withers was a prime moving force in the founding, planning and development of University Community Hospital and Women's Hospital. (Tr. Vo1. 1, pp. 26-28, 73; Vol. 4, pp. 547-548.) Petitioner seeks to construct in DHRS District VI a specialty "women's" hospital providing obstetrical and gynecological services at the corner of 30th Street and Fletcher Avenue in northern Hillsborough County and having 130 acute care beds. 1/ (Tr. Vol. 1, pp. 34, 74-75, Vol. 5, pp. 678-679, Northside Ex.-1, pp. 1-2, Ex.-4A.) The proposed hospital is to have 60 obstetrical, 66 gynecological and 4 intensive care beds. (Tr. Vol. 8, P. 1297, Northside Ex.-1 Table 17, Ex.-B.) DHRS District VI is composed of Hardy, Highlands, Hillsborough, Manatee and Polk counties. Each county is designated a subdistrict by the Local Health Council of District VI. Pasco County, immediately north of Hillsborough, is located in DHRS District V and is divided into two subdistricts, east Pasco and west Pasco. If built, Northside would be located in the immediate vicinity of University Community Hospital (UCH) in Tampa, Hillsborough County, Florida. Less than 5 percent of the total surgical procedures at UCH are gynecologically related, and little or no nonsurgical gynecological procedures arc performed there. (Tr. Vol. 4, p. 550.) There is no obstetrical practice at UCH, although it has the capacity to handle obstetric emergencies. The primary existing providers of obstetrical services to the metropolitan Tampa area are Tampa General Hospital (TGH) and Women's Hospital (Women's). (Tr. Vol. 1, p. 79, Northside Ex.-4, Tr. Vol. 7, pp. 1074-1075.) TGH is a large public hospital located on Davis Islands near downtown Tampa. (Tr. Vol. 1, pp. 47-48, Vol. 8, pp. 1356, 1358.) TGH currently has a 35 bed obstetrical unit, but is currently expanding to 70 beds as part of a major renovation and expansion program scheduled for completion in late 1985. (Tr. Vol. 7, pp. 1049, 1095, Vol. 8, pp. 1367-1368, Vol. 10, P. 1674, Northside Ex.- 2, P. 3.) In recent years, the overwhelming majority of Tampa General's admissions in obstetrics at TGH have been indigent patients. (Tr. Vol. 1, P. 61, Vol. 8, pp. 1375- 1379; Vol. 9, P. 1451; TGH Ex.-3.) Tampa General's internal records reflect that it had approximately 2,100 patient days of gynecological care compared with over 38,000 patient days in combined obstetrical care during a recent eleven month period. (TGH Ex.-3..) Women's is a 192 bed "specialty" hospital located in the west central portion of the City of Tampa near Tampa Stadium. (Tr. Vol. 1, pp. 63-64, 66-67; Vol. 10 P. 1564; Northside Ex.-4.) Women's Hospital serves primarily private-pay female patients. (Vol. 1, pp. 79, 88-89; Vol. 6, pp. 892-893.) Humana Brandon Hospital, which has a 16 bed obstetrics unit, and South Florida Baptist Hospital in Plant City, which has 12 obstetric beds, served eastern Hillsborough County. (Tr. Vol. 7, P. 1075; Northside Ex.-2, P. 3; Northside Ex.-4 and Tr. Vol. 1, P. 79; Northside Ex.-4.) There are two hospitals in eastern Pasco County, which is in DHRS District V. Humana Hospital, Pasco and East Pasco Medical Center, each of which has a six bed obstetric unit. Both hospitals are currently located in Dade City, but the East Pasco Medical Center will soon move to Zephyrhills and expand its obstetrics unit to nine beds. (Tr. Vol. 1, pp. 108- 109; Tr. Vol. 7, P. 1075; Vol. 8, pp. 1278-1281; Northside Ex.-4.) There are no hospitals in central Pasco County, DHRS District V. Residents of that area currently travel south to greater Tampa, or, to a lesser extent, go to Dade City for their medical services. (Tr. Vol. 2, pp. 266-267, 271-272; Vol. 7, p. 1038.) Bed Need There are currently 6,564 existing and CON approved acute care beds in DHRS District VI, compared with an overall bed need of 5,718 acute care beds. An excess of 846 beds exist in District VI in 1989, the year which is the planning horizon use by DHRS in determining bed need applicable to this application. (Tr. Vol. 7, pp. 1046-1047, 1163, 1165-66; DHRS Ex.-1.) There is a net need for five acute care beds in DHRS District V according to the Department's methodology. (Tr. Yolk. 7, pp. 1066, 1165; DHRS Ex.-1.) The figures for District VI include Carrollwood Community Hospital which is an osteopathic facility which does not provide obstetrical services. (Tr. Vol. 1, P. 158; Vol. 7, p. 1138; Vol. 8, P. 1291.) However, these osteopathic beds are considered as meeting the total bed need when computing a11 opathic bed need. DHRS has not formally adopted the subdistrict designations of allocations as part of its rules. (Tr. Vol. 7, pp. 1017-1017, 1019; Vol. 8, pp. 1176, 1187.) Consideration of the adoption of subdistricts by the Local Health Council is irrelevant to this application. 2/ Areas of Consideration in Addition to Bed Need Availability Availability is deemed the number of beds available. As set forth above, there is an excess of beds. (Nelson, Tr. Vol. VII, P. 1192.) Tampa General Hospital and Humana Women's Hospital offer all of the OB related services which UMP proposes to offer in its application. These and a number of other hospitals to include UCH, offer all of the GYN related services proposed by Northside. University Community Hospital is located 300 yards away from the proposed site of Northside. UCH is fully equipped to perform virtually any kind of GYN/OB procedure. Humana and UCH take indigent patients only on an emergency basis, as would the proposed facility. GYN/OB services are accessible to all residents of Hillsborough County regardless of their ability to pay for such services at TGH. (Williams, Tr. Vol. IX, P. 1469; Baehr, Tr. Vol. X, P. 1596; Splitstone, Tr. Vol. IV, P. 582; Hyatt, TGH Exhibit 19, P. 21.) Utilization Utilization is impacted by the number of available beds and the number of days patients stay in the hospital. According to the most recent Local Health Council hospital utilization statistics, the acute care occupancy rate for 14 acute care hospitals in Hillsborough County for the most recent six months was 65 percent. This occupancy rate is based on licensed beds and does not include CON approved beds which are not yet on line. This occupancy rate is substantially below the optimal occupancies determined by DHRS in the Rule. (DHRS Exhibit 4; Contis, Tr. Vol. VII, P. 1069.) Utilization of obstetric beds is higher than general acute care beds; however, the rules do not differentiate between general and obstetric beds. 3/ Five Hillsborough County hospitals, Humana Women's, St. Joseph's, Tampa General, Humana Brandon, and South Florida Baptist, offer obstetric services. The most recent Local Health Council utilization reports indicate that overall OB occupancy for these facilities was 82 percent for the past 6 months. However, these computations do not include the 35 C0N-approved beds which will soon be available at Tampa General Hospital. (DHRS Exhibit 4). There will be a substantial excess of acute care beds to include OB beds in Hillsborough County for the foreseeable future. (Baehr, Tr.w Vol. X, pp. 1568, 1594, 1597.) The substantial excess of beds projected will result in lower utilization. In addition to excess beds, utilization is lowered by shorter hospital stays by patients. The nationwide average length of stay has been reduced by almost two days for Medicare patients and one day for all other patients due to a variety of contributing circumstances. (Nelson, Tr. Vol. VII, P. 1192; Contis, Tr. Vol. VII, P. 1102; Baehr, Tr. Vol. X, pp. 1583-84; etc.) This dramatic decline in length of hospital stay is the result of many influences, the most prominent among which are: (1) a change in Medicare reimbursement to a system which rewards prompt discharges of patients and penalizes overutilization ("DGRs"), (2) the adaptation by private payers (insurance companies, etc.) of Medicare type reimbursement, (3) the growing availability and acceptance of alternatives to hospitalization such as ambulatory surgical centers, labor/delivery/recovery suites, etc. and (4) the growing popularity of health care insurance/delivery mechanisms such as health maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"), and similar entities which offer direct or indirect financial incentives for avoiding or reducing hospital utilization. The trend toward declining hospital utilization will continue. (Nelson, Tr. Vol. VII, pp. 1192-98; Baehr, Tr. Vol. X, pp. 1584-86; etc.) There has been a significant and progressive decrease in hospital stays for obstetrics over the last five years. During this time, a typical average length of stay has been reduced from three days to two and, in some instances, one day. In addition, there is a growing trend towards facilities (such as LDRs) which provide obstetrics on virtually an outpatient basis. (Williams, Tr. Vol. IX, P. 1456; Hyatt, Tr. Vol. IV, P. 644.) The average length of stay for GYN procedures is also decreasing. In addition, high percentage of GYN procedures are now being performed on an outpatient, as opposed to inpatient, basis. (Hyatt, Tr. Vol. IV, P. 644, etc.) The reduction in hospital stays and excess of acute care beds will lower utilization of acute care hospitals, including their OB components, enough to offset the projected population growth in Hillsborough County. The hospitals in District VI will not achieve the optimal occupancy rates for acute care beds or OB beds in particular by 1989. The 130 additional beds proposed by UMP would lower utilization further. (Paragraphs 7, 14, and 18 above; DHRS Exhibit 1, Humana Exhibit 1.) Geographic Accessibility Ninety percent of the population of Hillsborough County is within 30 minutes of an acute care hospital offering, at least, OB emergency services. TGH 20, overlay 6, shows that essentially all persons living in Hillsborough County are within 30 minutes normal driving time not only to an existing, acute care hospital, but a hospital offering OB services. Petitioner's service area is alleged to include central Pasco County. Although Pasco County is in District V, to the extent the proposed facility might serve central Pasco County, from a planning standpoint it is preferable to have that population in central Paso served by expansion of facilities closer to them. Hospitals in Tampa will become increasingly less accessible with increases in traffic volume over the years. The proposed location of the UMP hospital is across the street from an existing acute care hospital, University Community Hospital ("UCH"). (Splitstone, Tr. Vol. IV, P. 542.) Geographic accessibility is the same to the proposed UMP hospital and UCH. (Smith, Tr. Vol. III, P. 350; Wentzel, Tr. Vol. IV, p. 486; Peters, Tr. Vol. IX, P. 1532.) UCH provides gynecological services but does not provide obstetrical services. However, UCH is capable of delivering babies in emergencies. (Splitstone, Tr. Vol. IV, p. 563.) The gynecological services and OB capabilities at UCH are located at essentially the same location as Northside's proposed site. Geographic accessibility of OB/GYN services is not enhanced by UMP's proposed 66 medical-surgical beds. The accessibility of acute care beds, which under the rule are all that is considered, is essentially the same for UCH as for the proposed facility. As to geographic accessibility, the residents of Hillsborough and Pasco Counties now have reasonable access to acute care services, including OB services. The UMP project would not increase accessibility to these services by any significant decrease. C. Economic Accessibility Petitioner offered no competent, credible evidence that it would expand services to underserved portions of the community. Demographer Smith did not study income levels or socioeconomic data for the UMP service area. (Smith, TR. Vol. III, pp. 388, 389.) However, Mr. Margolis testified that 24 percent of Tampa General's OB patients, at least 90 percent of who are indigents, came from the UMP service area. (Margolis, Tr. Vol. X, P. 1695.) The patients proposed to be served at the Northside Hospital are not different than those already served in the community. (Withers, Tr. Vol. II, P. 344.) As a result, Northside Hospital would not increase the number of underserved patients. Availability of Health Care Alternative An increasing number of GYN procedures are being performed by hospitals on an outpatient basis and in freestanding ambulatory-surgical centers. An ambulatory-surgical center is already in operation at a location which is near the proposed UMP site. In fact, Dr. Hyatt, a UMP general partner, currently performs GYN procedures at that surgical center. (Withers, Tr. Vol. I, P. 150; Hyatt, Tr. Vol. IV, pp. 644, 646. Ambulatory surgical centers, birthing centers and similar alternative delivery systems offer alternatives to the proposed facility. Existing hospitals are moving to supply such alternatives which, with the excess beds and lower utilization, arc more than adequate to preclude the need for the UMP proposal. (Nelson, Tr. Vol. VII, P. 1204, 1205, 1206; Williams, Tr. Vol. IX, pp. 1453, 1469; Contis, Tr. Vol. VII, pp. 1154; Contis, Tr. Vol. VII, pp. 1151, 1154.) Need for Special Equipment & Services DHRS does not consider obstetrics or gynecology to be "special services" for purposes of Section 381.494(6)(c)6, Florida Statutes. In addition, the services proposed by UMP are already available in Hillsborough and Pasco Counties. (Nelson, Tr. Vol. VII, pp. 1162, 1210.) Need for Research & Educational Facilities USF currently uses Tampa General as a training facility for its OB residents. TCH offered evidence that the new OB facilities being constructed at Tampa General were designed with assistance from USF and were funded by the Florida Legislature, in part, as an educational facility. (Powers, Tr. Vol. IX, P. 1391; Williams, Tr. Vol. IX, pp. 1453-1455.) The educational objectives of USF for OB residents at Tampa General are undermined by a disproportionately high indigent load. Residents need a cross section of patients. The UMP project will further detract from a well rounded OB residency program at Tampa General by causing Tampa General's OB Patient mix to remain unbalanced. (Williams, Tr. Vol. IX, P. 1458; Margolis, Tr. Vol. X, P. 1695.) UMP offered no evidence of arrangements to further medical research or educational needs in the community. (Nelson, Tr. Vol. VII, P. 1213. UMP's proposed facility will not contribute to research and education in District VI. Availability of Resources Management UMP will not manage its hospital. It has not secured a management contract nor entered into any type of arrangement to insure that its proposed facility will be managed by knowledgeable and competent personnel. (Withers, Tr. Vol. I, p. 142.) However, there is no alleged or demonstrated shortage of management personnel available. Availability of Funds For Capital and Operating Expenditures The matter of capital funding was a "de novo issue," i.e., evidence was presented which was in addition to different from its application. In its application, Northside stated that its project will be funded through 100 percent debt. Its principal general partner, Dr. Withers, states that this "figure is not correct." However, neither Dr. Withers nor any other Northside witness ever identified the percentage of the project, if any, which is to be funded through equity contributions except the property upon which it would be located. (UMP Exhibit 1, p. 26; Withers, Tr. Vol. I, P. 134.) The UMP application contained a letter from Landmark Bank of Tampa which indicates an interest on the part of that institution in providing funding to Northside in the event that its application is approved. This one and one half year year old letter falls short of a binding commitment on the part of Landmark Bank to lend UMP the necessary funds to complete and operate its project and is stale. Dr. Withers admitted that Northside had no firm commitment as of the date of the hearing to finance its facility, or any commitment to provide 1196 financing as stated in its application. (UMP Exhibit I/Exhibit Dr. Withers, Tr. Vol. I, P. 138.) Contribution to Education No evidence was introduced to support the assertion in the application of teaching research interaction between UMP and USF. USF presented evidence that no such interaction would occur. (Tr. Vol. IX, P. 1329.) The duplication of services and competition for patients and staff created by UMP's facility would adversely impact the health professional training programs of USF, the state's primary representative of health professional training programs in District VI. (Tr. Vol. IX, pp. 1314-19; 1322-24; 1331-1336.) Financial Feasibility The pro forma statement of income and expenses for the first two years of operation (1987 and 1988) contained in the UMP application projects a small operating loss during the first year and a substantial profit by the end of the second year. These pro formas are predicated on the assumption that the facility will achieve a utilization rate of 61 percent in Year 1 and 78 percent in its second year. To achieve these projected utilization levels, Northside would have to capture a market share of 75-80 percent of all OB patient days and over 75% of all GYN patient days generated by females in its service area. (UMP, Exhibit 1; Withers, Tr. Vol. I, P. 145, Dacus; Tr. Vol. V, P. 750-755.) These projected market shares and resulting utilization levels are very optimistic. It is unlikely that Northside could achieve these market shares simply by making its services available to the public. More reasonable utilization assumptions for purposes of projecting financial feasibility would be 40-50 percent during the first year and 65 percent in the second year. (Margolis, Tr. Vol. X, P. 1700; Baehr, Tr. Vol. X, pp. 1578, 1579, 1601.) UMP omitted the cost of the land on which its facility is to be constructed from its total project cost and thus understates the income necessary to sustain its project. Dr. Withers stated the purchase price of this land was approximately $1.5 million and it has a current market value in excess of $5 million. (Withers, Tr. Vol. I, pp. 139, 140.) Dr. Withers admitted that the purchase price of the land would be included in formulating patient charges. As a matter of DHRS interpretation, the cost of land should be included as part of the capital cost of the project even if donated or leased and, as such, should be added into the pro formas. UMP's financial expert, Barbara Turner, testified that she would normally include land costs in determining financial feasibility of a project, otherwise total project costs would be understated (Withers, Tr. Vol. I, P. 141; Nelson, Tr. Vol. VII, pp. 1215, 1216; Turner, Tr. Vol. X, P. 1714.) In addition, the pro formas failed to include any amount for management expenses associated with the new facility. Dr. Withers admitted UMP does not intend to manage Northside and he anticipates that the management fee would be considerably higher than the $75,000 in administrator salaries included in the application. (Withers, Tr. Vol. I, pp. 143, 144.) Barbara Turner, UMP's financial expert, conceded that the reasonableness of the percent UMP pro formas is predicated on the reasonableness of its projected market share and concomitant utilization assumptions. These projections are rejected as being inconsistent with evidence presented by more credible witnesses. The UMP project, as stated in its application or as presented at hearing, is not financially feasible on the assumption Petitioner projected. VIII. Impact on Existing Facilities Approval of the UMP application would result in a harmful impact on the costs of providing OB/GYN services at existing facilities. The new facility would be utilized by patients who would otherwise utilize existing facilities, hospitals would be serving fewer patients than they are now. This would necessarily increase capital and operating costs on a per patient basis which, in turn, would necessitate increases in patient charges. (Nelson, Tr. Vol. VII, pp. 1217-1219; Baehr, Tr. Vol. X, P. 1587.) Existing facilities are operating below optimal occupancy levels. See DHRS Exhibit 4. The Northside project would have an adverse financial impact on Humana, Tampa General Hospital, and other facilities regardless of whether Northside actually makes a profit. See next subheading below. The Northside project would draw away a substantial number of potential private-pay patients from TGH. Residents of the proposed Northside service area constitute approximately 24 percent of the total number of OB patients served by TGH. The Northside project poses a threat to TGH's plans to increase its non- indigent OB patient mix which is the key to its plans to provide a quality, competitive OB service to the residents of Hillsborough County. (Nelson, Tr. Vol. VIII, P. 1225; Margolis, Tr. Vol. X, P. 1695.) Impact Upon Costs and Competition Competition via a new entrant in a health care market can be good or bad in terms of both the costs and the quality of care rendered, depending on the existing availability of competition in that market at the time. Competition has a positive effect when the market is not being adequately or efficiently served. In a situation where adequate and efficient service exists, competition can have an adverse impact on costs and on quality because a new facility is simply adding expense to the system without a concomitant benefit. (Baehr, Tr. Vol. X, p. 1650.) Competition among hospitals in Hillsborough County is now "intense and accelerating." (Splitstone, Tr. Vol. IV, p. 558.) Tampa General is at a competitive disadvantage because of its indigent case load and its inability to offer equity interests to physicians in its hospital. (Blair, Tr. Vol. VI, pp. 945, 947-948); Powers, Tr. Vol. IX, P. 1405.) Tampa General Hospital is intensifying its marketing effort, a physician office building under construction now at Tampa General is an illustration of Tampa General's effort to compete for private physicians and patients. (Powers, Tr. Vol. IX, pp. 1405-1406.) The whole thrust of Tampa General's construction program is to increase its ability to compete for physicians. (Nelson, Tr. Vol. VII, P. 1224; Powers, Tr. Vol. IX, p. 1442.) The Tampa General construction will create new competition for physicians and patients. (Contis, Tr. Vol. VII, p. 1099.) Patients go to hospitals where their doctors practice, therefore, hospitals generally compete for physicians. (Splitstone, Tr. Vol. IV, P. 563; Blair, Tr. Vol. VI, pp. 898, 928.) Because many of the UMP partners are obstetricians who plan to use Northside exclusively, approval of the Northside project would lessen competition. (Popp, TGH Exhibit 18, P. 11.) It is feasible for Tampa General to attract more private pay OB patients. (Williams, Tr. Vol. IX, pp. 1460- 1461.) At its recently opened rehabilitation center, Tampa General has attracted more private pay patients. (Powers, Tr. Vol. IX, pp. 1393-1396.) USF OB residents at Tampa General are planning to practice at Tampa General. (Williams, Tr. Vol. IX, pp. 1460-1461.) The state-of-the-art labor, delivery, recovery room to be used at Tampa General will be an attractive alternative to OB patients. (Williams, Tr. Vol. IX, pp. 1460- 1461); Popp, TGH Exhibit 18, p.26) IX. Capital Expenditure Proposals The proposed Northside hospital will not offer any service not now available in Tampa. (Hyatt, TGH Exhibit 19, p. 21).
Recommendation Petitioner having failed to prove the need for additional acute care beds to include OB beds or some special circumstance which would warrant approval of the proposed project, it is recommended that its application for a CON be DENIED. DONE and ORDERED this 25th day of June, 1985, in Tallahassee, Florida STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1985.
Findings Of Fact HCAC, on March 14, 1986, filed with DHRS, a letter of intent giving notice of its forthcoming application for a 90 bed long term psychiatric hospital in Hillsborough County, Florida. DHRS is the state agency authorized to consider, and approve or deny, applications for CONs. The proposed location is within DHRS service district VI. On April 15, 1986, HCAC filed the CON application which DHRS designated as CON #4526. The facility, HCAC Psychiatric Hospital of Hillsborough County, was intended to provide treatment to chronically mentally disturbed patients, and was planned to contain a 74 bed adult/geriatric unit and a 16 bed adolescent unit. The application listed Anthony J. Estevez as the applicant and Francis A. Gomez as the authorized representative. Mr. Gomez is a consultant to Mr. Estevez. On May 15, 1986, DHRS requested additional information of the applicant. On June 23, 1986, HCAC provided the requested material. On June 29, 1986, DHRS deemed the application complete. The HCAC application was comparatively reviewed by DHRS with another CON application, subsequently denied, which is not at issue in this proceeding. On September 30, 1986, DHRS granted partial approval to HCAC for the construction of a 50 bed adult and geriatric long term psychiatric facility. DHRS is authorized to grant approval to an identifiable portion of an application for a CON. DHRS considers a single bed to be an identifiable portion. Notice of the agency's decision was published in Florida Administrative Weekly, Vol. 40, No. 24, at 3684. HCAC did not protest the denial of the remainder of the application. The Petitioners in the consolidated cases timely requested formal administrative hearing. On September 15, 1987, HCAC provided, to all parties, materials purporting to be updated information relating to the DHRS-mandated reduction in the scale of their proposal and changed economic circumstances. Charter moved at the hearing to exclude the material. The hearing officer denied the motion, but recognized a continuing objection to the use of such materials. In that HCAC has failed to establish that there is need for 50 long term psychiatric beds in district VI, the updated information is not relevant to this order and has been disregarded. HCAC, formally known as Health Care Advisors Corporation, Inc., was not incorporated until April 14, 1987, but - the name had been reserved prior to the incorporation. HCAC is wholly owned and controlled by Anthony J. Estevez. Following construction of the proposed facility, HCAC intends to operate as a general partnerships in which Mr. Estevez and his wife would be limited partners. Long term psychiatric services are hospital based inpatient services averaging a length of stay of 90 days. DHRS rules provide that such services may be provided in specifically designated beds in a general hospital, or in a specialty hospital setting. HCAC has failed to establish that there is a need for 50 additional long term psychiatric beds in district VI. The evidence does not indicate that there are persons within district VI who are unable to obtain long term psychiatric services, or whether there is need for any additional long term psychiatric beds in district VI. The HCAC application is inconsistent with the goals of both the district and state health plans, as well as other available needs assessment data. The district VI health plan indicates that additional long term psychiatric beds are unnecessary. The plan indicates that existing psychiatric hospital bed utilization must be at least 75%. The evidence indicates that for the three year period preceding the hearing, occupancy in existing psychiatric hospital beds was approximately 60%. Goal #1 of the state health plan indicates that mental health services should be made available to persons in need of such services in the least restrictive setting which offers treatment. Long term hospitalization does not generally offer the least restrictive setting for such treatment. Further, objective 1.3 of the state plan provides that additional long term beds in a particular district should not be approved unless the average annual occupancy rate for all existing long term beds in the district is at least 80%. The average annual occupancy rate for existing long term beds in district VI is less than 80%. The district VI alcohol, drug abuse and mental health plan also emphasizes the desirability of providing psychiatric care in a noninstitutional setting when possible, and suggests utilization of alternatives to institutionalization. Additional long term psychiatric beds are not identified as needed for the district. The plan does indicate that additional services for elderly persons are needed in the district, and that some elderly persons are inappropriately hospitalized due to lacking community resources. The evidence does not indicate that such persons would benefit from the HCAC project. DHRS approved the facility primarily based upon the premise that there was need for long term psychiatric beds in district VI. DHRS has not established a method of establishing numerical need for long term psychiatric beds. In the absence of such methodology, DHRS identified the "inaccessibility" of long-term beds in the eastern part of district VI as the most important consideration in their determination to award the HCAC certificate. The agency concluded in making the determination to grant the CON that "it is highly doubtful" that persons in need of services and residing in the eastern portion of the district would be within two hours driving time of facilities located within the district. However, the agency conducted no actual drive time study, instead relying on estimations based upon map distances and the agency analyst's perceptions of the time required to cover such distances. At least 90% of the district VI population is within two hours driving time to long term psychiatric beds. In determining that district VI residents were unable to obtain services, DHRS failed to consider existing long term psychiatric beds which are located within a two hour drive from, but outside of, district VI. Further, although it is normal for the agency to consider approved but unconstructed facilities in making CON determinations, the agency failed to consider such long term psychiatric beds located within a two hour drive from district VI for which CONs have been issued but which are not yet operating. The HCAC application did not suggest a detailed bed need assessment methodology. HCAC did not conduct a demographic study in district VI to assess or propose a numerical bed need for the district. Subsequent to the filing of the application and prior to the administrative hearing, a bed need analysis based upon the report of the Graduate Medical Educational National Advisory Committee (GMENAC) was prepared for HCAC. The GMENAC report was prepared in 1981 in order to predict the numbers of physicians (including psychiatrists) which would be needed in the United States by 1990. The study was not prepared for the purpose of predicting bed need, but was prepared for the purpose of predicting the need for educating new physicians. The GMENAC-based bed need projection results in a bed-to-population ratio of .61 beds per 1,000 residents. The accepted DHRS short term bed need methodology results in a bed-to-population ratio of .35 per 1,000 residents. However, according to the testimony of all witnesses including HCAC's and DHRS's, there is greater need for short term beds than for long term beds. The use of the GMENAC report as a basis for projection of long term psychiatric bed need overestimates the need for long term psychiatric beds. The resulting bed need projections are not supported by the weight of the evidence and have been disregarded. DHRS does not recognize numerical bed need projections which are projected pursuant to any methodology other than as specified in the agency rules. As stated previously, DHRS has not established a numerical bed need methodology applicable to long term psychiatric beds. In making the determining of need, DHRS did not consider the existence of long term beds in district VI which are designated for children and adolescents. The agency's rationale for failing to include all beds in ascertaining relevant occupancy levels in existing beds, is that children and adolescents are required by rule to be housed separately from adults in long term psychiatric hospitals. Although the rule relating to approval of short term psychiatric hospital beds requires that occupancy levels for short term adult beds and child/adolescent beds be counted separately, the long term rule states that need for additional beds will not be found unless the annual occupancy rate for all existing long term psychiatric beds in the district is at or in excess of 80%. The rule does not provide for DHRS to disregard some long term beds in determining that other long term beds are needed. There was no evidence to support the decision by DHRS to waive the 80% occupancy requirement as it relates to all existing long term beds in the district. The agency rule requires that all such beds be taken into account in determining whether there is need for a proposed facility. The evidence establishes that the annual occupancy rate for all existing long term psychiatric beds in district VI is less than 80%. The DHRS rule accordingly directs the finding that additional beds are not needed. HCAC proposes to offer a full range of high level, specialty long term psychiatric services, including diagnostics and evaluation, to chronically mentally disturbed patients. Such patients suffer from illnesses such as personality disorder, organic brain syndrome, and schizophrenia. Generally, long term patients may be differentiated from short term patients by the nature of the illnesses addressed through hospitalization and the type of care which is appropriate to particular patients. Long term patients are generally unserved or underserved, and require specialized treatment. However, many of the patients HCAC intends to serve are also appropriate for, and receive, short term treatment. The stated goal of the facility is to assure that the full continuum of psychiatric care is available to residents of district VI. The facility proposes to provide "milieu" therapy. Such therapy provides patients with a sense of community important where lengths of stay are extended. The facility proposes to offer educational programs designed to teach patients skills necessary for successful living outside an institution. The facility proposes to provide family counseling, and support for family members who are confronted with the chronic mental illness of a family member. Such services are generally currently available to residents of district VI. HCAC intends, as do other providers of similar services, to admit patients from a broad range of other facilities, private practitioners, and public and private agencies. HCAC states that it will establish relationships with other area mental health care providers in order to facilitate the cooperation between agencies conducive to providing appropriate treatment to persons needing mental health services. There was no evidence that such relationships or admission agreements have yet been entered into by HCAC. HCAC intends, as do other facilities, to closely monitor treatment plans for individual patients in order to provide a high level of care and to maintain therapeutic progress. A system of goal attainment will be utilized in evaluating appropriateness of treatment and planning further care. HCAC intends to ensure that patients receive services from existing community-based agencies following discharge so as to make subsequent readmission into a facility less likely. HCAC states that it intends to provide training to staff and other personnel, both from the HCAC facility and from other providers. However there was no evidence to establish that the facility will be specifically staffed by instructional personnel capable of providing such training. The HCAC facility is expected to draw patients primarily from within the district VI area, however, additional patient referrals from outside the service district are anticipated. The facility is planned to include 36 adult and 14 geriatric beds. Mr. Estevez is a developer and general contractor. Mr. Estevez's interest in long term psychiatric facilities is related to his personal inability to locate an acceptable instate long term psychiatric facility which could provide the level of care which Mr. Estevez believed would be appropriate for a family member in need of services. The facility would be managed by Flowers Management Corporation. Flowers' a for-profit entity, is 51% owned and controlled by Anthony J. Estevez. While Flowers manages several short term psychiatric and substance abuse facilities, Flowers has never operated or managed a long term psychiatric hospital. Nelson Rodney, Flowers, vice president for the Florida region, will be responsible for the management and programmatic operation of the proposed facility. Mr. Rodney has never managed, or been employed by, or had direct experience in, a long term psychiatric facility. The evidence does not indicate that Flowers Management Company is currently capable of managing and operating a long term psychiatric facility. The proposed HCAC facility will include a psychiatric inpatient unit, patient support services, diagnostic services, and ambulatory care services. The program to be utilized by the HCAC facility is based upon the "Flowers" model. The Flowers model is the Flowers designation for the type of services and care which are available at facilities managed by the Flowers Management Corporation. The Flowers model currently utilized by the company is constituted of numerous treatment modalities developed over a period of years and is essentially similar to treatment programs offered at short-term psychiatric hospitals. The Flowers model is applicable to both short term and long term treatment programs. None of the treatment modalities identified by HCAC as proposed for use at the facility are unavailable to residents of district VI. There are adequate, available and accessible alternatives to the proposed HCAC facility, both within and outside of district VI. In considering the HCAC application, DHRS disregarded beds in short term psychiatric facilities because agency rule distinguishes between long term and short term beds. However, DHRS has previously considered short term psychiatric services when evaluating the need for a long term psychiatric service provider. It is appropriate to consider existing short term facilities in determining whether alternatives to the proposed facility are adequate and available. Short term and long term facilities compete to some extent in providing services. Projecting an expected length of stay for a particular patient is an inexact process and is very difficult. Most psychiatric patients are considered to be in need of, intermediate care, extending beyond 30 days but less than 90 days. On occasion, some patients in short term facilities are hospitalized in excess of 90 days, and some patients hospitalized in long term facilities are discharged prior to 90 days. The average length of stay projected by HCAC was 90 days. HCAC chose the 90 day figure solely because DHRS defines a long term psychiatric facility as one with an average length of stay of 90 days, and HCAC proposes to construct a lone term facility. HCAC expects the average length of stay to be in excess of 90 days. In an attempt to screen out prospective patients with shorter lengths of stay, HCAC proposes to utilize an experimental method of projecting lengths of hospitalization, in order to eliminate patients with projected hospitalizations of less than 90 days. The experimental methodology, a "strain ratio analysis", enables psychiatric health care providers to assess a prospective patient's situation, develop an appropriate course of treatment, and determine the anticipated length of the hospitalization. However, such prototypical models are, by their nature, testing vehicles. The Flowers Management Corporation has never used the strain ratio analysis system. No facility was utilizing the strain ratio analysis system in other than an experimental capacity at the time of the administrative hearing. The strain ratio analysis system has been tested primarily in short term psychiatric facilities, rather than in long term facilities such as proposed by HCAC. While such methods hold great promise, and may be helpful in predicting the expected length of stay in individual cases, they are not sufficiently reliable to establish that HCAC's average length of stay will exceed 90 days. Some HCAC patients could be hospitalized for periods of time shorter than 90 days. Short term facilities, on occasion, provide treatment to patients hospitalized in excess of 90 days when such continued treatment is warranted. HCAC intends to take short term psychiatric facility charges into account when determining rate structure. HCAC used financial data from several short term psychiatric hospitals in preparing the information submitted to DHRS as part of the application for the CON. There are 654 licensed or approved short term psychiatric beds in service district VI, most of which may be utilized to treat adults in need of care. The annual average occupancy rate for these short term beds is less than 80%. The available beds are accessible, appropriate, underutilized and available. Additionally, there are beds in district VI residential treatment centers and nursing homes which to some extent may be used as alternatives to the HCAC proposal. UPC is a licensed short term psychiatric hospital located in Hillsborough County, approved in part as a teaching and research facility. The UPC facility contains 114 beds, including a 28 bed adult unit, a 20 bed geriatric unit, a 22 bed substance abuse unit, an 8 bed professorial unit, an 8 bed child unit, and a 28 bed-adolescent unit. The operation of the HCAC facility would negatively impact the operation of UPC through a reduction in patient days and related revenue. Charter is a short term psychiatric hospital located in Hillsborough County, containing 146 beds, 84 of which are designated as' adult or geriatric. Charter provides services to adult and geriatric patients. Although Charter is a short term facility, services to be provided by HCAC are essentially similar to services provided by Charter. Accordingly, the proposed HCAC facility would have a substantial impact on the operations of Charter. Because there is no need for additional psychiatric bed capacity, it is reasonable to assume that Charter would lose a significant number of patients, and revenue, to the HCAC facility, if the HCAC facility were operational. St. Francis is a 30 bed alcohol and drug treatment unit located in Hillsborough County. Although HCAC would not admit a patient with a primary diagnosis of substance abuse, HCAC would provide substance abuse treatment to persons receiving care for other illnesses. Patients in need of substance abuse treatment receive care at various types of facilities. At the hearing, an HCAC witness stated that some of the beds which the HCAC/GMENAC methodology indicated were needed could operate as residential substance abuse treatment beds. Accordingly, the HCAC facility could impact on the operation of St. Francis. UPC, Charter, and St. Francis provide services essentially similar to those which the HCAC facility would provide. There is a shortage Of personnel available to staff psychiatric hospitals. The HCAC facility would exacerbate the shortage, however, there are sufficient personnel to meet projected staffing levels, although it would make staff retention more difficult for existing providers. Theme was no evidence which would indicate that the HCAC facility would, through the operation of joint, cooperative, or shared health care resources, provide for probable economies or improvements in the delivery of psychiatric services. There was no evidence which would indicate that HCAC planned to participate in joint, cooperative, or shared health care service provision. There was no evidence which would indicate that there was need for special equipment or services which are not reasonably and economically accessible in district VI or in adjoining areas. There was no evidence which would indicate that there was need for research or educational facilities beyond what is currently available within and adjacent to district VI. The proposed HCAC facility is not specifically designated as a research or educational facility and would provide no opportunity for such, beyond what any additional long term psychiatric hospital would provide. The HCAC facility would be designed and constructed by Project Advisors Corporation (PAC). PAC is wholly owned and controlled by Anthony J. Estevez. Mr. Estevez has never designed or constructed a long term psychiatric hospital. Mr. Estevez has not purchased property in the district VI area. However, PAC and Mr. Estevez have been involved in constructing short term psychiatric facilities. Construction of short term and long-term psychiatric facilities are essentially similar. Mr. Estevez's background and knowledge indicate that, assuming the project were otherwise permitted, the proposed project could be constructed in a timely manner and at a reasonable cost. The projected costs of land acquisition, equipment and initial operating costs are based upon the establishment of need for the facility. Such need was not established, and accordingly the projections have not been considered. The evidence indicated that financing was available to Mr. Estevez at an annual rate of 13%. Mr. Estevez's has a continuing relationship with NCNB Bank which has indicated interest in providing financing for the project. The annual rate is reasonable. The projected construction cost is based on similar projects for which Mr. Estevez has been responsible and appears reasonable; however, such costs are related to need for the project, which was not established by the evidence, and accordingly such projections have been disregarded. Further Mr. Estevez has stated his intention to provide personal funds for capital, if necessary, and the evidence indicates that he is able to do so. The proposed staffing and salary levels are based upon the establishment of need for the proposed facility. Such need was not established, and accordingly the projections are irrelevant. HCAC states that the project will be accessible to all residents of district VI in need of services. However HCAC failed to establish that there is need for 50 additional long term psychiatric beds in district VI. In asserting that the proposed project was financially feasible, HCAC projected costs and revenue for the proposed facility. Such projections necessarily rely on the assumed need for the facility. However, the evidence has failed to establish that there is need in district VI for 50 additional long term psychiatric hospital beds. Accordingly, the financial information filed with the application, as well as the updated information provided subsequently, has not been considered to the extent based upon the assumption of need and resulting projected levels of occupancy. In that there is no demonstrable need for the project, the project is not financially feasible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order denying the application of HCAC for certificate of need #4526. DONE and ENTERED this 17th day of April, 1989, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1989. APPENDIX CASES NO. 86-4378, 86-4379, and 83-4380 The following constitute rulings on proposed findings of facts submitted by the parties. UPC UPC's proposed findings of fact are accepted as modified in the Recommended order except as follows: 15-26. Rejected. Unnecessary. 28. Rejected. Unnecessary. 48. Accepted insofar as relevant. 49-53. Rejected. Unnecessary. 58-70. Rejected. Unnecessary. 73. Rejected. Must be within service district. 80. Rejected. Conclusion of law. 87. Rejected. Unnecessary. Charter Charter's proposed findings of fact are accepted as modified in the Recommended Order except as follows: 32-35. Rejected. Statute directs consideration of beds within district. 40. Rejected. Restatement of testimony. 75. Rejected. Conclusion of law. 77-82. Rejected. Unnecessary. 83-95. Rejected. Not supported by weight of evidence. 96-121. Rejected. Unnecessary. 122. Rejected. Not supported by weight of evidence. 123-127. Rejected. Unnecessary. 128-132. Rejected. Not supported by weight of evidence. 133-134. Rejected.. Unnecessary. 135-139. Rejected. Not supported by weight-of evidence. 146-153. Rejected. Unnecessary. St. Francis St. Francis' proposed findings of fact are accepted as modified in the Recommended Order except as follows: 18. Third sentence rejected. Irrelevant. 25. Rejected. Unnecessary. 32. Rejected. Irrelevant. 36-40. Rejected insofar as related to projects not at issue in this proceeding. 41. Rejected. Not required to provide firm loan commitment. 42-43. Rejected. Unnecessary. 54. Rejected. Subordinate. 55-64. Rejected. Unnecessary. 65. Rejected. Restatement of testimony. 76. Rejected. Conclusion of law. 91. Rejected. Testimony cited relates solely to occupancy requirement for existing beds, not other agency criteria. 113. Rejected. Not supported by weight of evidence. 114-147. Rejected. Unnecessary. Rejected. Implementation of staffing plan not required. Rejected. Unnecessary. Rejected. Restatement of testimony. Rejected. Irrelevant. 156. Rejected. Methodology not' supported by evidence. HCAC HCAC's proposed findings of fact are accepted as modified in the Recommended Order except as follows: Accepted, but irrelevant. Rejected. Irrelevant. 11. Rejected insofar as related to updated information not related to the DHRS-mandated reduction in scale of project or due to changed economic conditions. 19. First sentence rejected. Not supported by weight of evidence. 31. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. HCAC is not operator of facility. Flowers Is Operator and Flowers experience insufficient. 51-52. Rejected. Not supported by weight of evidence. 53. Rejected. Need not established. 63-68. Rejected. Unnecessary. 69. Rejected. Not supported by weight of evidence. 70-92. Rejected. Assumes need, not established. Rejected. Not supported by weight of evidence. Rejected. Assumes need, not established. Rejected. Inconsistent with HCAC-stated admission of non- local patients. Rejected. Service districts not necessarily related to accessibility. Rejected. Not supported by weight of evidence. Second sentence rejected. Rule does not authorize separate calculation of adult/geriatric and child/adolescent long term beds. 103-108. Rejected. Not supported by weight of evidence. 110. Rejected. Assumes need, not established. 111-112. Rejected. Not supported by weight of evidence. Rejected. Unnecessary. Rejected. Conclusion of law. 115-117. Rejected. Not supported by weight of evidence. Rejected. Unnecessary. Rejected. Not supported by weight of evidence. Rejected. Unnecessary. 121-129. Rejected. Methodology not supported by weight of evidence. 131-139. Rejected. Not supported by weight of evidence. DHRS DHRS's proposed findings of fact are accepted as modified in the Recommended Order except as follows: 6. Rejected. Need for project not established. COPIES FURNISHED: Christopher R. Haughee, Esq. Moffitt, Hart & Herron 216 South Monroe Street, Suite 300 Tallahassee, Florida 32301-1859 Susan Greco Tuttle, Esq. Moffitt, Hart & Herron 401 South Florida Avenue, Suite 200 Tampa, Florida 33602-5417 Lesley Mendelson, Esq. Assistant General Counsel Department of Health and Rehabilitative Services Regulation and Health Facilities Fort Knox Executive Center 2727 Mahan Drive, Suite 103 Tallahassee, Florida 32308 Gerald B. Sternstein, Esq. Darrell White, Esq. McFarlain, Sternstein, Wiley & Cassedy, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 Michael D. Ross, Esq. J. Robert Williamson, Esq. King & Spalding 2500 Trust Company Tower Atlanta, Georgia 30303 George N. Meros, Jr., Esq. Rumberger, Kirk, Caldwell, Cabaniss & Burke 101 North Monroe Street, Suite 900 Tallahassee, Florida 32301 Judith S. Marber, Esq. Wood, Lucksinger & Epstein Southeast Financial Center Two South Biscayne Boulevard, 31st Floor Miami, Florida 33131-2359 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Whether an out-of-state corporation doing business as a psychiatric hospital located out of state and as a counseling servico located in Florida's District I is entitled to formal administrative proceedings on an application for certificate of need filed by another party seeking a certificate of need to construct an 80-bed long-term psychiatric hospital in District I? For present purposes Bay Psychiatric's well-pleaded, factual allegations in its petition for formal hearing are assumed to be true. The petition alleges essentially the following ASSUMED FACTS Bay Psychiatric proposes to build an 80-bed long-term psychiatric hospital in Bay County, Florida, and HRS proposes to grant it certificate of need No. 3204 authorizing it to do so. The proposed hospital's primary service area is to be HRS Districts l and 2. Petitioner operates a free standing psychiatric hospital in Dothan, Alabama, which "includes beds defined as long-term psychiatric beds by Rule 10- 5.11(26), Florida Administrative Code, and beds defined as short-term psychiatric beds by Rule 10-5.11(25), Florida Administrative Code." Approximately one quarter of the Dothan hospital's patients come across the state line from HRS Districts l and 2. Last year the Dothan hospital experienced less than an 80 percent occupancy rate of its long-term beds, less than a 75 percent occupancy rate of its adult short-term beds, and less than a 70 percent occupancy rate of its other short-term beds. If Bay Psychiatric receives a certificate of need, the Dothan hospital "will be substantially and adversely affected because any patients admitted to the proposed UNITED MEDICAL facility would otherwise likely have been admitted to CHARTER WOODS HOSPITAL. Petitioner also operates a "counseling and intervention facility located in Panama City, Florida, "offering various outpatient services which "at least in part" are the types of outpatient services Bay Psychiatric would offer at its proposed hospital. Because of "a finite patient population" petitioner's counseling facility would also be "substantially and adversely affected " if Bay Psychiatric receives a certificate of need.
Recommendation It is, accordingly, RECOMMENDED: That the Department of Health and Rehabilitative dismiss the petition for formal proceeding. DONE AND ENTERED this 26th day of October, 1984, at Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of October, 1984. COPIES FURNISHED: Douglas L. Mannheimer, Esquire 318 North Calhoun Street Post Office Drawer 11300 Tallahassee, Florida 32302-3300 William E. Hoffman, Jr. James A. Dyer Bondurant Miller Hishon and Stephenson 2200 First Atlanta Tower Two Peachtree Street, N.W. Atlanta, Georgia 30383 F. Philip Blank, Esquire 241 East Virginia Street Tallahassee, Florida 32301 Chris H. Bentley, Esquire Fuller & Johnson, P.A. 300 East Park Avenue Post Office Box 1739 Tallahassee, Florida 32302 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winuwood Boulevard Tallahassee, Florida 32301
