Findings Of Fact The Parties The Applicant, LMHS The applicant, LMHS, is a public, not-for-profit health care system, created in 1968 by special act of the Legislature. A ten-member publicly elected board of directors is responsible for overseeing LMHS on behalf of the citizens of Lee County. LMHS does not have taxing power. LMHS is the dominant provider of hospital services in Lee County. LMHS operates four hospital facilities under three separate hospital licenses. The four hospital campuses are dispersed throughout Lee County: borrowing the sub-county area descriptors adopted by LMHS’s health planning expert, LMHS operates one hospital in northwest Lee County, one hospital in central Lee County, and two hospitals in south Lee County.1/ At present, the four hospital campuses are licensed to operate a total of 1,423 hospital beds. The only non-LMHS hospital in Lee County is 88-bed Lehigh Regional Medical Center (Lehigh Regional) in northeast Lee County, owned and operated by a for-profit hospital corporation, Health Management Associates, Inc. (HMA). LMHS has a best-practice strategy of increasing and concentrating clinical specialties at each of its existing hospitals. The LMHS board has already approved which specialty service lines will be the focus at each of its four hospitals. Although there is still some duplication of specialty areas, LMHS has tried to move more to clinical specialization concentrated at a specific hospital to lower costs, better utilize resources, and also to concentrate talent and repetitions, leading to improved clinical outcomes. Currently licensed to operate 415 hospital beds, Lee Memorial Hospital (Lee Memorial) is located in downtown Fort Myers in central Lee County. The hospital was initially founded in 1916 and established at its current location in the 1930s. In the 1960s, a five-story clinical tower was constructed on the campus, to which three more stories were added in the 1970s. The original 1930s building was demolished and its site became surface parking. Today, Lee Memorial provides a full array of acute care services, plus clinical specialties in such areas as orthopedics, neurology, oncology, and infectious diseases. Lee Memorial’s licensed bed complement includes 15 adult inpatient psychiatric beds (not in operation), and 60 beds for comprehensive medical rehabilitation (CMR), a tertiary health service.2/ Lee Memorial is a designated stroke center, meaning it is a destination to which EMS providers generally seek to transport stroke patients, bypassing any closer hospital that lacks stroke center designation. Lee Memorial operates the only verified level II adult trauma center in the seven-county region designated AHCA district 8. Lee Memorial also is home to a new residency program for medical school graduates. At its peak, Lee Memorial operated as many as 600 licensed beds at the single downtown Fort Myers location. In 1990, when hospital beds were still regulated under the CON program, Lee Memorial transferred its right to operate 220 beds to establish a new hospital facility to the south, HealthPark Medical Center (HealthPark). One reason to shift some of its regulated hospital beds to the south was because of the growing population in the southern half of Lee County. Another reason was to ensure a paying patient population by moving beds away from Lee Memorial to a more affluent area. That way, LMHS would have better system balance, and be better able to bear the financial burden of caring for disproportionately high numbers of Medicaid and charity care patients at the downtown safety-net hospital. That was a reasonable and appropriate objective. HealthPark, located in south Lee County ZIP code 33908, to the south and a little to the west of Lee Memorial, now operates 368 licensed beds--320 general acute care and 48 neonatal intensive care beds. HealthPark’s specialty programs and services include cardiac care, open heart surgery, and urology. HealthPark is a designated STEMI3/ (heart attack) center, a destination to which EMS providers generally seek to transport heart attack patients, bypassing any closer hospital lacking STEMI center designation. HealthPark also concentrates in specialty women’s and children’s services, offering obstetrics, neonatal intensive care, perinatal intensive care, and pediatrics. HealthPark is a state-designated children’s cancer center. HealthPark’s open heart surgery, neonatal and perinatal intensive care, and pediatric oncology services are all tertiary health services. In 1996, LMHS acquired its third hospital, Cape Coral Medical Center (Cape Coral), from another entity.4/ The acquisition of Cape Coral was another step in furtherance of the strategy to improve LMHS’s overall payer mix by establishing hospitals in affluent areas. Cape Coral is located in northwest Lee County, and is licensed to operate 291 general acute care beds. Cape Coral’s specialty concentrations include obstetrics, orthopedics, gastroenterology, urology, and stroke treatment. Cape Coral recently achieved primary stroke center designation, making it an appropriate destination for EMS transport of stroke patients, according to Lee County EMS transport guidelines. The newest LMHS hospital, built in 2007-2008 and opened in 2009, is Gulf Coast Medical Center (Gulf Coast) in south Lee County ZIP code 33912.5/ With 349 licensed beds, Gulf Coast offers tertiary services including kidney transplantation and open heart surgery, and specialty services including obstetrics, stroke treatment, surgical oncology, and neurology. Gulf Coast is both a designated primary stroke center and a STEMI center. NCH NCH is a not-for-profit system operating two hospital facilities with a combined 715 licensed beds in Collier County, directly to the south of Lee County. Naples Community Hospital (Naples Community) is in downtown Naples. NCH North Naples Hospital Campus (North Naples) is located in the northernmost part of Collier County, near the Collier-Lee County line.6/ The Petitioner in this case is NCH doing business as North Naples. North Naples is licensed to operate 262 acute care beds. It provides an array of acute care hospital services, specialty services including obstetrics and pediatrics, and tertiary health services including neonatal intensive care and CMR. AHCA AHCA is the state health planning agency charged with administering the CON program pursuant to the Health Facility and Services Development Act, sections 408.031-408.0455, Florida Statutes (2013).7/ AHCA is responsible for the coordinated planning of health care services in the state. To carry out its responsibilities for health planning and CON determinations, AHCA maintains a comprehensive health care database, with information that health care facilities are required to submit, such as utilization data. See § 408.033(3), Fla. Stat. AHCA conducts its health planning and CON review based on “health planning service district[s]” defined by statute. See § 408.032(5), Fla. Stat. Relevant in this case is district 8, which includes Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry, and Collier Counties. Additionally, by rule, AHCA has adopted acute care sub-districts, originally utilized in conjunction with an acute care bed need methodology codified as Florida Administrative Code Rule 59C-1.038. The acute care bed need rule was repealed in 2005, following the deregulation of acute care beds from CON review. However, AHCA has maintained its acute care sub-district rule, in which Lee County is designated sub-district 8-5. Fla. Admin. Code R. 59C-2.100(3)(h)5. The Proposed Project LMHS proposes to establish a new 80-bed general hospital on the southeast corner of U.S. Highway 41 and Coconut Road in Bonita Springs (ZIP code 34135),8/ in south Lee County. The CON application described the hospital services to be offered at the proposed new hospital in only the most general fashion--medical- surgical services, emergency services, intensive care, and telemetry services. Also planned for the proposed hospital are outpatient care, community education, and chronic care management --all non-hospital, non-CON-regulated services. At hearing, LMHS did not elaborate on the planned hospital services for the proposed new facility. Instead, no firm decisions have been made by the health system regarding what types of services will be offered at the new hospital. The proposed site consists of three contiguous parcels, totaling approximately 31 acres. LMHS purchased a 21-acre parcel in 2004, with a view to building a hospital there someday. LMHS later added to its holdings when additional parcels became available. At present, the site’s development of regional impact (DRI) development order does not permit a hospital, but would allow the establishment of a freestanding emergency department. The proposed hospital site is adjacent to the Bonita Community Health Center (BCHC). Jointly owned by LMHS and NCH, BCHC is a substantial health care complex described by LMHS President James Nathan as a “hospital without walls.” This 100,000 square-foot complex includes an urgent care center, ambulatory surgery center, and physicians’ offices. A wide variety of outpatient health care services are provided within the BCHC complex, including radiology/diagnostic imaging, endoscopy, rehabilitation, pain management, and lab services. Although LMHS purchased the adjacent parcels with the intent of establishing a hospital there someday, representatives of LMHS expressed their doubt that “someday” has arrived; they have candidly admitted that this application may be premature. CON Application Filing LMHS did not intend to file a CON application when it did, in the first hospital-project review cycle of 2013. LMHS did not file a letter of intent (LOI) by the initial LOI deadline to signify its intent to file a CON application. However, LMHS’s only Lee County hospital competitor, HMA, filed an LOI on the deadline day. LMHS learned that the project planned by HMA was to replace Lehigh Regional with a new hospital, which would be relocated to south Lee County, a little to the north of the Estero/Bonita Springs area. LMHS was concerned that if the HMA application went forward and was approved, that project would block LMHS’s ability to pursue a hospital in Bonita Springs for many years to come. Therefore, in reaction to HMA’s LOI, LMHS filed a “grace period” LOI, authorized under AHCA’s rules, to submit a competing proposal for a new hospital in south Lee County. But for the HMA LOI, there would have been no grace period for a competing proposal, and LMHS would not have been able to apply when it did. Two weeks later, on the initial application filing deadline, LMHS submitted a “shell” application. LMHS proceeded to quickly prepare the bulk of its application to file five weeks later by the omissions response deadline of April 10, 2013. Shortly before the omissions response deadline, Mr. Nathan met with Jeffrey Gregg, who is in charge of the CON program as director of AHCA’s Florida Center for Health Information and Policy Analysis, and Elizabeth Dudek, AHCA Secretary, to discuss the LMHS application. Mr. Nathan told the AHCA representatives that LMHS was not really ready to file a CON application, but felt cornered and forced into it to respond to the HMA proposal. Mr. Nathan also discussed with AHCA representatives the plan to transfer 80 beds from Lee Memorial, but AHCA told Mr. Nathan not to make such a proposal. Since beds are no longer subject to CON regulation, hospitals are free to add or delicense beds as they deem appropriate, and therefore, an offer to delicense beds adds nothing to a CON proposal. LMHS’s CON application was timely filed on the omissions deadline. A major focus of the application was on why LMHS’s proposal was better than the expected competing HMA proposal. However, HMA did not follow through on its LOI by filing a competing CON application. The LMHS CON application met the technical content requirements for a general hospital CON application, including an assessment of need for the proposed project. LMHS highlighted the following themes to show need for its proposed new hospital: South Lee County “should have its own acute care hospital” because it is a fast-growing area with an older population; by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population. The Estero/Bonita Springs community strongly supports the proposed new hospital. Approval of the proposed new hospital “will significantly reduce travel times for the service area’s residents and will thereby significantly improve access to acute care services,” as shown by estimated travel times to local hospitals for residents in the proposed primary service area and by Lee County EMS transport logs. LMHS will agree to a CON condition to delicense 80 beds at Lee Memorial, which are underutilized, so that there will be no net addition of acute care beds to the sub-district’s licensed bed complement. AHCA’s Preliminary Review and Denial AHCA conducted its preliminary review of the CON application in accordance with its standard procedures. As part of the preliminary review process for general hospital applications, the CON law now permits existing health care facilities whose established programs may be substantially affected by a proposed project to submit a detailed statement in opposition. Indeed, such a detailed statement is a condition precedent to the existing provider being allowed to participate as a party in any subsequent administrative proceedings conducted with respect to the CON application. See § 408.037(2), Fla. Stat. North Naples timely filed a detailed statement in opposition to LMHS’s proposed new hospital. LMHS timely filed a response to North Naples’ opposition submittal, pursuant to the same law. After considering the CON application, the North Naples opposition submittal, and the LMHS response, AHCA prepared its SAAR in accordance with its standard procedures. A first draft of the SAAR was prepared by the CON reviewer; the primary editor of the SAAR was AHCA CON unit manager James McLemore; and then a second edit was done by Mr. Gregg. Before the SAAR was finalized, Mr. Gregg met with the AHCA Secretary to discuss the proposed decision. The SAAR sets forth AHCA’s preliminary findings and preliminary decision to deny the LMHS application. Mr. Gregg testified at hearing as AHCA’s representative, as well as in his capacity as an expert in health planning and CON review. Through Mr. Gregg’s testimony, AHCA reaffirmed its position in opposition to the LMHS application, and Mr. Gregg offered his opinions to support that position. Statutory and Rule Review Criteria The framework for consideration of LMHS’s proposed project is dictated by the statutory and rule criteria that apply to general hospital CON applications. The applicable statutory review criteria, as amended in 2008 for general hospital CON applications, are as follows: The need for the health care facilities and health services being proposed. The availability, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant. * * * (e) The extent to which the proposed services will enhance access to health care for residents of the service district. * * * (g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness. * * * (i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent. § 408.035(1), Fla. Stat.; § 408.035(2), Fla. Stat. (identifying review criteria that apply to general hospital applications). AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. In the absence of a numeric need methodology promulgated by AHCA for the project at issue, Florida Administrative Code Rule 59C-1.008(2)(e) applies. This rule provides that the applicant is 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 and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Florida Administrative Code Rule 59C-1.030 also applies. This rule elaborates on “health care access criteria” to be considered in reviewing CON applications, with a focus on the needs of medically underserved groups such as low income persons. LMHS’s Needs Assessment LMHS set forth its assessment of need for the proposed new hospital, highlighting the population demographics of the area proposed to be served. Theme: South Lee County’s substantial population The main theme of LMHS’s need argument is that south Lee County “should have its own acute care hospital” because it is a fast-growing area with a substantial and older population. (LMHS Exh. 3, p. 37). LMHS asserts that south Lee County’s population is sufficient to demonstrate the need for a new hospital because “by 2018, the southern ZIP codes of Lee County will contain nearly a third of the county’s total population.” Id. LMHS identified eight ZIP codes--33908, 33912, 33913, 33928, 33931, 33967, 34134, and 34135--that constitute “south Lee County.” (LMHS Exh. 3, Table 4). Claritas population projections, reasonably relied on by the applicant, project that by 2018 these eight ZIP codes will have a total population of 200,492 persons, approximately 29 percent of the projected population of 687,795 for all of Lee County. The age 65-and-older population in south Lee County is projected to be 75,150, approximately 40 percent of the projected 65+ population of 185,655 for all of Lee County. A glaring flaw in LMHS’s primary need theme is that the eight-ZIP-code “south Lee County” identified by LMHS is not without its own hospital. That area already has two of the county’s five existing hospitals: Gulf Coast and HealthPark. In advancing its need argument, LMHS selectively uses different meanings of “south Lee County.” When describing the “south Lee County” that deserves a hospital of its own, LMHS means the local Estero/Bonita Springs community in and immediately surrounding the proposed hospital site in the southernmost part of south Lee County. However, when offering up a sufficient population to demonstrate need for a new hospital, “south Lee County” expands to encompass an area that appears to be half, if not more, of the entire county. The total population of the Estero/Bonita Springs community is 76,753, projected to grow to 83,517 by 2018--much more modest population numbers compared to those highlighted by the applicant for the expanded version of south Lee County. While the rate of growth for Estero/Bonita Springs is indeed fast compared to the state and county growth rates, this observation is misleading because the actual numbers are not large. LMHS also emphasizes the larger proportion of elderly in the Estero/Bonita Springs community, which is also expected to continue to grow at a fast clip. Although no specifics were offered, it is accepted as a generic proposition that elderly persons are more frequent consumers of acute care hospital services. By the same token, elderly persons who require hospitalization tend to be sicker, and to present greater risks of potential complications from comorbidities, than non-elderly patients. As a result, for example, as discussed below, Lee County EMS’s emergency transport guidelines steer certain elderly patients to hospitals with greater breadth of services than the very basic hospital planned by LMHS, “as a reasonable precaution.” Projections of a Well-Utilized Proposed Hospital Mr. Davidson, LMHS’s health planning consultant, was provided with the proposed hospital’s location and number of beds, and was asked to develop the need assessment and projections. No evidence was offered regarding who determined that the proposed hospital should have 80 beds, or how that determination was made. Mr. Davidson set about to define the proposed primary and secondary service areas, keeping in mind that section 408.037(2) now requires a general hospital CON application to specifically identify, by ZIP codes, the primary service area from which the proposed hospital is expected to receive 75 percent of its patients, and the secondary service area from which 25 percent of the hospital’s patients are expected. Mr. Davidson selected six ZIP codes for the primary service area. He included the three ZIP codes comprising the Estero/Bonita Springs community. He also included two ZIP codes that are closer to existing hospitals than to the proposed site, according to the drive-time information he compiled. In addition, he included one ZIP code in which there is already a hospital (Gulf Coast, in 33912). Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, primary service area was not persuasive;9/ the criticisms by the other expert health planning witnesses were more persuasive and are credited. Mr. Davidson selected six more ZIP codes for the secondary service area. These include: two south Lee County ZIP codes that are HealthPark’s home ZIP code (33908) and a ZIP code to the west of HealthPark (33931); three central Lee County ZIP codes to the north of HealthPark and Gulf Coast; and one Collier County ZIP code that is North Naples’ home ZIP code. Mr. Davidson’s opinion that this was a reasonable, and not overly aggressive, secondary service area was not persuasive; the criticisms by the other expert health planning witnesses were more persuasive and are credited. As noted above, the existing LMHS hospitals provide tertiary-level care and a number of specialty service lines and designations that have not been planned for the proposed new hospital. Conversely, there are no services proposed for the new hospital that are not already provided by the existing LMHS hospitals. In the absence of evidence that the proposed new hospital will offer services not available at closer hospitals, it is not reasonable to project that any appreciable numbers of patients will travel farther, and in some instances, bypass one or more larger existing hospitals with greater breadth of services, to obtain the same services at the substantially smaller proposed new hospital. As aptly observed by AHCA’s representative, Mr. Gregg, the evidence to justify such an ambitious service area for a small hospital providing basic services was lacking: So if we were to have been given more detail[:] here’s the way we’re going to fit this into our system, here’s -- you know, here’s why we can design this service area as big as we did, even though it would require a lot of people to drive right by HealthPark or right by Gulf Coast to go to this tiny basic hospital for some reason. I mean, there are fundamental basics about this that just make us scratch our head. (Tr. 1457). The next step after defining the service area was to develop utilization projections, based on historic utilization data for service area residents who obtained the types of services to be offered by the proposed hospital. In this case, the utilization projections suffer from a planning void. Mr. Nathan testified that no decisions have been made regarding what types of services, other than general medical- surgical services, will be provided at the proposed new hospital. In lieu of information regarding the service lines actually planned for the proposed hospital, Mr. Davidson used a subtractive process, eliminating “15 or so” service lines that the proposed hospital either “absolutely wasn’t going to provide,” or that, in his judgment, a small hospital of this type would not provide. The service lines he excluded were: open heart surgery; trauma; neonatal intensive care; inpatient psychiatric, rehabilitation, and substance abuse; and unnamed “others.” His objective was to “narrow the scope of available admissions down to those that a smaller hospital could reasonably aspire to care for.” (Tr. 671-672). That objective is different from identifying the types of services expected because they have been planned for this particular proposed hospital. The testimony of NCH’s health planner, as well as Mr. Gregg, was persuasive on the point that Mr. Davidson’s approach was over-inclusive. The historic data he used included a number of service lines that are not planned for the proposed hospital and, thus, should have been subtracted from the historic utilization base. These include clinical specialties that are the focus of other LMHS hospitals, such as infectious diseases, neurology, neurosurgery, orthopedics, and urology; cardiac care, such as cardiac catheterization and angioplasty that are not planned for the proposed hospital; emergency stroke cases that will be directed to designated stroke centers; pediatric cases that will be referred to HealthPark; and obstetrics, which is not contemplated for the proposed hospital according to the more credible evidence.10/ Mr. Davidson’s market share projections suffer from some of the same flaws as the service area projections: there is no credible evidence to support the assumption that the small proposed new hospital, which has planned to offer only the most basic hospital services, will garner substantial market shares in ZIP codes that are closer to larger existing hospitals providing a greater breadth of services. In addition, variations in market share projections by ZIP code raise questions that were not adequately explained.11/ Overall, the “high-level” theme offered by LMHS’s health planner--that it is unnecessary to know what types of services will be provided at the new hospital in order to reasonably project utilization and market share--was not persuasive. While it is possible that utilization of the proposed new hospital would be sufficient to suggest it is filling a need, LMHS did not offer credible evidence that that is so. Bed Need Methodology for Proposed Service Area Mr. Davidson projected bed need for the proposed service area based on the historic utilization by residents of the 12 ZIP codes in the service lines remaining after his subtractive process, described above. Other than using an over-inclusive base (as described above), Mr. Davidson followed a reasonable approach to determine the average daily census generated by the proposed service area residents, and then applying a 75 percent occupancy standard to convert the average daily census into the number of beds supported by that population. The results of this methodology show that utilization generated by residents of the six-ZIP code primary service area would support 163 hospital beds; and utilization generated by residents of the six-ZIP code secondary service area would support 225 beds in the secondary service area. The total gross bed need for the proposed service area adds up to 388 beds. However, the critical next step was missing: subtract from the gross number of needed beds the number of existing beds, to arrive at the net bed need (or surplus). In the primary service area, 163 beds are needed, but there are already 349 beds at Gulf Coast. Thus, in the primary service area, there is a surplus of 186 beds, according to the applicant’s methodology. In the secondary service area, 225 beds are needed, but there are already 320 acute care beds at HealthPark and 262 acute care beds at North Naples. Thus, in the secondary service area, there is a surplus of 357 beds, according to the applicant’s methodology. While it is true that Gulf Coast and HealthPark use some of their beds to provide some tertiary and specialty services that were subtracted out of this methodology, and all three hospitals presumably provide services to residents outside the proposed service area, Mr. Davidson made no attempt to measure these components. Instead, the LMHS bed need methodology ignores completely the fact that there is substantial existing bed capacity--931 acute care beds--within the proposed service area. Availability and Utilization of Existing Hospitals LMHS offered utilization data for the 12-month period ending June 30, 2012, for Lee County hospitals. Cape Coral’s average annual occupancy rate was 57.6 percent; HealthPark’s was 77.5 percent; Lee Memorial’s was 55.9 percent; Lehigh Regional’s was 44 percent; and Gulf Coast’s was 79.8 percent. Mr. Davidson acknowledged that a reasonable occupancy standard to plan for a small hospital the size of the proposed hospital is 75 percent. For a larger operational hospital, 80 percent is a good standard to use, indicating it is well-utilized. Judged by these standards, only HealthPark and Gulf Coast come near the standard for a well-utilized hospital. As noted in the CON application, these annual averages do not reflect the higher utilization during peak season. According to the application, HealthPark’s occupancy was 88.2 percent and Gulf Coast’s was 86.8 percent for the peak quarter of January-March 2012. LMHS did not present utilization information for North Naples, even though that hospital is closest to the proposed hospital site and is within the proposed service area targeted by the applicant. For the same 12-month period used for the LMHS hospitals, North Naples’ average annual occupancy rate was 50.97 percent and for the January-March 2012 “peak season” quarter, North Naples’ occupancy was 60.68 percent. At the final hearing, LMHS did not present more recent utilization data, choosing instead to rely on the older information in the application. Based on the record evidence, need is not demonstrated by reference to the availability and utilization of existing hospitals in the proposed service area or in the sub-district. Community Support LMHS argued that the strong support by the Estero/Bonita Springs community should be viewed as evidence of need for the proposed new hospital. As summarized in the SAAR, approximately 2,200 letters of support were submitted by local government entities and elected officials, community groups, and area residents, voicing their support for the proposed hospital. LMHS chose not to submit these voluminous support letters in the record. The AHCA reviewer noted in the SAAR that none of the support letters documented instances in which residents of the proposed service area needed acute care hospital services but were unable to obtain them, or suffered poor or undesirable health outcomes due to the current availability of hospital services. Two community members testified at the final hearing to repeat the theme of support by Estero/Bonita Springs community residents and groups. These witnesses offered anecdotal testimony about traffic congestion during season, population growth, and development activity they have seen or heard about. They acknowledged the role their community organization has played in advocating for a neighborhood hospital, including developing and disseminating form letters for persons to express their support. Consistent with the AHCA reviewer’s characterization of the support letters, neither witness attested to any experiences needing acute care hospital services that they were unable to obtain, or any experiences in which they had poor or undesirable outcomes due to the currently available hospital services. There was no such evidence offered by any witness at the final hearing. Mr. Gregg characterized the expression of community support by the Estero/Bonita Springs community as typical “for an upper income, kind of retiree-oriented community where, number one, people anticipate needing to use hospitals, and number two, people have more time on their hands to get involved with things like this.” (Tr. 1433). Mr. Gregg described an extreme example of community support for a prior new hospital CON application, in which AHCA received 21,000 letters of support delivered in two chartered buses that were filled with community residents who wanted to meet with AHCA representatives. Mr. Gregg identified the project as the proposed hospital for North Port, which was ultimately denied following an administrative hearing. In the North Port case, the Administrative Law Judge made this apt observation with regard to the probative value of the overwhelming community support offered there: “A community’s desire for a new hospital does not mean there is a ‘need’ for a new hospital. Under the CON program, the determination of need for a new hospital must be based upon sound health planning principles, not the desires of a particular local government or its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04- 3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA April 11, 2006), RO at 26, ¶ 104, adopted in FO. That finding, which was adopted by AHCA in its final order, remains true today, and is adopted herein. Access The statutory review criteria consider access issues from two opposing perspectives: from the perspective of the proposed project, consideration is given to the extent to which the proposal will enhance access to health care services for the applicant’s service district; without the proposed project, consideration is given to the accessibility of existing providers of the health care services proposed by the applicant. Addressing this two-part access inquiry, LMHS contends that the proposed hospital would significantly reduce travel times and significantly enhance access to acute care services. Three kinds of access are routinely considered in CON cases: geographic access, in this case the drive times by individuals to hospitals; emergency access, i.e., the time it takes for emergency ground transport (ambulances) to deliver patients to hospitals; and economic access, i.e., the extent to which hospital services are provided to Medicaid and charity care patients. Geographic Access (drive times to hospitals) For nearly all residents of the applicable service district, district 8, the proposed new hospital was not shown to enhance access to health care at all. The same is true for nearly all residents of sub-district 8-5, Lee County. LMHS was substantially less ambitious in its effort to show access enhancement, limiting its focus on attempting to prove that access to acute care services would be enhanced for residents of the primary service area. LMHS did not attempt to prove that there would be any access enhancement to acute care services for residents of the six-ZIP code secondary service area. As set forth in the CON application, Mr. Davidson used online mapping software to estimate the drive time from each ZIP code in the primary service area to the four existing LMHS hospitals, the two NCH hospitals, and another hospital in north Collier County, Physicians Regional-Pine Ridge. The drive-time information offered by the applicant showed the following: the drive time from ZIP code 33912 was less to three different existing LMHS hospitals than to the proposed new hospital; the drive time from ZIP code 33913 was less to two different existing LMHS hospitals than to the proposed new hospital; and the drive time from ZIP code 33967 was less to one existing LMHS hospital than to the proposed hospital site. Thus, according to LMHS’s own information, drive times would not be reduced at all for three of the six ZIP codes in the primary service area. Not surprisingly, according to LMHS’s information, the three Estero/Bonita Springs ZIP codes are shown to have slightly shorter drive times to the proposed neighborhood hospital than to any existing hospital. However, the same information also suggests that those residents already enjoy very reasonable access of 20-minutes’ drive time or less to one or more existing hospitals: the drive time from ZIP code 33928 is between 14 and 20 minutes to three different existing hospitals; the drive time from ZIP code 34134 is between 18 and 20 minutes to two different existing hospitals; and the drive time from ZIP code 34135 is 19 minutes to one existing hospital. In terms of the extent of drive time enhancement, the LMHS information shows that drive time would be shortened from 14 minutes to seven minutes for ZIP code 33928; from 18 minutes to 12 minutes for ZIP code 34134; and from 19 minutes to 17 minutes for ZIP code 34135. There used to be an access standard codified in the (now-repealed) acute care bed need rule, providing that acute care services should be accessible within a 30-minute drive time under normal conditions to 90 percent of the service area’s population. Mr. Davidson’s opinion is that the former rule’s 30-minute drive time standard remains a reasonable access standard for acute care services. Here, LMHS’s drive time information shows very reasonable access now, meeting an even more rigorous drive-time standard of 20 minutes. The establishment of a new hospital facility will always enhance geographic access by shortening drive times for some residents. For example, if LMHS’s proposed hospital were established, another proposed hospital could demonstrate enhanced access by reducing drive times from seven minutes to four minutes for residents of Estero’s ZIP code 33928. But the question is not whether there is any enhanced access, no matter how insignificant. Instead, the appropriate consideration is the “extent” of enhanced access for residents of the service district or sub-district. Here, the only travel time information offered by LMHS shows nothing more than insignificant reductions of already reasonable travel times for residents of only three of six ZIP codes in the primary service area. The drive-time information offered in the application and at hearing was far from precise, but it was the only evidence offered by the applicant in an attempt to prove its claim that there would be a significant reduction in drive times for residents of the primary service area ZIP codes. No travel time expert or traffic engineer offered his or her expertise to the subject of geographic accessibility in this case. No evidence was presented regarding measured traffic conditions or planned roadway improvements. Anecdotal testimony regarding “congested” roads during “season” was general in nature and insufficient to prove that there is not reasonable access now to basic acute care hospital services for all residents of the proposed service area. The proposed new hospital is not needed to address a geographic access problem. Consideration of the extent of access enhancement does not weigh in favor of the proposed new hospital. Emergency Access LMHS also sought to establish that emergency access via EMS ambulance transport was becoming problematic during the season because of traffic congestion. In its CON application, LMHS offered Lee County EMS transport logs as evidence that ambulance transport times from the Estero/Bonita Springs community to an existing hospital were higher during season than in the off-season months. LMHS represented in its CON application that the voluminous Lee County EMS transport logs show average transport times of over 22 minutes from Bonita Springs to a hospital in March 2012 compared to 15 minutes for June 2012, and average transport times of just under 22 minutes from Estero to a hospital in March 2012 compared to over 17 minutes for June 2012. LMHS suggested that these times were not reasonable because these were all emergency transports at high speeds with flashing lights and sirens. LMHS did not prove the accuracy of this statement. The Lee County EMS ordinance limits the use of sirens and flashing lights to emergency transports, defined to mean transports of patients with life- or limb-threatening conditions. According to Lee County EMS Deputy Chief Panem, 90 to 95 percent of ambulance transports do not involve such conditions. Contrary to the conclusion that LMHS urges should be drawn from the EMS transport logs, the ambulance transport times summarized by LMHS in its application do not demonstrate unreasonable emergency access for residents of Estero/Bonita Springs. The logs do not demonstrate an emergency access problem for the local residents during the season, as contended by LMHS; nor did LMHS offer sufficient evidence to prove that the proposed new hospital would materially improve ambulance transport times. LMHS’s opinion that the ambulance logs show a seasonal emergency access problem for Estero/Bonita Springs residents cannot be credited unless the travel times on the logs reflect patient transports to the nearest hospital, such that establishing a new hospital in Bonita Springs would result in faster ambulance transports for Estero/Bonita Springs residents. Deputy Chief Panem testified that ambulance transport destination is dictated in the first instance by patient choice. In addition, for the “most serious calls,” the destination is dictated by emergency transport guidelines with a matrix identifying the most “appropriate” hospitals to direct patients. For example, as Deputy Chief Panem explained: In the case of a stroke or heart attack, we want them to go to a stroke facility or a heart attack facility[;] or trauma, we have a trauma center in Lee County as well . . . Lee Memorial Hospital downtown is a level II trauma center. (Tr. 378). The emergency transport matrix identifies the hospitals qualified to handle emergency heart attack, stroke, or trauma patients. In addition, the matrix identifies the “most appropriate facility” for emergency pediatrics, obstetrics, pediatric orthopedic emergencies, and other categories involving the “most serious calls.” Of comparable size to the proposed new hospital, 88-bed Lehigh Regional is not identified as an “appropriate facility” to transport patients with any of the serious conditions shown in the matrix. Similar to Lehigh Regional, the slightly smaller proposed new hospital is not expected to be identified as an appropriate facility destination for patients with any of the conditions designated in the Lee County EMS emergency transport matrix. The Lee County EMS transport guidelines clarify that all trauma alert patients “will be” transported to Lee Memorial as the Level II Trauma Center. In addition, the guidelines provide as follows: “Non-trauma alert patients with a high index of suspicion (elderly, etc.) should preferentially be transported to the Trauma Center as a reasonable precaution.” (emphasis added). For the elderly, then, a condition that would not normally be considered one of the most serious cases to be steered to the most appropriate hospital may be reclassified as such, as a reasonable precaution because the patient is elderly. The Lee County EMS transport logs do not reflect the reason for the chosen destination. The patients may have requested transport to distant facilities instead of to the nearest facilities. Patients with the most serious conditions may have accepted the advice of ambulance crews that they should be transported to the “most appropriate facility” with special resources to treat their serious conditions; or those patients may have been unable to express their choice due to the seriousness of their condition, in which case the patients would be taken to the most appropriate facility, bypassing closer facilities. Elderly patients may have been convinced to take the reasonable precaution to go to an appropriate facility even if their condition did not fall into the most serious categories. Since the transport times on the EMS logs do not necessarily reflect transport times to the closest hospital, it is not reasonable to conclude that the transport times would be shorter if there were an even closer hospital, particularly where the closer hospital is not likely to be designated as an appropriate destination in the transport guidelines matrix. The most serious cases, categorized in the EMS transport matrix, are the ones for which minutes matter. For those cases, a new hospital in Estero/Bonita Springs, which has not planned to be a STEMI receiving center, a stroke center, or a trauma center, is not going to enhance access to emergency care, even for the neighborhood residents. The evidence at hearing did not establish that ambulance transport times are excessive or cause an emergency access problem now.12/ In fact, Deputy Chief Panem did not offer the opinion, or offer any evidence to prove, that the drive time for ambulances transporting patients to area hospitals is unreasonable or contrary to any standard for reasonable emergency access. Instead, Lee County EMS recently opposed an application for a certificate of public convenience and necessity by the Bonita Springs Fire District to provide emergency ground transportation to hospitals, because Lee County EMS believed then, and believes now, that it is providing efficient and effective emergency transport services to the Bonita Springs area residents. At hearing, LMHS tried a different approach by attempting to prove an emergency access problem during season, not because of the ambulance drive times, but because of delays at the emergency departments themselves after patients are transported there. The new focus at hearing was on EMS “offload” times, described as the time between ambulance arrival at the hospital and the time the ambulance crews hand over responsibility for a patient to the emergency department staff. According to Deputy Chief Panem, Lee County hospitals rarely go on “bypass,” a status that informs EMS providers not to transport patients to a hospital because additional emergency patients cannot be accommodated. No “bypass” evidence was offered, suggesting that “bypass” status is not a problem in Lee County and that Lee County emergency departments are available to EMS providers. Deputy Chief Panem also confirmed that North Naples does not go on bypass. The North Naples emergency department consistently has been available to receive patients transported by Lee County EMS ambulances, during seasonal and off- season months. Offload times are a function of a variety of factors. Reasons for delays in offloading patients can include inadequate capacity or functionality of the emergency department, or inadequate staffing in the emergency department such that there may be empty treatment bays, but the bays cannot be filled with patients because there is no staff to tend to the patients. Individual instances of offload delays can occur when emergency department personnel prioritize incoming cases, and less-emergent cases might have to wait while more-emergent cases are taken first, even if they arrived later. Offload times are also a function of “throughput” issues. Approximately 20 to 25 percent of emergency department patients require admission to the hospital, but there can be delays in the admission process, causing the patient to be held in a treatment bay that could otherwise be filled by the next emergency patient. There can be many reasons for throughput delays, including the lack of an available acute care bed, or inadequate staffing that prevents available acute care beds from being filled. No evidence was offered to prove the actual causes of any offload delays. Moreover, the evidence failed to establish that offload times were unreasonable or excessive. Deputy Chief Panem offered offload time data summaries that reflect very good performance by LMHS hospitals and by North Naples. Deputy Chief Panem understandably advocates the shortest possible offload time, so that Lee County EMS ambulances are back in service more quickly. Lee County EMS persuaded the LMHS emergency departments to agree to a goal for offload times of 30 minutes or less 90 percent of the time, and that is the goal he tracks. Both Lee Memorial and North Naples have consistently met or exceeded that goal in almost every month over the last five years, including during peak seasonal months. Cape Coral and Gulf Coast sometimes fall below the goal in peak seasonal months, but the evidence did not establish offload times that are excessive or unreasonable during peak months. HealthPark is the one LMHS hospital that appears to consistently fall below Lee County EMS’s offload time goal; in peak seasonal months, HealthPark’s offload times were less than 30 minutes in approximately 70 percent of the cases. No evidence was offered to prove the extent of offload delays at HealthPark for the other 30 percent of emergency cases, nor was evidence offered to prove the extent of offload delays at any other hospital. Deputy Chief Panem referred anecdotally to offload times that can sometimes reach as high as two to three hours during season, but he did not provide specifics. Without documentation of the extent and magnitude of offload delays, it is impossible to conclude that they are unreasonable or excessive. There is no persuasive evidence suggesting that this facet of emergency care would be helped by approval of the proposed new hospital, especially given the complicated array of possible reasons for each case in which there was a delayed offload.13/ Staffing/professional coverage issues likely would be exacerbated by approving another hospital venue for LMHS. Pure physical plant issues, such as emergency department capacity and acute care bed availability, might be helped to some degree, at least in theory, by a new hospital, but to a lesser degree than directly addressing any capacity issues at the existing hospitals. For example, HealthPark’s emergency department has served as a combined destination for a wide array of adult and pediatric emergencies. However, HealthPark is about to break ground on a new on-campus children’s hospital with its own dedicated emergency department. There will be substantially expanded capacity both within the new dedicated pediatric emergency department, and in the existing emergency department, where vacated space used for pediatric patients will be freed up for adults. Beyond the emergency departments themselves, there will be substantial additional acute care bed capacity, with space built to accommodate 160 dedicated pediatric beds in the new children’s hospital. The existing hospital will have the ability to add more than the 80 acute care beds proposed for the new hospital. This additional bed capacity could be in place within roughly the same timeframe projected for opening the proposed new hospital. To the extent additional capacity would improve emergency department performance, Cape Coral is completing an expansion project that increases its treatment bays from 24 to 42, and Lee Memorial is adding nine observation beds to its emergency department. No current expansion projects were identified for Gulf Coast, which just began operations in 2009, but LMHS has already invested in design and construction features to enable that facility to expand by an additional 252 beds. In Mr. Kistel’s words, Gulf Coast has a “tremendous platform for growth[.]” (Tr. 259). Mr. Gregg summarized AHCA’s perspective in considering the applicant’s arguments of geographic and emergency access enhancement, as follows: [I]n our view, this community is already well served by existing hospitals, either within the applicant’s system or from the competing Naples system, and we don’t think that the situation would be improved by adding another very small, extremely basic hospital. And to the extent that that would mislead people into thinking that it’s a full-service hospital that handles time-sensitive emergencies in the way that the larger hospitals do, that’s another concern. (Tr. 1425). * * * The fact that this hospital does not plan to offer those most time-sensitive services means that any – on the surface, as I said earlier, the possible improvement in emergency access offered by any new hospital is at least partially negated in this case because it has been proposed as such a basic hospital, when the more sophisticated services are located not far away. (Tr. 1431). Mr. Gregg’s opinion is reasonable and is credited. Economic Access The Estero/Bonita Springs community is a very affluent area, known for its golf courses and gated communities. As a result of the demographics of the proposed hospital’s projected service area, LMHS’s application offers to accept as a CON condition a commitment to provide 10 percent of the total annual patient days to a combination of Medicaid, charity, and self-pay patients. This commitment is less than the 2011-2012 experience for the primary service area, where patient days attributable to residents in these three payer classes was a combined 16.3 percent; and the commitment is less than the 2011- 2012 experience for the total proposed service area, where patient days in these three categories was a combined 14.4 percent. Nonetheless, LMHS’s experts reasonably explained that the commitment was established on the low side, taking into account the uncertainties of changes in the health care environment, to ensure that the commitment could be achieved. In contrast with the 10 percent commitment and the historic level of Medicaid/charity/self-pay patient days in the proposed service area, Lee Memorial historically has provided the highest combined level of Medicaid and charity patient days in district 8. According to LMHS’s financial expert, in 2012, Lee Memorial downtown and HealthPark, combined for reporting purposes under the same license, provided 31.5 percent of their patient days to Medicaid and charity patients--a percentage that would be even higher, it is safe to assume, if patient days in the “self- pay/other” payer category were added. At hearing, Mr. Gregg reasonably expressed concern with LMHS shifting its resources from the low-income downtown area where there is great need for economic access to a very affluent area where comparable levels of service to the medically needy would be impossible to achieve. Mr. Gregg acknowledged that AHCA has approved proposals in the past that help systems with safety-net hospitals achieve balance by moving some of the safety net’s resources to an affluent area. As previously noted, that sort of rationale was at play in the LMHS project to establish HealthPark, and again in the acquisitions of Cape Coral and Gulf Coast. However, LMHS now has three of its four hospitals thriving in relatively affluent areas. To move more LMHS resources from the downtown safety-net hospital to another affluent area would not be a move towards system balance, but rather, system imbalance, and would be contrary to the economic access CON review criteria in statute and rule. Missing Needs Assessment Factor: Medical Treatment Trends The consistent testimony of all witnesses with expertise to address this subject was that the trend in medical treatment continues to be in the direction of outpatient care in lieu of inpatient hospital care. The expected result will be that inpatient hospital usage will narrow to the most highly specialized services provided to patients with more serious conditions requiring more complex, specialized treatments. Mr. Gregg described this trend as follows: “[O]nly those services that are very expensive, operated by very extensive personnel” will be offered to inpatients in the future. (Tr. 1412). A basic acute care hospital without planned specialty or tertiary services is inconsistent with the type of hospital dictated by this medical treatment trend. Mr. Gregg reasonably opined that “the ability of a hospital system to sprinkle about small little satellite facilities is drawing to a close.” (Tr. 1413). Small hospitals will no longer be able to add specialized and tertiary services, because these will be concentrated in fewer hospitals. LMHS’s move to clinical specialization at its hospitals bears this out. Another trend expected to impact services within the timeframe at issue is the development of telemedicine as an alternative to inpatient hospital care. For patients who cannot be treated in an outpatient setting and released, an option will be for patients to recover at home in their own beds, with close monitoring options such as visual monitoring by video linking the patient with medical professionals, and use of devices to constantly measure and report vital signs monitored by a practitioner at a remote location. Telemedicine offers advantages over inpatient hospitalization with regard to infection control and patient comfort, as well as overall health care cost control by reducing the need for capital-intensive traditional bricks-and- mortar hospitals. A medical treatment trend being actively pursued by both LMHS and NCH is for better, more efficient management of inpatient care so as to reduce the average length of patient stays. A ten-year master planning process recently undertaken by LMHS included a goal to further reduce average lengths of stay by 0.65 days by 2021, and thereby reduce the number of hospital beds needed system-wide by 128 beds. LMHS did not address the subject of medical treatment trends as part of its needs assessment. The persuasive evidence demonstrated that medical treatment trends do not support the need for the proposed new facility; consideration of these trends weighs against approval. Competition; Market Conditions The proposed new hospital will not foster competition; it will diminish competition by expanding LMHS’s market dominance of acute care services in Lee County. AHCA voiced its reasonable concerns about Lee Memorial’s “unprecedented” market dominance of acute care services in a county as large as Lee, which recently ranked as the eighth most populous county in Florida. LMHS already provides a majority of hospital care being obtained by residents of the primary service area. LMHS will increase its market share if the proposed new hospital is approved. This increase will come both directly, via basic medical-surgical services provided to patients at the new hospital, and indirectly, via LMHS’s plan for the proposed new hospital to serve as a feeder system to direct patients to other LMHS hospitals for more specialized care.14/ The evidence did not establish that LMHS historically has used its market power as leverage to demand higher charges from private insurers. However, as LMHS’s financial expert acknowledged, the health care environment is undergoing changes, making the past less predictive of the future. The changing environment was cited as the reason for LMHS’s low commitment to Medicaid and charity care for the proposed project. There is evidence of LMHS’s market power in its high operating margin, more than six percent higher than NCH’s operating margin between 2009 and 2012. LMHS’s financial expert’s opinion that total margin should be considered instead of operating margin when looking at market power was not persuasive. Of concern is the market power in the field of hospital operations, making operating margin the appropriate measure. Overall, Mr. Gregg reasonably explained the lack of competitive benefit from the proposed project: I think that this proposal does less for competition than virtually any acute care hospital proposal that we’ve seen. As I said, it led the Agency to somewhat scratch [its] head in disbelief. There is no other situation like it. . . . This is the most basic of satellites. This hospital will be referring patients to the rest of the Lee Memorial system in diverse abundance because they are not going to be able to offer specialized services. And economies of scale are not going to allow it in the future. People will not be able to duplicate the expensive services that hospitals offer. So we do not see this as enhancing competition in any way at all. (Tr. 1416-1417). The proposed hospital’s inclusion of outpatient services, community education, and chronic care management presents an awkward dimension of direct competition with adjacent BCHC, the joint venture between LMHS and NCH. BCHC has been a money-losing proposition in a direct sense, but both systems remain committed to the venture, in part because of the indirect benefit they now share in the form of referrals of patients to both systems’ hospitals. Duplication of BCHC’s services, which are already struggling financially, would not appear to be beneficial competition. While this is not a significant factor, to the extent LMHS makes a point of the non-hospital outpatient services that will be available at the proposed new hospital, it must be noted that that dimension of the project does nothing to enhance beneficial competition. Adverse Impact NCH would suffer a substantial adverse financial impact caused by the establishment of the proposed hospital, if approved. A large part of the adverse financial impact would be attributable to lost patient volume at North Naples, an established hospital which is not well-utilized now, without a new hospital targeting residents of North Naples’ home zip code. The expected adverse financial impact of the proposed new hospital was reasonably estimated to be $6.4 million annually. Just as LMHS cited concerns about the unpredictability of the health care environment as a reason to lower its Medicaid/charity commitment for the proposed project, NCH has concerns with whether the substantial adverse impact from the proposed hospital will do serious harm to NCH’s viability, when added to the uncertain impacts of the Affordable Care Act, sequestration, Medicaid reimbursement, and other changes. LMHS counters with the view that if the proposed hospital is approved, in time population growth will offset the proposed hospital’s adverse impact. While consideration of medical treatment trends may dictate that an increasing amount of future population growth will be treated in settings other than a traditional hospital, Mr. Gregg opined that over time, the area’s population growth will still tend to drive hospital usage up. However, future hospital usage will be by a narrower class of more complex patients. Considering all of the competing factors established in this record, the likely adverse impact that NCH would experience if the proposed hospital is established, though substantial enough to support the standing of Petitioner North Naples, is not viewed as extreme enough to pose a threat to NCH’s viability. Institution/System-Specific Interests LMHS’s proposed condition to transfer 80 beds from Lee Memorial downtown is not a factor weighing in favor of approval of its proposed hospital. At hearing, LMHS defended the proposed CON condition as a helpful way to allow LMHS to address facility challenges at Lee Memorial. The evidence showed that to some extent, this issue is overstated in that, by all accounts, Lee Memorial provides excellent, award-winning care that meets all credentialing requirements for full accreditation. The evidence also suggested that to some extent, there are serious system issues facing LMHS that will need to be confronted at some point to answer the unanswered question posed by Mr. Gregg: What will become of Lee Memorial? Recognizing this, LMHS began a ten-year master planning process in 2011, to take a look at LMHS’s four hospitals in the context of the needs of Lee County over a ten-year horizon, and determine how LMHS could meet those needs. A team of outside and in-house experts were involved in the ten-year master planning process. LMHS’s strategic planning team looked at projected volumes and population information for all of Lee County over the next ten years and determined the number of beds needed to address projected needs. Recommendations were then developed regarding how LMHS would meet the needs identified for Lee County through 2021 by rearranging, adding, and subtracting beds among the four existing hospital campuses. A cornerstone of the master plan assessment by numerous outside experts and LMHS experts was that Lee Memorial’s existing physical plant was approaching the end of its useful life. Options considered were: replace the hospital building on the existing campus; downsize the hospital and relocate some of the beds and services to Gulf Coast; and the favored option, discontinue operations of Lee Memorial as an acute care hospital, removing all acute care beds and reestablishing those beds and services primarily at the Gulf Coast campus, with some beds possibly placed at Cape Coral. All of these options addressed the projected needs for Lee County through 2021 within the existing expansion capabilities of Gulf Coast and Cape Coral, and the expansion capabilities that HealthPark will have with the addition of its new on-campus children’s hospital. Somewhat confusingly, the CON application referred several times to LMHS’s “ten-year master plan for our long-term facility needs, which considers the changing geographic population trends of our region, the need for additional capacity during the seasonal months, and facility challenges at Lee Memorial[.]” (LMHS Exh. 3, pp. 12, 57). The implication given by these references was that the new hospital project was being proposed in furtherance of the ten-year master plan, as the product of careful, studied consideration in a long-range planning process to address the future needs of Lee County. To the contrary, although the referenced ten-year master plan process was, indeed, a long- range deliberative planning process to assess and plan for the future needs of Lee County, the ten-year master plan did not contemplate the proposed new hospital as a way to meet the needs in Lee County identified through 2021.15/ The ten-year master planning process was halted because of concerns about the options identified for Lee Memorial. Further investigation was to be undertaken for Lee Memorial and what services needed to be maintained there. No evidence was presented to suggest that this investigation had taken place as of the final hearing. The proposed CON condition to transfer 80 beds from Lee Memorial does nothing to address the big picture issues that LMHS faces regarding the Lee Memorial campus. According to different LMHS witnesses, either some or nearly all of those licensed beds are not operational or available to be put in service, so the license is meaningless and delicensing them would accomplish nothing. To the extent any of those beds are operational, delicensing them might cause Lee Memorial to suddenly have throughput problems and drop below the EMS offload time goal, when it has been one of the system’s best performers. The proposed piecemeal dismantling of Lee Memorial, without a plan to address the bigger picture, reasonably causes AHCA great concern. As Mr. Gregg explained, “[I]t raises a fundamental concern for us, in that the area around Lee Memorial, the area of downtown Fort Myers is the lower income area of Lee County. The area around the proposed facility, Estero, Bonita, is one of the upper income areas of Lee County.” (Tr. 1410). The plan to shift resources away from downtown caused Mr. Gregg to pose the unanswered question: “[W]hat is to become of Lee Memorial?” Id. Recognizing the physical plant challenges faced there, nonetheless AHCA was left to ask, “[W]hat about that population and how does [the proposed new hospital] relate? How does this proposed facility fit into the multihospital system that might exist in the future?” (Tr. 1410-1411). These are not only reasonable, unanswered questions, they are the same questions left hanging when LMHS interrupted the ten-year master planning process to react to HMA’s LOI with the CON application at issue here. Balanced Review of Pertinent Criteria In AHCA’s initial review, when it came time to weigh and balance the pertinent criteria, “It was difficult for us to come up with the positive about this proposal.” (Tr. 1432). In this case, AHCA’s initial review assessment was borne out by the evidence at hearing. The undersigned must agree with AHCA that the balance of factors weighs heavily, if not entirely, against approval of the application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue a Final Order denying CON application no. 10185. DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.
The Issue The issues in these cases are whether Certificate of Need (CON) Application No. 10432 filed by East Florida-DMC, Inc. (DMC), to build an 80-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, or CON Application No. 10433 filed by The Public Health Trust of Miami-Dade County, Florida d/b/a Jackson Hospital West (JW), to build a 100-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, on balance, satisfy the applicable criteria; and, if so, whether either or both should be approved.
Findings Of Fact Based upon the parties’ stipulations, the demeanor and credibility of the witnesses, other evidence presented at the final hearing, and on the entire record of this proceeding, the following Findings of Fact are made: The Parties The Public Health Trust of Miami-Dade County d/b/a Jackson Hospital West and Jackson Health System (JHS) JHS is a taxpayer-funded health system located in and owned by Miami-Dade County. It is governed by The Public Health Trust of Miami Dade-County, Florida (PHT), a seven-member board. JHS owns and operates three acute care hospitals in Miami-Dade County--Jackson Memorial Hospital (JMH); Jackson North Medical Center (JN); and Jackson South Medical Center (JS)--as well as three specialty hospitals: Holtz Children’s Hospital (Holtz); Jackson Rehabilitation Hospital; and Jackson Behavioral Health Hospital. JHS also owns and operates numerous other non- hospital healthcare facilities within Miami-Dade County. JHS’s applicant in this proceeding is JW which, if approved, will be another acute care hospital in JHS. JHS is an academic teaching institution, and the University of Miami (UM) is JHS’s affiliated medical school. Over 1,000 UM residents staff JMH pursuant to an operating agreement with JHS. JN and JS are not academic medical centers. JHS annually receives sales tax and ad valorem tax revenues from Miami-Dade County in order to help fund its operations. JS and JN are community hospitals operated as part of JHS. JS was acquired in 2001. JS is licensed for 226 beds and is also home to a verified Level II trauma center. The JN facility was acquired by JHS in 2006. The facility is licensed for 382 beds. East Florida (DMC) DMC is an affiliate of HCA Healthcare, Inc. (HCA), the largest provider of acute care hospital services in the world. DMC will operate within HCA’s East Florida Division (EFD), which is comprised of 15 hospitals, 12 surgery centers, two diagnostic imaging centers, four freestanding emergency departments, nine behavioral health facilities, and one regional laboratory, along with other related services. There are three HCA-affiliated hospitals in Miami-Dade County: KRMC; Aventura Hospital and Medical Center (Aventura); and Mercy Hospital, a campus of Plantation General Hospital (Mercy). Kendall Regional (KRMC) KRMC, which is located at the intersection of the Florida Turnpike and Southwest 40th Street in Miami-Dade County, is a 417-bed tertiary provider comprised of 380 acute care beds, 23 inpatient adult psychiatric beds, eight Level II neonatal intensive care unit (NICU) beds, and five Level III NICU beds. It is a Baker Act receiving facility. KRMC is a verified Level I trauma center. It also has a burn program. KRMC is also an academic teaching facility, receiving freestanding institutional accreditation from the Accrediting Council for Graduate Medical Education (ACGME) in 2013. KRMC currently has six residency programs including, among others, surgery, internal medicine, podiatry, anesthesia, and surgical critical care. Its teaching programs are affiliated with the University of South Florida, Nova Southeastern University, and Florida International University. KRMC also participates in scholarly and clinical research. In 2017, KRMC had over 82,000 Emergency Department (ED) visits. It treated over 115,000 total inpatients and outpatients that year. There are 850 physicians on KRMC’s medical staff. It offers a full range of medical surgery services, interventional procedures, obstetrics (OB), pediatric, and neonatal care, among many other service lines. KRMC primarily serves southern and western portions of Miami-Dade County but also receives referrals from the Florida Keys up through Broward County, Palm Beach County, and the Treasure Coast. Its main competitors include, but are not limited to: Baptist Hospital; Baptist West; South Miami Hospital; PGH; Hialeah; CGH; JS, and Palm Springs General Hospital. The Tenet Hospitals PGH, Hialeah, and CGH are wholly-owned subsidiaries of Tenet South Florida. These are all for-profit hospitals. PGH is a 368-bed tertiary facility that opened in the early 1970s. It has 297 licensed acute care beds, 48 adult psychiatric beds, 52 ICU beds, and 15 Level II NICU beds. It is located at the Palmetto Expressway and Northwest 122nd Street in Hialeah, Florida. The hospital employs about 1,700 people and has over 600 physicians on its medical staff. PGH is a tertiary-level facility offering a variety of specialty services, including adult open heart surgery, a comprehensive stroke center, and robotic surgery. It has inpatient mental health beds and serves the community as a Baker Act receiving facility. It also offers OB and Level II NICU services with approximately 1,500 births a year. It has approximately 70,000 ED visits and between 17,000 and 18,000 inpatient admissions per year. In addition to its licensed inpatient beds, PGH operates 31 observation beds. PGH is ACGME accredited and serves a significant teaching function in the community. It has approximately 89 residents and fellows. The hospital provides fellowships in cardiology, critical care and interventional cardiology, and also has rotations in neurology and gastroenterology. Residents from Larkin General Hospital also rotate through PGH. PGH generally serves the communities of Opa Locka, Hialeah, Miami Lakes, Hialeah Gardens, Doral, and Miami Springs. In reality, all of the hospitals in the county are competitors, but more direct competition comes from Palm Springs Hospital, Memorial in Miramar, Mount Sinai, Kendall, and even its sister hospital, Hialeah. Hialeah first opened in 1951 and is a 378-bed acute care facility. It has 356 acute care beds, 12 adult psychiatric beds, and 10 Level II NICU beds. The ED has 25 beds and about 40,000 visits per year. It has approximately 14,000 inpatient admissions and 1,400 babies delivered annually. It offers services including cardiac, stroke, robotic surgery, colorectal surgery, and OB services. The hospital has a Level II NICU with 12 beds. CGH is located in the City of Coral Gables and is near the border between Coral Gables and the City of Miami on Douglas Road. It first opened in 1926. Portions of the original structure are still in use. CGH has 245 licensed beds, over 725 employees, 367 physicians, and over 100 additional allied providers on its medical staff. The hospital has a full-service ED. Its service lines include general surgery, geriatrics, urology, treatment of cardiovascular and pulmonary disease, and others. The hospital has eight operating rooms and offers robotic surgery. The ED has 28 beds divided into the main area and a geriatric emergency room. It had about 25,000 ED visits last year, which is lower than prior years, due in part to the presence of over a dozen nearby urgent care centers. CGH has over 8,500 inpatient admissions per year and is not at capacity. While patient days have grown slightly, the average occupancy is still just a little over 40%, meaning, on average, it has over 140 empty inpatient beds on any given day. The hospital is licensed for 245 beds, but typically there are only 180 beds immediately available for use. Agency for Healthcare Administration (AHCA) AHCA is the state health-planning agency charged with administration of the CON program as set forth in sections 408.31-408.0455, Florida Statutes. The Proposals Doral Medical Center (DMC) DMC proposes to build an 80-bed community hospital situated within the residential district of Doral. The hospital will be located in southwestern Doral in zip code 33126 and will serve the growing population of Doral, along with residential areas to the north and south of Doral. The hospital will be located in the City of Doral’s residential district on Northwest 41st Street between Northwest 109th Avenue to the east, and Northwest 112th Avenue to the west. Doral has seen significant growth in the past 15 years and has been consistently included on the list of the fastest growing cities in Florida. The new facility will have a bed complement of 80 licensed acute care beds, including 72 medical/surgical and eight OB beds. The proposed acute care hospital will be fully accredited by the Joint Commission for the Accreditation of Healthcare Facilities and licensed by the State of Florida. No public funds will be utilized in construction of the hospital and it will contribute to the state, county, and municipal tax base as a proprietary corporation. DMC will offer a full range of non-tertiary services, including emergency services, imaging, surgery, intensive care, cardiac catheterization, and women's services, including an OB unit, and pediatric care. DMC will be a general medical facility that will include a general medical component and a surgery component. Although DMC will operate an OB unit, NICU services will not be offered at DMC. If DMC’s patients need more advanced services, including NICU, the EFD hopes they will receive them from KRMC. The open medical staff will be largely community-based, but University of Miami physicians would be welcome at DMC. Before the hospital is built, KRMC will construct and operate a freestanding emergency department (FSED) at the location that will eventually become the ED of DMC. Construction of the FSED is now underway, and Brandon Haushalter, chief executive officer (CEO) of KRMC, estimated that it will open in March or April of 2019. Jackson West JHS proposes to build a community hospital to be known as “Jackson West” near the eastern edge of Doral. The proposed 100-bed general acute care hospital would have medical surgical and obstetrical beds and offer basic acute care services. JHS is a public health system owned by Miami-Dade County. All of JHS’s assets, as well as its debts, belong to the county. JHS is a not-for-profit entity, and therefore does not pay taxes, though it receives hundreds of millions of dollars from property taxes and sales taxes in Miami-Dade County. JHS’s main campus is a large health campus located near the Midtown Miami area in between Allapattah (to the north) and Little Havana (to the south). In addition to JMH, the campus includes Holtz Children’s Hospital, a behavioral health hospital, an inpatient rehabilitation hospital, and several specialty clinics. Bascom-Palmer Eye Institute, a Veterans Administration hospital, and University of Miami Hospital are also located adjacent to Jackson West’s main campus. JMH is a 1,500-bed hospital with a wide array of programs and services, including tertiary and quaternary care, and a Level I trauma program, the Ryder Trauma Center. JMH receives patients from throughout Miami-Dade County, elsewhere in Florida, and internationally. JMH is a teaching hospital and has a large number of residents, as well as professors from the University of Miami, on staff. UM and JMH have had a relationship for many years, and in addition to research and teaching, UM provides physician staffing to JMH. JN is a 342-bed community hospital located in between Miami Gardens and North Miami Beach, just off of I-95 and the Turnpike. JS is a 252-bed community hospital located in the Palmetto Bay area just south of Kendall. It has stroke certification and interventional cardiology, and was recently approved for a trauma program, which began in May 2016. Both JN and JS were existing hospitals that were acquired by JHS. JHS has never built a hospital from the ground up. In 2014, JHS leadership directed its internal planning team to review the healthcare needs of county residents. JHS’s analysis identified a need for outpatient services in western Miami-Dade, the only remaining quadrant of the county in which JHS did not have a hospital or healthcare program at the time. As part of its due diligence, JHS then consulted healthcare firm Kurt Salmon & Associates (KSA) to independently evaluate the data. KSA’s investigation validated a need in the west county for adult and pediatric outpatient services, including need for an FSED. This prompted JHS to explore opportunities for expansion of outpatient services where needed: in the western corridor of Miami-Dade. This was also the genesis of JHS’s long-range plan to first build an FSED in the Doral area, to be followed ultimately by the addition of a general acute care hospital at the site. The JW site is a 27-acre parcel of land located just west of the Palmetto Expressway and north of 25th Street. The site is in an industrial area only a short distance from the western end of the runways at Miami International Airport. The site is located in zip code 33122, which is very sparsely populated. JW proposed a primary service area (PSA) consisting of zip codes 33126, 33144, 33166, 33172/33122, 33174, 33178, and 33182, and a secondary service area (SSA) of zip codes 33155, 33165, 33175, and 33184. JW intends to serve general, acute care non-tertiary patients and OB patients. Detailed below, trends in the JW service area do not demonstrate need for its proposed hospital. The location of the JW site will not contribute to the viability of the proposed hospital. According to 2010 census data, only 328 people live within a one-mile radius of the JW site. Since 2000, only 32 total people have moved into that same area around the JW site--an average of three per year. There are virtually no residences within a one-mile radius of the JW site. From 2000 to 2010, the population within a two- mile radius of the JW site decreased by a rate of 9.4%. The JW health planner projects JW’s home zip code of 33122 will have a total population of only eight (8) people in 2022. From 2012 to 2014, the use rate in the JW service area for non-tertiary patients decreased by 3.9%. That decline continued at a steeper pace of 4.2% from 2014 to 2017. This was largely due to the 65+ age cohort, the demographic of patients that utilize inpatient services the most. The 65+ age cohort is growing at a slower pace in the JW service area than in Miami- Dade or Florida as a whole. Non-tertiary discharges in the JW service area are declining at a greater pace than that of Miami- Dade County--negative 4.2% compared to negative 1.9%. The rate of projected population growth in the JW PSA is decreasing. The projected rate of growth for the JW service area is lower than that of Miami-Dade County and Florida as a whole. The OB patient base JW intends to rely on is projected to remain flat. The inpatient discharges for all ages in the JW service area have declined from 2014 to 2017. For ages 0-17, discharges in the JW service area declined 21.4% during that time period. The discharges for ages 18-44 declined by 4.8%, and the discharges for ages 45-64 declined by 8.9%. The discharges for the important 65+ age cohort declined by 0.1%. Specifically, the discharges for ages 65-74 declined by 6.5%, and the discharges for ages 75-84 declined by 3.3%. The discharges for ages 85+ are the only age cohort that has not declined from 2012 to 2017. Overall, the non-tertiary discharges per 1,000 population (i.e., use rate) for all ages in the JW service area declined from 2012 to 2014 by 6%, and from 2014 to 2017 by 7.8%. Despite these declines in discharges in the JW service area, the health planners who crafted the JW projections used a constant use rate for the 0-17, 18-44, and 45-64 age cohorts. The JW health planners used a declining use rate for the 65+ age cohort. These use rates were applied uniformly across all zip codes, despite wide variance in actual use rates in each zip code. Applying the zip code specific use rates in conjunction with the other assumptions used by the JW health planner demonstrates that the JW projections are unreasonable. For instance, JW’s reliance on a uniform use rate over-projects the number of discharges in JW PSA zip code 33178 by nearly 1,000 patients. This occurs because the population is only growing at a 2% rate in the zip code, but JW’s reliance on service area-wide projections cause the discharges to grow at an extraordinary rate of 8.9% per year. Applying actual use rates across all zip codes causes a drastic change in the JW PSA and SSA definition. Section 408.037(2) requires a CON applicant to identify its PSA and SSA by listing zip codes in which it will receive discharges in descending order, beginning with the zip code with the highest amount of discharges, then proceeding in diminishing order to the zip code with the lowest amount of discharges. The zip codes, which comprise 75% of discharges, constitute the PSA; and the remaining zip codes, which consist of the remaining 25% of discharges, makes up the SSA. However, JW did not project its utilization in this manner. In its application, JW did not define its service area, PSA, and SSA zip codes in descending order by number or percentage of discharges. When this correct adjustment is made, its PSA consists of zip codes 33126, 33172, 33178, 33174, 33144, and 33165; and its SSA consists of zip codes 33175, 33166, 33155, 33182, and 33184. Zip codes 33166 and 33182 were in the original JW PSA, and zip code 33165 was in the original JW SSA. As such, JW’s home zip code should actually be in its SSA. JW health planners call this illogical, but it demonstrates that the JW site is located within a zip code that has almost no population of potential patients. JHS is developing an FSED and outpatient/ambulatory facilities on the JW site regardless of whether its CON application for a hospital is approved. Construction has begun on the JW site, and JHS is actually building a “shelled in” structure intended to house a future hospital, notwithstanding lack of CON approval for the hospital. There is no contingency plan for use of the shelled-in hospital space if CON approval is not obtained. JHS executives unequivocally stated that they intend to continue pursuing CON approval for the JW hospital, even if the proposed DMC hospital is approved. Indeed, JHS has filed third and fourth CON applications for its proposed JW hospital. The budget for the JW campus is $252 million. Sixty to $70 million is being funded from a bond issuance approved by voters in Miami-Dade County. Notably, the bond referendum approved by voters made no mention of a new hospital. The remaining $180 to $190 million is being funded by JHS, which has chosen to only keep 50 days cash-on-hand, and put any surplus toward capital projects. This is well below the number of days cash-on-hand ws advisable for a system like JHS. The specific programs and services to be offered at JW have not been finalized, but it is clear that JW will be a small community hospital that will not offer anything unique or different from any of the existing hospitals in the area, nor will it operate NICU beds. Patients presenting to JW in need of specialized or tertiary services will need to be transferred to another hospital with the capability of serving them, most likely JMH. The Applicants’ Arguments Doral Medical Center (DMC) DMC’s arguments in support of its proposed hospital may be summarized as follows: Geographic features surrounding Doral create transportation access barriers for the residents of the area; Doral is a densely-populated community that is growing quickly and lacks a readily accessible hospital; KRMC, which is the provider of choice for Doral residents, is a growing tertiary facility that cannot sufficiently expand to meet its future demands. DMC will serve much of the same patient population currently served by KRMC and help decompress KRMC’s acute care load so KRMC can focus on its tertiary service lines; From a geographic standpoint, the Doral community and its patients are isolated from much of Miami-Dade County to the north, west, and east, and the nearest hospitals. East Florida-DMC is a subsidiary of HCA and would be a part of the HCA EFD. Michael Joseph is the president of the EFD, which includes 15 hospitals and other facilities from Miami north through the Treasure Coast. Mr. Joseph authorized the filing of the DMC CON application, which proposes an 80-bed basic acute care hospital that includes 72 medical surgical and eight OB beds. As noted, there will be neither unique services at DMC nor any tertiary services, such as a NICU. HCA anticipates that DMC patients needing tertiary services would be referred and treated at KRMC. The proposed hospital would be built on 41st Street, between Northwest 109th Avenue and Northwest 112th Avenue. This site is located on the western edge of Doral, just east of the Everglades. When the consultants were retained to write the first DMC CON application, HCA had already made the decision to go forward with the project. Mr. Joseph described Miami-Dade County as one of the most competitive markets in the country for hospital services. There is robust competition in the Miami-Dade market from the standpoints of payors, physicians, and the many hospitals located in the county, including Jackson, HCA, Tenet, Baptist and others. HCA is not proposing this project because any of the existing hospitals in the area do not provide good quality care. HCA is currently building an FSED on the DMC site that will open regardless of whether the DMC hospital is approved. Mr. Joseph acknowledged that there is a trend toward outpatient rather than inpatient care. Inpatient occupancy of acute care hospitals in Miami-Dade County has been declining in recent years. Managed care has added further pressure on reducing inpatient admissions. Surgical advances have also resulted in fewer inpatient admissions. Surgeries that formerly required an inpatient stay are now often done on an outpatient basis. Mr. Joseph agreed that 30 minutes is a reasonable travel time to access an acute care hospital. The home zip code for the proposed DMC hospital is 33178. KRMC’s market share for that zip code is 20%. Individuals in that zip code are currently accessing a wide variety of hospitals. PGH is only 6.7 miles away and has the fourth highest market share in that zip code. HCA’s healthcare planning expert, Dan Sullivan, acknowledged that, if approved, DMC would likely have an adverse financial impact on KRMC and other area hospitals. Several witnesses testified that the travel time from the DMC site to KRMC is about 10 minutes, and that an ambulance could do it in as little as five minutes. As to the argument that the residents of Doral face geographic access barriers, the evidence did not indicate that there is anything unique about Doral from a traffic standpoint compared to other parts of Miami-Dade County. People come in and out of Doral on a daily basis in significant numbers for work and other reasons via various access points. Witnesses agreed that 25 to 30 minutes is a reasonable drive time for non-tertiary acute care services, and the evidence showed that residents of Doral, and the DMC service area, are well within 30 minutes of multiple hospitals providing more intensive services than are proposed by DMC. Indeed, many residents of DMC’s service area are closer to other hospitals than to the DMC site. None of the DMC witnesses were able to identify any patient in Doral who had been unable to access acute care services, or had suffered a bad outcome because of travel from Doral to an area hospital. The evidence did not establish that there currently exists either geographic or financial access barriers within the service area proposed to be served by DMC. Jackson West As in its Batch One application, JW advances six arguments as to why its proposed hospital should be approved. They are: It will serve a significant amount of indigent and Medicaid patients. JHS already serves residents of the proposed service area, which JW characterizes as “fragmented,” in that residents go to a number of different hospitals to receive services. Development of the freestanding ED and ambulatory center is under way. JW would provide an additional opportunity to partner with UM and FIU. There is physician and community support for the project. JW will add to the financial viability of JHS and its ability to continue its mission. JW presented very little analysis of the types of factors typically considered in evaluating need for a new hospital. JW did not discuss existing providers and their programs and services, the utilization of existing hospitals, and whether they have excess capacity, or other important considerations. Instead, JW advanced the six arguments noted above, for approval of its proposed hospital, none of which truly relate to the issue of need. First, JW states that its proposed hospital will serve a significant level of Medicaid and indigent patients. While it is true that JHS serves a significant amount of Medicaid and indigent patients, there are a number of reasons why this is not a basis to approve its proposed hospital. As an initial matter, JW treads a fine line in touting its service to Medicaid and indigent patients, while also targeting Doral for its better payer mix and financial benefit to JHS. JHS also receives an enormous amount of tax dollars to provide care to indigent and underserved patients. While other hospitals in Miami-Dade County provide care to such patients, they do not receive taxpayer dollars, as does JHS, although they pay taxes, unlike JHS. Also, Medicaid is a good payer for JHS. With its substantial supplement, JHS actually makes money from Medicaid patients, and it costs the system more for a Medicaid patient to be treated at a JHS hospital than elsewhere. More significantly, there is not a large Medicaid or indigent population in Doral, nor evidence of financial access issues in Doral. Second, JW argues that its CON application should be approved because JHS already serves patients from the Doral area, which JW characterizes as “fragmented” because area residents go to several different hospitals for care. This so- called “fragmentation” is not unique to Doral, and is not unusual in a densely-populated urban market with several existing hospitals. The same phenomenon occurs in other areas of Miami-Dade County, some of which actually have a hospital in the localized area. The fact that Doral residents are accessing several different hospitals demonstrates that there are a number of existing providers that are accessible to them. As discussed in greater detail below, residents of the Doral area have choices in every direction (other than to the west, which is the Everglades). JHS itself already serves patients from the Doral area. If anything, this tells us that patients from Doral currently have access to the JHS hospitals. Third, JW argues that its CON application should be approved because development of the JW campus is under way. This is irrelevant to the determination of need, and is simply a statement of JHS’s intent to build an FSED and outpatient facilities on a piece of land that was acquired for that purpose, regardless of CON approval. Fourth, JW argues for approval of its proposed hospital because it would provide an additional opportunity to partner with UM and Florida International University (FIU). However, the statutory criteria no longer addresses research and teaching concerns, and JHS’s relationship with UM or FIU has no bearing on whether there is a need for a new hospital in the Doral area. Moreover, JW did not present any evidence of how it would partner with UM or FIU at JW, and there does not seem to be any set plans in this regard. Fifth, JW claims that there is physician and community support for its proposed hospital, but it is very common for CON applicants to obtain letters in support for applications. Indeed, the DMC application was also accompanied by letters of support. Sixth and finally, JW argues that its proposed hospital will add to the financial viability of HSA and allow it to continue its mission. However, JW provided no analysis of the projected financial performance of its proposed hospital to substantiate this. The only financial analysis in the record is from KSA, a consulting firm that JHS hired to analyze the programs and services to be developed at JW. The KSA analysis posits that the JW FSED project will lose millions of dollars and not achieve break-even unless there is an inpatient hospital co-located there so that JW can take advantage of the more lucrative hospital-based billing and reimbursement. The sixth “need” argument relates to the issue of JHS’s historical financial struggles, which bear discussion. Only a handful of years ago, the entire JHS was in dire financial trouble, so much so that selling all or parts of it was considered. Days cash-on-hand was in the single digits, and JHS fell out of compliance with bond covenants. JHS’s financial difficulties prompted the appointment of an outside monitor to oversee JHS’s finances. Price Waterhouse served in that role, and made several recommendations for JHS to improve its revenue cycle, make accounting adjustments, and improve its staffing and efficiency. As a result of these recommendations, JHS went through a large reduction in force, and began to more closely screen the income and residency of its patients. As a result of these measures, overall financial performance has since improved. Despite its improved financial position, JHS still consistently loses money on operations, including a $362,000,915 loss as of June 30, 2018. JHS clearly depends upon the hundreds of millions of non-operating tax-based revenues it receives annually. JHS’s CEO expressed concerns over decreases in the system’s non-operating revenue sources, and claimed that JHS needs to find ways to increase its operating revenue to offset this. JW is being proposed as part of this strategy. However, JHS’s chief financial officer testified that “the non-operating revenues are a fairly stable source of income.” In fact, JHS’s tax revenues have gone up in the last few years. JHS sees the more affluent Doral area as a source of better paying patients that will enhance the profitability of its new hospital. Beyond this aspiration however, there is no meaningful analysis of the anticipated financial performance of its proposed hospital. This is a glaring omission given that a significant impetus for spending millions of public dollars on a new hospital is to improve JHS’s overall financial position. The KSA analysis referenced above determined that changes to the Hospital Outpatient Prospective Payment System rule would result in the JW campus losing hundreds of millions of dollars and never reaching “break even,” absent an inpatient hospital on the campus for “hospital based” billing and reimbursement. Though a financial benefit to the system, the increased reimbursement JHS would receive by having an inpatient hospital on the JW campus would be a financial burden on the healthcare delivery system since it would cost more for the same patient to receive the same outpatient services in a hospital- based facility. Reports by KSA also state that a strategic purpose of JW is to attract patients that would otherwise go to nearby facilities like PGH and Hialeah, and to capture tertiary or higher complexity cases which would then be sent to JMH. JW’s witnesses and healthcare planning experts fully expect this to happen. In 2015, and again in 2017, JHS conducted a “Community Health Needs Assessment,” which is required by law to be performed by public safety net hospitals. The assessments were conducted by gathering responses to various questions from a wide array of community leaders and stakeholders, including the CEOs of JHS’s hospitals, about the healthcare needs of the community. The final Community Health Needs Assessment documents are lengthy and cover a variety of health-related topics, but most notable for this case is that: (1) nowhere in either the 2015 or 2017 assessment is the development of a new hospital recommended; and (2) expansion into western Miami-Dade County scored by far the lowest on a list of priorities for JHS. In its application and at hearing, JW took the position that JW can enter the Doral area market without impacting existing providers to any meaningful extent. While JW acknowledges that its proposed hospital would impact the Tenet Hospitals, it argues that the impact is not significant. The evidence established that the financial impact to the Tenet Hospitals (calculated based upon lost contribution margin) would total roughly $3 million for lost inpatients, and $5.2 million including lost outpatients. While these losses will not put the Tenet Hospitals in financial peril, they are nonetheless significant and material. The Existing Healthcare Delivery System Miami-Dade County is home to 18 freestanding acute care hospitals, comprising a total of 7,585 licensed and approved acute care beds. With an average annual occupancy of 53.8% in calendar year 2017, there were, on average, approximately 3,500 unoccupied acute care beds in the county on any given day. While the countywide occupancy rate fluctuates from year to year, it has been on a downward trend in the past several years. As pointed out by several witnesses, the lack of a hospital in Doral is not itself an indication of need. In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. The population of Doral currently is only about 59,000 people. It is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. As set forth in JW’s CON application, the better payer mix in Doral was a significant factor behind its decision to file its CON application. Although there is not a hospital within the Doral city limits, there are a number of healthcare providers in Doral and several hospitals nearby. PGH and Palm Springs Hospital are just north of Doral. KRMC is just south of Doral. Hialeah is northeast of Doral. CGH, Westchester General, and NCH are southeast of Doral. JMH and all of its facilities are east of Doral. And there are others within reasonable distance. KRMC is only six miles due south of the proposed DMC site, and PGH is just eight miles north of the DMC site. As to the JW site, PGH is 6.9 miles distant, CGH is 8.6 miles distant, and Hialeah is 7.4 miles distant. Residents of the Doral area have many choices in hospitals with a wide array of services, and they are accessing them. The parties to this case, as well as other existing hospitals, all have a share of the Doral area market. JW calls this “fragmentation” of the market and casts it in a negative light, but the evidence showed this to be a normal phenomenon in an urban area like Miami, with several hospitals in healthy competition with each other. Among the experts testifying at the hearing, it was undisputed that inpatient acute care hospital use rates are on the decline. There are different reasons for this, but it was uniformly recognized that decreasing use rates for inpatient services, and a shift toward outpatient services, are ongoing trends in the market. Recognizing the need for outpatient services in the Doral area, both JW and DMC (or, more accurately, their related entities) have proposed outpatient facilities and services to be located in Doral. Kendall Regional Medical Center KRMC is currently the dominant hospital provider in the Doral area. Regarding his motivation for filing the DMC application, Mr. Joseph readily admitted “it’s as much about protecting what I already currently provide, number one.” KRMC treats Medicaid and indigent patients. KRMC has never turned away a patient because it did not have a contract with a Medicaid-managed care company. The CEO agreed that there is no access problem for Medicaid or charity patients justifying a new hospital. It was argued that KRMC is crowded, and the DMC hospital would help “decompress” KRMC, but the evidence showed that KRMC has a number of licensed beds that are not being used for inpatients. In addition, its ED has never gone on diversion, and no patient has ever been turned away due to the lack of a bed. Moreover, the census at KRMC has been declining. It had 25,324 inpatient admissions in 2015, 24,649 admissions in 2016, and 23,301 in 2017. The most recent data available at the time of hearing reflected that KRMC has been running at a little less than 75% occupancy, before its planned bed additions. KRMC is between an eight to 10 minute drive from Doral, and currently has the largest market share within the applicants’ defined service areas. KRMC is readily available and accessible to the residents of Doral. KRMC currently has a $90 million dollar expansion project under way. It involves adding beds and two new floors to the West Tower--a new fifth floor which will add 24 ICU beds and 24 step-down beds, and a new sixth floor which will house the relocated pediatric unit and 12 new medical-surgical beds. KRMC is also adding a new nine-story, 765 parking space garage and other ancillary space. This expansion will reduce the occupancy rate of KRMC’s inpatient units, and in particular its ICUs. These bed additions, in conjunction with increasing emphasis on outpatient services and the resultant declining inpatient admissions, will alleviate any historical capacity constraints KRMC may have had. There are also a number of ways KRMC could be further expanded in the future if needed. The West Tower is designed so it could accommodate a seventh floor, and the East Tower is also designed so that an additional floor could also be added to it. In addition, KRMC recently completed construction of a new OR area that is built on pillars. The new construction includes a third floor of shelled-in space that could house an additional 12 acute care beds. Moreover, this new OR tower was designed to go up an additional two to three floors beyond the existing shelled-in third floor. It is clear that KRMC has implemented reasonable strategies for addressing any bed capacity issues it may have experienced in the past. Decompression of KRMC is not a reason to approve DMC. Palmetto General Hospital Evidence regarding PGH was provided by its CEO Ana Mederos. Ms. Mederos is a registered nurse and has lived in Miami-Dade County for many years. She has a master of business education from Nova University and has worked in several different hospitals in the county. Specifically, she was the chief operating officer (COO) at Cedars Medical Center, the CEO at North Shore Medical Center, the CEO at Hialeah Hospital, and has been the CEO at PGH since August of 2006. Ms. Mederos is one of the few witnesses that actually lives in Doral. She travels in and out of the area on a daily basis. Her average commute is only about 15 minutes, and she has multiple convenient options in and out of Doral. PGH is located just off the Palmetto Expressway at 68th Street. It opened in the early 1970s and has 368 licensed beds, including 52 ICU beds. The hospital employs about 1,800 people and has over 600 physicians on its medical staff. PGH’s occupancy has declined from 79.8% in 2015 to 64% in 2016, and even further to 56.7% in 2017. There are many reasons for this decline, including pressure from managed care organizations, the continued increase in the use of outpatient procedures, improvements in technology, and increased competition in the Miami-Dade County market. Ms. Mederos expects that inpatient demand will continue to decline into the foreseeable future. PGH recently activated 31 observation beds to help improve throughput and better accommodate the increasing number of observation patients. PGH offers high-quality care and uses various metrics and indicators to measure and monitor what is going on in the hospital. The hospital has also been recognized with numerous awards. Through its parent, Tenet, PGH has contracts with just about every insurance and managed care company that serves the community. The hospital treats Medicaid and indigent patients. PGH’s Medicaid rate of $3,580 per patient is significantly lower than the rate paid to JMH. PGH has an office dedicated to helping patients get qualified for Medicaid or other financial resources, which not only helps the hospital get paid for its services, it also assists patients and families to make sure that they have benefits on an ongoing basis. Roughly 9-10% of PGH’s patients annually are completely unfunded. PGH only transfers patients if there is a need for a service not provided at the hospital, or upon the patient’s request. PGH does not transfer patients just because they cannot pay. PGH pays physicians to take calls in the ED which also obligates those physicians to provide care to patients that are seen at the hospital. PGH is a for-profit hospital that pays income taxes and property taxes, and does not receive any taxpayer subsidies like those received by JHS. Ms. Mederos reviewed the applications of JW and DMC, and articulated a number of reasons why, in her opinion, neither application should be approved. She sees no delays in providing care to anyone in the area, as there are hospitals serving Doral in every direction. There are a multitude of FSEDs available and additional FSEDs are being built in Doral by both applicants. There is another FSED being built close to PGH by Mount Sinai Medical Center. NCH has also opened an FSED that has negatively affected the volume of pediatric patients seen at PGH. There are also multiple urgent care centers. It was Ms. Mederos’ firm belief that persons living in Doral have reasonable geographic access to both inpatient and outpatient medical services. Ms. Mederos’ testimony in this regard is credited. There are no programs or services being proposed by either applicant that are not already available in the area. Ms. Mederos also noted that there is currently no problem with access to OB services in the area. However, she has a particular concern in that both applicants propose to offer OB services, but neither is proposing to offer NICU services. The evidence showed that most all of the hospitals that provide OB services to the Doral area offer at least Level II and some Level III NICU services. Thus, in terms of OB care, both proposed hospitals would be a step below what has developed as the standard of care for OB patients in the county. Ms. Mederos acknowledged that PGH does not have a huge market share in the zip codes that the applicants are proposing to serve, but that does not mean that the impact from either would not be real and significant. If a hospital is built by either applicant, it will need physicians, with some specialists in short supply. There are tremendous shortages in certain medical fields, such as orthopedics and neurology. In addition, there will be additional competition for nurses and other staff, which will increase the cost of healthcare. The loss of $1.3 to $2 million in contribution margin, as projected by Tenet’s healthcare planner, is a negative impact on PGH as hospital margins become thinner, and those numbers do not include costs like those needed to recruit and retain staff. PGH is again experiencing a nursing shortage, and losing nurses, incurring the higher cost for contract labor, paying overtime, and essentially not having the staff to provide the required services is a serious potential adverse impact from either proposed new hospital. JHS also tends to provide more lucrative benefits than PGH, and a nearby JW hospital is a threat in that regard. As a final note, Ms. Mederos stated that her conviction that there is no need for either proposed hospital in Doral is even more resolute than when she testified in the Batch One Case. With continued declines in admissions, length of stay and patient days, the development of more services for the residents of Doral, the shortages of doctors and nurses, the ever increasing role of managed care that depresses the demand for inpatient hospital services and other factors, she persuasively explained why no new hospitals are needed in the Doral area. Coral Gables Hospital (CGH) Maria Cristina Jimenez testified on behalf of CGH, where she has worked in a variety of different capacities since 1985. She was promoted to CEO in March 2017. She has lived in Miami her entire life. Ms. Jimenez has been involved in initiatives to make her hospital more efficient. She is supportive of efforts to reduce inpatient hospitalizations and length of stay, as this is what is best for patients. Overall, the hospital length of stay is dropping, which adds to the decreasing demand for inpatient services. CGH is accredited by the Joint Commission, has received multiple awards, and provides high-quality care to its patients. It also has contracts with a broad array of managed care companies as do the other Tenet hospitals. CGH treats Medicaid patients, and its total Medicaid rate is less than $3,500 per inpatient. The hospital has a program similar to PGH to help patients get qualified for Medicaid and other resources. CGH also provides services to indigent patients, and self-pay/charity is about 6% of the hospital’s total admissions. The hospital does not transfer patients just because they are indigent. Physicians are compensated to provide care in the emergency room and are expected to continue with that care if the patients are admitted to the hospital, even if they do not have financial resources. CGH also pays income and property taxes, but does not receive any taxpayer support. CGH generally serves the Little Havana, Flagami, Miami, and Coral Gables communities, and its service area overlaps with those of the applicants. In order to better serve its patients and to help it compete in the highly competitive Miami-Dade County marketplace, CGH is developing a freestanding ED at the corner of Bird Road and Southwest 87th Avenue, which is scheduled to open in January 2020. This will provide another resource for patients in the proposed service areas. Ms. Jimenez had reviewed the CON applications at issue in this case. She does not believe that either hospital should be approved because it will drain resources from CGH, not only from a financial standpoint, but also physician and nurse staffing. CGH experiences physician shortages. Urologists are in short supply, as are gastrointestinal physicians that perform certain procedures. Hematology, oncology, and endocrinology are also specialty areas with shortages. The addition of another hospital will exacerbate those shortages at CGH. While CGH does not have a large market share in the proposed PSA of either applicant, anticipated impact from approval of either is real and substantial. A contribution margin loss of $1.2 to $2.2 million per year, as projected by Tenet’s healthcare planner, would be significant. The drain on resources, including staff and physicians, is also of significant concern. Hialeah Hospital Dr. Jorge Perez testified on behalf of Hialeah. Dr. Perez is a pathologist and medical director of laboratory at the hospital. More significantly, Dr. Perez has been on the hospital’s staff since 2001 and has served in multiple leadership roles, including chair of the Performance Improvement Council, chief of staff; and since 2015, chair of the Hialeah Hospital Governing Board. Hialeah offers obstetrics services and a Level II NICU with 12 beds. Approximately 1,400 babies a year are born there. Hialeah’s occupancy has been essentially flat for the past three years, at below 40%, and it clearly has ample excess capacity. On an average day, over 200 of Hialeah’s beds are unoccupied. Like other hospitals in the county, Hialeah has a number of competitors. The growth of managed care has affected the demand for inpatient beds and services at Hialeah. Hialeah treats Medicaid and indigent patients. Approximately 15% of Hialeah’s admissions are unfunded. As with its sister Tenet hospitals, Hialeah is a for- profit hospital that pays taxes and does not receive tax dollars for providing care to the indigent. Dr. Perez succinctly and persuasively identified a variety of reasons why no new hospital is needed in Doral. First and foremost, there is plenty of capacity at the existing hospitals in the area, including Hialeah. Second, both inpatient admissions and length of stay continue trending downward. Care continues to shift toward outpatient services, thereby reducing the demand for inpatient care. According to Dr. Perez, if a new hospital is approved in Doral it will bring with it adverse impacts on existing hospitals, including Hialeah. A new hospital in Doral will attract patients, some of which would have otherwise gone to Hialeah. Moreover, Doral has more insured patients, meaning the patients that would be lost would be good payors. There would also be a significant risk of loss of staff to a new hospital. Dr. Perez’s testimony in this regard is credible. Statutory and Rule Review Criteria In 2008, the Florida Legislature streamlined the review criteria applicable for evaluating new hospital applications. Mem’l Healthcare Grp. v. AHCA, Case No. 12- 0429CON, RO at 32 (Fla. DOAH Dec. 7, 2012). The criteria specifically eliminated included quality of care, availability of resources, financial feasibility, and the costs and methods of proposed construction. Lee Mem’l Health System v. AHCA, Case No. 13-2508CON, RO at 135 (Fla. DOAH Mar. 28, 2014). The remaining criteria applicable to new hospital projects are set forth at section 408.035(1), Florida Statutes. Section 408.035(1)(a): The need for the healthcare facilities and health services being proposed. Generally, CON applicants are responsible for demonstrating need for new acute care hospitals, typically in the context of a numeric need methodology adopted by AHCA. However, AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. Florida Administrative Code Rule 59C-1.008(2)(e) provides that if no agency need methodology exists, the applicant is 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 and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict, or both; Medical treatment trends; and Market conditions. Both applicants propose to build small community hospitals providing basic acute care and OB services in the Doral area of western Miami-Dade County. Both applicants point to the increasing population and the lack of an acute care hospital in Doral as evidence of need for a hospital. The DMC application focuses largely on geographic access concerns, while the JW application is premised upon six arguments as to why JHS contends its proposed JW hospital should be approved. The lack of a hospital in Doral is not itself an indication of need.3/ In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals, and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. Doral is in the west/northwest part of Miami-Dade County, in between the Miami International Airport (to the east) and the Everglades (to the west). It is surrounded by major roadways, with US Highway 27/Okeechobee Road running diagonally to the north, US Highway 836/Dolphin Expressway running along its southern edge, US Highway 826/Palmetto Expressway running north-south to the east, and the Florida Turnpike running north- south along the western edge of Doral. To the west of the Turnpike is the Everglades, where there is minimal population and very limited development possible in the future. The City of Doral itself has an area of about 15 square miles, and is only two or three times the size of the Miami International Airport, which sits just east of Doral. Much of Doral is commercial and industrial, with the largest concentration of residential areas being in the northwest part of the city. While there is unquestionably residential growth in Doral, the population of Doral is currently only about 59,000 people. Doral is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. JW proposes to locate its hospital on the eastern side of Doral, just west of Miami International Airport, while the DMC site is on the western side of Doral, just east of the Everglades. JW’s site is located in an industrial area with few residents, while the DMC site is located in an area where future growth is likely to be limited. Both sites have downsides for development of a hospital, with both applicants spending considerable time at hearing pointing out the flaws of each other’s chosen location. Both applicants define their service areas to include the City of Doral, but also areas outside of Doral. Notably, the entire DMC service area is contained within KRMC’s existing service area, with the exception of one small area. While the population of Doral itself is only 59,000 people, there are more concentrated populations in areas outside of Doral (except to the west). However, the people in these areas are closer to existing hospitals like PGH, Hialeah, KRMC, and others. For the population inside Doral, there are several major roadways in and out of Doral, and area residents can access several existing hospitals with plenty of capacity within a 20-minute drive time, many closer than that. It was undisputed that inpatient acute care hospital use rates continue to decline. There are different reasons for this, but it was uniformly recognized that decreasing inpatient use rates, and a shift toward outpatient services, are ongoing trends in the market. These trends existed at the time of the Batch One Case. As observed by Tenet’s healthcare planner at hearing: “The occupancy is lower today than it was two years ago, the use rates are lower, and the actual utilization is lower.” Both applicants failed to establish a compelling case of need. While there is growth in the Doral area, it remains a relatively small population, and there was no evidence of community needs being unmet. Sound healthcare planning, and the statutory criteria, require consideration of existing hospitals, their availability, accessibility, and extent of utilization. These considerations weigh heavily against approval of either CON application, even more so than in the prior case. Section 408.035(1)(b): The availability, accessibility, and extent of utilization of existing healthcare facilities and health services in the service district of the applicant; and Section 408.035(1)(e): The extent to which the proposed services will enhance access to healthcare for residents of the service district. As stated above, there are several existing hospitals in close proximity to Doral. Thus, the question is whether they are accessible and have capacity to serve the needs of patients from the Doral area. The evidence overwhelmingly answers these questions in the affirmative. Geographic access was a focal point of the DMC application, which argued that there are various barriers to access in and around Doral, such as a canal that runs parallel to US Highway 27/Okeechobee Road, train tracks and a rail yard, industrial plants, and the airport. While the presence of these things is undeniable, as is the fact that there is traffic in Miami, based upon the evidence presented, they do not present the barriers that DMC alleges. Rather, the evidence was undisputed that numerous hospitals are accessible within 20 minutes of the proposed hospital sites, and some within 10 to 15 minutes. All of Doral is within 30 minutes of multiple hospitals. These are reasonable travel times and are not indicative of a geographic access problem, regardless of any alleged “barriers.” In addition, existing hospitals clearly have the capacity to serve the Doral community, and they are doing so. Without question, there is excess capacity in the Miami-Dade County market. With approximately 7,500 hospital beds in the county running at an average occupancy just over 50%, there are around 3,500 beds available at any given time. Focusing on the hospitals closest to Doral (those accessible within 20 minutes), there are hundreds of beds that are available and accessible from the proposed service areas of the applicants. KRMC is particularly noteworthy because of its proximity to, and market share in, the Doral area. The most recent utilization and occupancy data for KRMC indicate that it has, on average, 100 vacant beds. This is more than the entire 80-bed hospital proposed in the DMC application (for a service area that is already served and subsumed by KRMC). Moreover, KRMC is expanding, and will soon have even more capacity at its location less than a 10-minute drive from the DMC site. From a programmatic standpoint, neither applicant is proposing any programs or services that are not already available at numerous existing hospitals, and, in fact, both would offer fewer programs and services than other area hospitals. As such, patients in need of tertiary or specialized services will still have to travel to other hospitals like PGH, KRMC, or JMH. Alternatively, if they present to a small hospital in Doral in need of specialized services, they will then have to be transferred to an appropriate hospital that can treat them. The same would be true for babies born at either DMC or JW in need of a NICU. Similarly, there are bypass protocols for EMS to take cardiac, stroke, and trauma patients to the closest hospital equipped to treat them, even if it means bypassing other hospitals not so equipped, like JW and DMC. Less acute patients can be transported to the closest ED. And since both applicants are building FSEDs in Doral, there will be ample access to emergency services for residents of Doral. This criterion does not weigh in favor of approval of either hospital. To the contrary, the evidence overwhelmingly established that existing hospitals are available and accessible to Doral area residents. Section 408.035(1)(e), (g) and (i): The extent to which the proposed services will enhance access to healthcare, the extent to which the proposal will foster competition that promotes quality and cost-effectiveness, and the applicant’s past and proposed provision of healthcare services to Medicaid patients and the medically indigent. It goes without saying that any new hospital is going to enhance access to the people closest to its location; but as explained above, there is no evidence of an access problem, or any pressing need for enhanced access to acute care hospital services. Rather, the evidence showed that Doral area residents are within very reasonable travel times to existing hospitals, most of which have far more extensive programs and services than either applicant is proposing to offer. Indeed, the proposed DMC service area is contained within KRMC’s existing service area, and KRMC is only 10 minutes from the DMC site. Neither applicant would enhance access to tertiary or specialized services, and patients in need of those services will still have to travel to other hospitals, or worse, be transferred after presenting to a Doral hospital with more limited programs and services. Although it was not shown to be an issue, access to emergency services is going to be enhanced by the FSEDs being built by both applicants. Thus, to the extent that a new hospital would enhance access, it would be only for non-emergent patients in need of basic, non-tertiary level care. Existing hospitals are available and easily accessible to these patients. In addition, healthy competition exists between several existing providers serving the Doral area market. That healthy competition would be substantially eroded by approval of the DMC application, as HCA would likely capture a dominant share of the market. While approval of the JW application might not create a dominant market share for one provider, it would certainly not promote cost-effectiveness given the fact that it costs the system more for the same patient to receive services at a JHS hospital than other facilities. Indeed, approval of JW’s application would mean that the JW campus will have the more expensive hospital-based billing rates. Florida Medicaid diagnosis related group (DRG) payment comparisons among hospitals are relevant because both DMC and JW propose that at least 22% of their patients will be Medicaid patients. Data from the 2017-18 DRG calculator provided by the Medicaid program office was used to compare JHS to the three Tenet hospitals, KRMC, and Aventura Hospital, another EFD hospital in Miami-Dade County. The data shows that JHS receives the highest Medicaid rate enhancement per discharge for the same Medicaid patients ($2,820.06) among these six hospitals in the county. KRMC receives a modest enhancement of $147.27. Comparison of Medicaid Managed Care Reimbursement over the period of fiscal years 2014-2016 show that JHS receives substantially more Medicaid reimbursement per adjusted patient day than any of the hospitals in this proceeding, with the other hospitals receiving between one-third and one-half of JHS reimbursement. In contrast, among all of these hospitals, KRMC had the lowest rate for each of the three years covered by the data, which means KRMC (and by extension DMC) would cost the Medicaid program substantially less money for care of Medicaid patients. Under the new prospective payment system instituted by the State of Florida for Medicaid reimbursement of acute care hospital providers, for service between July 1, 2018, and March 31, 2019, JHS is the beneficiary of an automatic rate enhancement of more than $8 million. In contrast, KRMC’s rate enhancement is only between $16,000 and $17,000. Thus, it will cost the Medicaid program substantially more to treat a patient using the same services at JW than at DMC. Furthermore, rather than enhance the financial viability of the JHS system, the evidence indicates that the JW proposal will be a financial drain on the JHS system. Finally, JHS’s past and proposed provision of care to Medicaid and indigent patients is noteworthy, but not a reason to approve its proposed hospital. JW is proposing this hospital to penetrate a more affluent market, not an indigent or underserved area, and it proposes to provide Medicaid and indigent care at a level that is consistent with the existing hospitals. JHS also receives the highest Low Income Pool (LIP) payments per charity care of any system in the state, and is one of only a handful of hospital systems that made money after receipt of the LIP payments. HCA-affiliated hospitals, by comparison, incur the second greatest cost in the state for charity care taking LIP payments into consideration. Analysis of standardized net revenues per adjusted admission (NRAA) among Miami-Dade County acute care hospitals, a group of 16 hospitals, shows JHS to be either the second or the third highest hospital in terms of NRAA. KRMC, in contrast, part of the EFD/HCA hospitals, is about 3% below the average of the 16 hospitals for NRAA. DMC’s analysis of standardized NRAA using data from 2014, 2015, and 2016, among acute care hospitals receiving local government tax revenues, shows JHS receives more net revenue than any of the other hospitals in this grouping. Using data from FY 2014 to FY 2016, DMC compared hospital costs among the four existing providers that are parties to this proceeding and JMH as a representative of JHS. Standardizing for case mix, fiscal year end, and location, an analysis of costs per adjusted admission shows that the hospitals other than JMH have an average cost of between a half and a third of JMH’s average cost. The same type of analysis of costs among a peer group of eight statutory teaching hospitals shows JHS’s costs to be the highest. It should also be noted that if JW were to fail or experience significant losses from operations, the taxpayers of Miami-Dade County will be at risk. In contrast, if DMC were to fail financially, EFD/HCA will shoulder the losses. When the two applications are evaluated in the context of the above criteria, the greater weight of the evidence does not mitigate in favor of approval of either. However, should AHCA decide to approve one of the applicants in its final order, preference should be given to DMC because of its lower costs per admission for all categories of payors, and in particular, the lower cost to the Florida Medicaid Program. In addition, the risk of financial failure would fall upon EFD/HCA, rather than the taxpayers of Miami-Dade County. Rule 59C-1.008(2)(e): Need considerations. Many of the considerations enumerated in rule 59C- 1.008(2)(e) overlap with the statutory criteria, but there are certain notable trends and market conditions that warrant mention. Specifically, while the population of Doral is growing, it remains relatively small, and does not itself justify a new hospital. And while there are some more densely populated areas outside of the city of Doral, they are much closer to existing hospitals having robust services and excess capacity. Doral is a more affluent area, and there was no evidence of any financial or cultural access issues supporting approval of either CON application. The availability, utilization, and quality of existing hospitals are clearly not issues, as there are several existing hospitals with plenty of capacity accessible to Doral area residents. In terms of medical treatment trends, it was undisputed that use rates for inpatient hospital services continue trending downward, and that trend is expected to continue. Concomitantly, there is a marked shift toward outpatient services in Miami-Dade County and elsewhere. Finally, both applicants are proposing to provide OB services without a NICU, which is below the standard in the market. While not required for the provision of obstetrics, NICU backup is clearly the most desirable and best practice. For the foregoing reasons, the considerations in rule 59C-1.008(2)(e) do not weigh in favor of approval of either hospital.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Healthcare Administration enter a final order denying East Florida-DMC, Inc.’s CON Application No. 10432 and denying The Public Health Trust of Miami-Dade County, Florida, d/b/a Jackson Hospital West’s CON Application No. 10433. DONE AND ENTERED this 30th day of April, 2019, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2019.
The Issue Whether the certificate of need (CON) applications filed by New Port Richey Hospital, Inc., d/b/a Community Hospital of New Port Richey (Community Hospital) (CON No. 9539), and Morton Plant Hospital Association, Inc., d/b/a North Bay Hospital (North Bay) (CON No. 9538), each seeking to replace and relocate their respective general acute care hospital, satisfy, on balance, the applicable statutory and rule criteria.
Findings Of Fact The Parties AHCA AHCA is the single state agency responsible for the administration of the CON program in Florida pursuant to Chapter 408, Florida Statutes (2000). The agency separately reviewed and preliminarily approved both applications. Community Hospital Community Hospital is a 300,000 square feet, accredited hospital with 345 licensed acute care beds and 56 licensed adult psychiatric beds, located in southern New Port Richey, Florida, within Sub-District 5-1. Community Hospital is seeking to construct a replacement facility approximately five miles to the southeast within a rapidly developing suburb known as "Trinity." Community Hospital currently provides a wide array of comprehensive inpatient and outpatient services and is the only provider of obstetrical and adult psychiatric services in Sub-District 5-1. It is the largest provider of emergency services in Pasco County with approximately 35,000 visits annually. It is also the largest provider of Medicaid and indigent patient days in Sub-District 5-1. Community Hospital was originally built in 1969 and is an aging facility. Although it has been renovated over time, the hospital is in poor condition. Community Hospital's average daily census is below 50 percent. North Bay North Bay is a 122-bed facility containing 102 licensed acute care beds and 20 licensed comprehensive medical rehabilitation beds, located approximately one mile north of Community Hospital in Sub-District 5-1. It serves a large elderly population and does not provide pediatric or obstetrical care. North Bay is also an aging facility and proposes to construct a replacement facility in the Trinity area. Notably, however, North Bay has spent approximately 12 million dollars over the past three years for physical improvements and is in reasonable physical condition. Helen Ellis Helen Ellis is an accredited hospital with 150 licensed acute care beds and 18 licensed skilled nursing unit beds. It is located in northern Pinellas County, approximately eight miles south of Community Hospital and nine miles south of North Bay. Helen Ellis provides a full array of acute care services including obstetrics and cardiac catheterization. Its daily census average has fluctuated over the years but is approximately 45 percent. Mease Mease operates two acute care hospitals in Pinellas County including Mease Dunedin Hospital, located approximately 18 to 20 miles south of the applicants and Mease Countryside Hospital, located approximately 16 to 18 miles south of Community and North Bay. Each hospital operates 189 licensed beds. The Mease hospitals are located in the adjacent acute care sub-district but compete with the applicants. The Health Planning District AHCA's Health Planning District 5 consists of Pinellas and Pasco Counties. U.S. Highway 41 runs north and south through the District and splits Pasco County into Sub- District 5-1 and Sub-District 5-2. Sub-District 5-1, where Community Hospital and North Bay are located, extends from U.S. 41 west to the Gulf Coast. Sub-District 5-2 extends from U.S. 41 to the eastern edge of Pasco County. Pinellas County is the most densely populated county in Florida and steadily grows at 5.52 percent per year. On the other hand, its neighbor to the north, Pasco County, has been experiencing over 15 percent annual growth in population. The evidence demonstrates that the area known as Trinity, located four to five miles southeast of New Port Richey, is largely responsible for the growth. With its large, single- owner land tracts, Trinity has become the area's fuel for growth, while New Port Richey, the older coastal anchor which houses the applicants' facilities, remains static. In addition to the available land in Trinity, roadway development in the southwest section of Pasco County is further fueling growth. For example, the Suncoast Highway, a major highway, was recently extended north from Hillsborough County through Sub-District 5-1, west of U.S. 41. It intersects with several large east-west thoroughfares including State Road 54, providing easy highway access to the Tampa area. The General Proposals Community Hospital's Proposal Community Hospital's CON application proposes to replace its existing, 401-bed hospital with a 376-bed state- of-the-art facility and relocate it approximately five miles to the southeast in the Trinity area. Community Hospital intends to construct a large medical office adjacent to its new facility and provide all of its current services including obstetrical care. It does not intend to change its primary service area. North Bay's Proposal North Bay's CON application proposes to replace its existing hospital with a 122-bed state-of-the-art facility and also plans to relocate it approximately eight miles to the southeast in the Trinity area of southwestern Pasco County. North Bay intends to provide the same array of services it currently offers its patients and will not provide pediatric and obstetrical care in the proposed facility. The proposed relocation site is adjacent to the Trinity Outpatient Center which is owned by North Bay's parent company, Morton Plant. The Outpatient Center offers a full range of diagnostic imaging services including nuclear medicine, cardiac nuclear stress testing, bone density scanning, CAT scanning, mammography, ultrasound, as well as many others. It also offers general and specialty ambulatory surgical services including urology; ear, nose and throat; ophthalmology; gastroenterology; endoscopy; and pain management. Approximately 14 physician offices are currently located at the Trinity Outpatient Center. The Condition of Community Hospital Facility Community Hospital's core facilities were constructed between 1969 and 1971. Additions to the hospital were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and 1999. With an area of approximately 294,000 square feet and 401 licensed beds, or 733 square feet per bed, Community Hospital's gross area-to-bed ratio is approximately half of current hospital planning standards of 1,600 square feet per bed. With the exception of the "E" wing which was completed in 1999, all of the clinical and support departments are undersized. Medical-Surgical Beds And Intensive Care Units Community Hospital's "D" wing, constructed in 1975, is made up of two general medical-surgical unit floors which are grossly undersized. Each floor operates 47 general medical-surgical beds, 24 of which are in three-bed wards and 23 in semi-private rooms. None of the patient rooms in the "D" wing have showers or tubs so the patients bathe in a single facility located at the center of the wing on each floor. Community Hospital's "A" wing, added in 1973, is situated at the west end of the second floor and is also undersized. It too has a combination of semi-private rooms and three-bed wards without showers or tubs. Community Hospital's "F" wing, added in 1979, includes a medical-surgical unit on the second and third floor, each with semi-private and private rooms. The second floor unit is centrally located between a 56-bed adult psychiatric unit and the Surgical Intensive Care Unit (SICU) which creates security and privacy issues. The third floor unit is adjacent to the Medical Intensive Care Unit (MICU) which must be accessed through the medical-surgical unit. Neither intensive care unit (ICU) possesses an isolation area. Although the three-bed wards are generally restricted to in-season use, and not always full, they pose significant privacy, security, safety, and health concerns. They fail to meet minimum space requirements and are a serious health risk. The evidence demonstrates that reconfiguring the wards would be extremely costly and impractical due to code compliance issues. The wards hinder the hospital's acute care utilization, and impair its ability to effectively compete with other hospitals. Surgical Department and Recovery Community Hospital's surgical department is separated into two locations including the main surgical suite on the second floor and the Endoscopy/Pain Management unit located on the first floor of "C" wing. Consequently, the department cannot share support staff and space such as preparation and recovery. The main surgical suite, adjacent recovery room, and central sterile processing are 25 years old. This unit's operating rooms, cystoscopy rooms, storage areas, work- stations, central sterile, and recovery rooms are undersized and antiquated. The 12-bay Recovery Room has no patient toilet and is lacking storage. The soiled utility room is deficient. In addition, the patient bays are extremely narrow and separated by curtains. There is no direct connection to the sterile corridor, and staff must break the sterile field to transport patients from surgery to recovery. Moreover, surgery outpatients must pass through a major public lobby going to and returning from surgery. The Emergency Department Community Hospital's existing emergency department was constructed in 1992 and is the largest provider of hospital emergency services in Pasco County, handling approximately 35,000 visits per year. The hospital is also designated a "Baker Act" receiving facility under Chapter 394, Florida Statutes, and utilizes two secure examination rooms for emergent psychiatric patients. At less than 8,000 total square feet, the emergency department is severely undersized to meet the needs of its patients. The emergency department is currently undergoing renovation which will connect the triage area to the main emergency department. The renovation will not enlarge the entrance, waiting area, storage, nursing station, nor add privacy to the patient care areas in the emergency department. The renovation will not increase the total size of the emergency department, but in fact, the department's total bed availability will decrease by five beds. Similar to other departments, a more meaningful renovation cannot occur within the emergency department without triggering costly building code compliance measures. In addition to its space limitations, the emergency department is awkwardly located. In 1992, the emergency department was relocated to the front of the hospital and is completely separated from the diagnostic imaging department which remained in the original 1971 building. Consequently, emergency patients are routinely transported across the hospital for imaging and CT scans. Issues Relating to Replacement of Community Hospital Although physically possible, renovating and expanding Community Hospital's existing facility is unreasonable. First, it is cost prohibitive. Any significant renovation to the 1971, 1975, 1977, and 1979 structures would require asbestos abatement prior to construction, at an estimated cost of $1,000,000. In addition, as previously noted, the hospital will be saddled with the major expense of complying with all current building code requirements in the 40-year-old facility. Merely installing showers in patient rooms would immediately trigger a host of expensive, albeit necessary, code requirements involving access, wiring, square footage, fireproofing columns and beams, as well as floor/ceiling and roof/ceiling assemblies. Concurrent with the significant demolition and construction costs, the hospital will experience the incalculable expense and loss of revenue related to closing major portions, if not all, of the hospital. Second, renovation and expansion to the existing facility is an unreasonable option due to its physical restrictions. The 12'4" height of the hospital's first floor limits its ability to accommodate HVAC ductwork large enough to meet current ventilation requirements. In addition, there is inadequate space to expand any department within the confines of the existing hospital without cannibalizing adjacent areas, and vertical expansion is not an option. Community Hospital's application includes a lengthy Facility Condition Assessment which factually details the architectural, mechanical, and electrical deficiencies of the hospital's existing physical plant. The assessment is accurate and reasonable. Community Hospital's Proposed Replacement Community Hospital proposes to construct a six- story, 320 licensed beds, acute care replacement facility. The hospital will consist of 548,995 gross square feet and include a 56-bed adult psychiatric unit connected by a hallway to the first floor of the main hospital building. The proposal also includes the construction of an adjacent medical office building to centralize the outpatient offices and staff physicians. The evidence establishes that the deficiencies inherent in Community Hospital's existing hospital will be cured by its replacement hospital. All patients will be provided large private rooms. The emergency department will double in size, and contain private examination rooms. All building code requirements will be met or exceeded. Patients and staff will have separate elevators from the public. In addition, the surgical department will have large operating rooms, and adequate storage. The MICU and SICU will be adjacent to each other on the second floor to avoid unnecessary traffic within the hospital. Surgical patients will be transported to the ICU via a private elevator dedicated to that purpose. Medical-surgical patient rooms will be efficiently located on the third through sixth floors, in "double-T" configuration. Community Hospital's Existing and Proposed Sites Community Hospital is currently located on a 23-acre site inside the southern boundary of New Port Richey. Single- family homes and offices occupy the two-lane residential streets that surround the site on all sides. The hospital buildings are situated on the northern half of the site, with the main parking lot located to the south, in front of the main entrance to the hospital. Marine Parkway cuts through the southern half of the site from the west, and enters the main parking lot. A private medical mall sits immediately to the west of the main parking lot and a one-acre storm-water retention pond sits to the west of the mall. A private medical office building occupies the south end of the main parking lot and a four-acre drainage easement is located in the southwest corner of the site. Community Hospital's administration has actively analyzed its existing site, aging facility, and adjacent areas. It has commissioned studies by civil engineers, health care consultants, and architects. The collective evidence demonstrates that, although on-site relocation is potentially an option, on balance, it is not a reasonable option. Replacing Community Hospital on its existing site is not practical for several reasons. First, the hospital will experience significant disruption and may be required to completely close down for a period of time. Second, the site's southwestern large four-acre parcel is necessary for storm-water retention and is unavailable for expansion. Third, a reliable cost differential is unknown given Community Hospital's inability to successfully negotiate with the city and owners of the adjacent medical office complexes to acquire additional parcels. Fourth, acquiring other adjacent properties is not a viable option since they consist of individually owned residential lots. In addition to the site's physical restrictions, the site is hindered by its location. The hospital is situated in a neighborhood between small streets and a local school. From the north and south, motorists utilize either U.S. 19, a congested corridor that accommodates approximately 50,000 vehicles per day, or Grand and Madison Streets, two-lane streets within a school zone. From the east and west, motorists utilize similar two-lane neighborhood streets including Marine Parkway, which often floods in heavy rains. Community Hospital's proposed site, on the other hand, is a 53-acre tract positioned five miles from its current facility, at the intersection of two major thoroughfares in southwestern Pasco County. The proposed site offers ample space for all facilities, parking, outpatient care, and future expansion. In addition, Community Hospital's proposed site provides reasonable access to all patients within its existing primary service area made up of zip codes 34652, 34653, 34668, 34655, 34690, and 34691. For example, the average drive times from the population centers of each zip code to the existing site of the hospital and the proposed site are as follows: Zip code Difference Existing site Proposed site 34652 3 minutes 14 minutes 11 minutes 34653 8 minutes 11 minutes 3 minutes 34668 15 minutes 21 minutes 6 minutes 34655 11 minutes 4 minutes -7 minutes 34690 11 minutes 13 minutes 2 minutes 34691 11 minutes 17 minutes 6 minutes While the average drive time from the population centroids of zip codes 34653, 34668, 34690, and 34691 to the proposed site slightly increases, it decreases from the Trinity area, where population growth has been most significant in southwestern Pasco County. In addition, a motorist's average drive time from Community Hospital's existing location to its proposed site is only 10 to 11 minutes, and patients utilizing public transportation will be able to access the new hospital via a bus stop located adjacent to the proposed site. The Condition of North Bay Facility North Bay Hospital is also an aging facility. Its original structure and portions of its physical plant are approximately 30 years old. Portions of its major mechanical systems will soon require replacement including its boilers, air handlers, and chillers. In addition, the hospital is undersized and awkwardly configured. Despite its shortcomings, however, North Bay is generally in good condition. The hospital has been consistently renovated and updated over time and is aesthetically pleasing. Moreover, its second and third floors were added in 1986, are in good shape, and structurally capable of vertical expansion. Medical Surgical Beds and ICU Units By-in-large, North Bay is comprised of undersized, semi-private rooms containing toilet and shower facilities. The hospital does not have any three-bed wards. North Bay's first floor houses all ancillary and support services including lab, radiology, pharmacy, surgery, pre-op, post-anesthesia recovery, central sterile processing and supply, kitchen and cafeteria, housekeeping and administration, as well as the mechanical, electrical, and facilities maintenance and engineering. The first floor also contains a 20-bed CMR unit and a 15-bed acute care unit. North Bay's second and third floors are mostly comprised of semi-private rooms and supporting nursing stations. Although the rooms and stations are not ideally sized, they are in relatively good shape. North Bay utilizes a single ICU with ten critical care beds. The ICU rooms and nursing stations are also undersized. A four-bed ICU ward and former nursery are routinely used to serve overflow patients. Surgery Department and Recovery North Bay utilizes a single pre-operative surgical room for all of its surgery patients. The room accommodates up to five patient beds, but has limited space for storage and pre-operative procedures. Its operating rooms are sufficiently sized. While carts and large equipment are routinely stored in hallways throughout the surgical suite, North Bay has converted the former obstetrics recovery room to surgical storage and has made efficient use of other available space. North Bay operates a small six-bed Post Anesthesia Care Unit. Nurses routinely prepare patient medications in the unit which is often crowded with staff and patients. The Emergency Department North Bay has recently expanded its emergency department. The evidence demonstrates that this department is sufficient and meets current and future expected patient volumes. Replacement Issues Relating to North Bay While it is clear that areas of North Bay's physical plant are aging, the facility is in relatively good condition. It is apparent that North Bay must soon replace significant equipment, including cast-iron sewer pipes, plumbing, boilers, and chillers which will cause some interruption to hospital operations. However, North Bay's four-page written assessment of the facility and its argument citing the need for total replacement is, on balance, not persuasive. North Bay's Proposed Replacement North Bay proposes to construct a new, state-of-the- art, hospital approximately eight miles southeast of its existing facility and intends to offer the identical array of services the hospital currently provides. North Bay's Existing and Proposed Sites North Bay's existing hospital is located on an eight-acre site with limited storm-water drainage capacity. Consequently, much of its parking area is covered by deep, porous, gravel instead of asphalt. North Bay's existing site is generally surrounded by residential properties. While the city has committed, in writing, it willingness to assist both applicants with on-site expansion, it is unknown whether North Bay can acquire additional adjacent property. North Bay's proposed site is located at the intersection of Trinity Oaks Boulevard and Mitchell Boulevard, south of Community Hospital's proposed site, and is quite spacious. It contains sufficient land for the facilities, parking, and future growth, and has all necessary infrastructure in place, including utility systems, storm- water structures, and roadways. Currently however, there is no public transportation service available to North Bay's proposed site. Projected Utilization by Applicants The evidence presented at hearing indicates that, statewide, replacement hospitals often increase a provider's acute care bed utilization. For example, Bartow Memorial Hospital, Heart of Florida Regional Medical Center, Lake City Medical Center, Florida Hospital Heartland Medical Center, South Lake Hospital, and Florida Hospital-Fish Memorial each experienced significant increases in utilization following the opening of their new hospital. The applicants in this case each project an increase in utilization following the construction of their new facility. Specifically, Community Hospital's application projects 82,685 total hospital patient days (64,427 acute care patient days) in year one (2006) of the operation of its proposed replacement facility, and 86,201 total hospital patient days (67,648 acute care patient days) in year two (2007). Using projected 2006 and 2007 population estimates, applying 2002 acute care hospital use rates which are below 50 percent, and keeping Community Hospital's acute care market share constant at its 2002 level, it is reasonably estimated that Community Hospital's existing hospital will experience 52,623 acute care patient days in 2006, and 53,451 acute care patient days in 2007. Consequently, Community Hospital's proposed facility must attain 11,804 additional acute care patient days in 2006, and 14,197 more acute care patient days in 2007, in order to achieve its projected acute care utilization. Although Community Hospital lost eight percent of the acute care market in its service area between 1995 and 2002, two-thirds of that loss was due to residents of Sub- District 5-1 acquiring services in another area. While Community Hospital experienced 78,444 acute care patient days in 1995, it projects only 64,427 acute care patient days in year one. Given the new facility and population factors, it is reasonable that the hospital will recapture half of its lost acute care market share and achieve its projections. With respect to its psychiatric unit, Community Hospital projects 16,615 adult psychiatric inpatient days in year one (2006) and 17,069 adult inpatient days in year two (2007) of the proposed replacement hospital. The evidence indicates that these projections are reasonable. Similarly, North Bay's acute care utilization rate has been consistently below 50 percent. Since 1999, the hospital has experienced declining utilization. In its application, North Bay states that it achieved total actual acute care patient days of 21,925 in 2000 and 19,824 in 2001 and the evidence at hearing indicates that North Bay experienced 17,693 total acute care patient days in 2002. North Bay projects 25,909 acute care patient days in the first year of operation of its proposed replacement hospital, and 27,334 acute care patient days in the second year of operation. Despite each applicant's current facility utilization rate, Community Hospital must increase its current acute care patient days by 20 percent to reach its projected utilization, and North Bay must increase its patient days by at least 50 percent. Given the population trends, service mix and existing competition, the evidence demonstrates that it is not possible for both applicants to simultaneously achieve their projections. In fact, it is strongly noted that the applicants' own projections are predicated upon only one applicant being approved and cannot be supported with the approval of two facilities. Local Health Plan Preferences In its local health plan for District 5, the Suncoast Health Council, Inc., adopted acute care preferences in October, 2000. The replacement of an existing hospital is not specifically addressed by any of the preferences. However, certain acute care preferences and specialty care preferences are applicable. The first applicable preference provides that preference "shall be given to an applicant who proposes to locate a new facility in an area that will improve access for Medicaid and indigent patients." It is clear that the majority of Medicaid and indigent patients live closer to the existing hospitals. However, Community Hospital proposes to move 5.5 miles from its current location, whereas North Bay proposes to move eight miles from its current location. While the short distances alone are less than significant, North Bay's proposed location is further removed from New Port Richey, is not located on a major highway or bus-route, and would therefore be less accessible to the medically indigent residents. Community Hospital's proposed site will be accessible using public transportation. Furthermore, Community Hospital has consistently provided excellent service to the medically indigent and its proposal would better serve that population. In 2000, Community Hospital provided 7.4 percent of its total patient days to Medicaid patients and 0.8 percent of its total patient days to charity patients. Community Hospital provided the highest percentage and greatest number of Medicaid patient days in Sub-District 5-1. By comparison, North Bay provided 5.8 percent of its total patient days to Medicaid patients and 0.9 percent of its total patient days to charity patients. In 2002, North Bay's Medicaid patients days declined to 3.56 percent. Finally, given the closeness and available bed space of the existing providers and the increasing population in the Trinity area, access will be improved by Community Hospital's relocation. The second local health plan preference provides that "[i]n cases where an applicant is a corporation with previously awarded certificates of need, preference shall be given to those which follow through in a timely manner to construct and operate the additional facilities or beds and do not use them for later negotiations with other organizations seeking to enter or expand the number of beds they own or control." Both applicants meet this preference. The third local health plan preference recognizes "Certificate of Need applications that provide AHCA with documentation that they provide, or propose to provide, the largest percentage of Medicaid and charity care patient days in relation to other hospitals in the sub-district." Community Hospital provides the largest percentage of Medicaid and charity care patient days in relation to other hospitals in Sub-District 5-1, and therefore meets this preference. The fourth local health plan preference applies to "Certificate of Need applications that demonstrate intent to serve HIV/AIDS infected persons." Both applicants accept and treat HIV/AIDS infected persons, and would continue to do so in their proposed replacement hospitals. The fifth local health plan preference recognizes "Certificate of Need applications that commit to provide a full array of acute care services including medical-surgical, intensive care, pediatric, and obstetrical services within the sub-district for which they are applying." Community Hospital qualifies since it will continue to provide its current services, including obstetrical care and psychiatric care, in its proposed replacement hospital. North Bay discontinued its pediatric and obstetrical programs in 2001, does not intend to provide them in its proposed replacement hospital, and will not provide psychiatric care. Agency Rule Preferences Florida Administrative Code Rule 59C-1.038(6) provides an applicable preference to a facility proposing "new acute care services and capital expenditures" that has "a documented history of providing services to medically indigent patients or a commitment to do so." As the largest Medicaid provider in Sub-District 5-1, Community Hospital meets this preference better than does North Bay. North Bay's history demonstrates a declining rate of service to the medically indigent. Statutory Review Criteria Section 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed in relation to the applicable district health plan District 5 includes Pasco and Pinellas County. Pasco County is rapidly developing, whereas Pinellas County is the most densely populated county in Florida. Given the population trends, service mix, and utilization rates of the existing providers, on balance, there is a need for a replacement hospital in the Trinity area. Section 408.035(2), Florida Statutes: The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant Community Hospital and North Bay are both located in Sub-District 5-1. Each proposes to relocate to an area of southwestern Pasco County which is experiencing explosive population growth. The other general acute care hospital located in Sub-District 5-1 is Regional Medical Center Bayonet Point, which is located further north, in the Hudson area of western Pasco County. The only other acute care hospitals in Pasco County are East Pasco Medical Center, in Zephyrhills, and Pasco Community Hospital, in Dade City. Those hospitals are located in Sub-District 5-2, east Pasco County, far from the area proposed to be served by either Community Hospital or North Bay. District 5 includes Pinellas County as well as Pasco County. Helen Ellis and Mease are existing hospital providers located in Pinellas County. Helen Ellis has 168 licensed beds, consisting of 150 acute care beds and an 18-bed skilled nursing unit, and is located 7.9 miles from Community Hospital's existing location and 10.8 miles from Community Hospital's proposed location. Access to Helen Ellis for patients originating from southwestern Pasco County requires those patients to travel congested U.S. 19 south to Tarpon Springs. As a result, the average drive time from Community Hospital's existing and proposed site to Helen Ellis is approximately 22 minutes. Helen Ellis is not a reasonable alternative to Community Hospital's proposal. The applicants' proposals are specifically designed for the current and future health care needs of southwestern Pasco County. Given its financial history, it is unknown whether Helen Ellis will be financially capable of providing the necessary care to the residents of southwestern Pasco. Mease Countryside Hospital has 189 licensed acute care beds. It is located 16.0 miles from Community Hospital's existing location and 13.8 miles from Community Hospital's proposed location. The average drive time to Mease Countryside is 32 minutes from Community Hospital's existing site and 24 minutes from its proposed site. In addition, Mease Countryside Hospital has experienced extremely high utilization over the past several years, in excess of 90 percent for calendar years 2000 and 2001. Utilization at Mease Countryside Hospital has remained over 80 percent despite the addition of 45 acute care beds in April 2002. Given the growth and demand, it is unknown whether Mease can accommodate the residents in southwest Pasco County. Mease Dunedin Hospital has 189 licensed beds, consisting of 149 acute care beds, a 30-bed skilled nursing unit, five Level 2 neonatal intensive care beds, and five Level 3 neonatal intensive care beds. Its former 15-bed adult psychiatric unit has been converted into acute care beds. It is transferring its entire obstetrics program at Mease Dunedin Hospital to Mease Countryside Hospital. Mease Dunedin Hospital is located approximately 18 to 20 miles from the applicants' existing and proposed locations with an average drive time of 35-38 minutes. With their remote location, and the exceedingly high utilization at Mease Countryside Hospital, neither of the two Mease hospitals is a viable alternative to the applicants' proposals. In addition, the construction of a replacement hospital would positively impact economic development and further attract medical professionals to Sub-District 5-1. On balance, given the proximity, utilization, service array, and accessibility of the existing providers, including the applicants, the relocation of Community Hospital will enhance access to health care to the residents. Section 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care As stipulated, both applicants provide excellent quality of care. However, Community Hospital's proposal will better enhance its ability to provide quality care. Community is currently undersized, non-compliant with today's standards, and located on a site that does not allow for reasonable expansion. Its emergency department is inadequate for patient volume, and the configuration of the first floor leads to inefficiencies in the diagnosis and treatment of emergency patients. Again, most inpatients are placed in semi-private rooms and three-bed wards, with no showers or tubs, little privacy, and an increased risk of infection. The hospital's waiting areas for families of patients are antiquated and undersized, its nursing stations are small and cramped and the operating rooms and storage facilities are undersized. Community Hospital's deficiencies will be effectively eliminated by its proposed replacement hospital. As a result, patients will experience qualitatively better care by the staff who serve them. Conversely, North Bay is in better physical condition and not in need of replacement. It has more reasonable options to expand or relocate its facility on site. Quality of care at North Bay will not be markedly enhanced by the construction of a new hospital. Sections 408.035(4)and(5), Florida Statutes, have been stipulated as not applicable in this case. Section 408.035(6), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds available for capital and operating expenditures, for project accomplishment and operation The parties stipulated that both Community Hospital and North Bay have available health personnel and management personnel for project accomplishment and operation. In addition, the evidence proves that both applicants have sufficient funds for capital and operating expenditures. Community Hospital proposes to rely on its parent company to finance the project. Keith Giger, Vice-President of Finance for HCA, Inc., Community Hospital's parent organization, provided credible deposition testimony that HCA, Inc., will finance 100 percent of the total project cost by an inter-company loan at eight percent interest. Moreover, it is noted that the amount to be financed is actually $20 million less than the $196,849,328 stated in the CON Application, since Community Hospital previously purchased the proposed site in June 2003 with existing funds and does not need to finance the land acquisition. Community Hospital has sufficient working capital for operating expenditures of the proposed replacement hospital. North Bay, on the other hand, proposes to acquire financing from BayCare Obligated Group which includes Morton Plant Hospital Association, Inc.; Mease; and several other hospital entities. Its proposal, while feasible, is less certain since member hospitals must approve the indebtedness, thereby providing Mease with the ability to derail North Bay's proposed bond financing. Section 408.035(7), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The evidence proves that either proposal will enhance geographical access to the growing population in the service district. However, with its provision of obstetrical services, Community Hospital is better suited to address the needs of the younger community. With respect to financial access, both proposed relocation sites are slightly farther away from the higher elderly and indigent population centers. Since the evidence demonstrates that it is unreasonable to relocate both facilities away from the down-town area, Community Hospital's proposal, on balance, provides better access to poor patients. First, public transportation will be available to Community Hospital's site. Second, Community Hospital has an excellent record of providing care to the poor and indigent and has accepted the agency's condition to provide ten percent of its total annual patient days to Medicaid recipients To the contrary, North Bay's site will not be accessible by public transportation. In addition, North Bay has a less impressive record of providing care to the poor and indigent. Although AHCA conditioned North Bay's approval upon it providing 9.7 percent of total annual patient days to Medicaid and charity patients, instead of the 9.7 percent of gross annual revenue proposed in its application, North Bay has consistently provided Medicaid and charity patients less than seven percent of its total annual patient days. Section 408.035(8), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate financial feasibility refers to the availability of funds to capitalize and operate the proposal. See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital Jacksonville vs. AHCA et al., Case No. 02-0447 et seq. Community Hospital has acquired reliable financing for the project and has sufficiently demonstrated that its project is immediately financially feasible. North Bay's short-term financial proposal is less secure. As noted, North Bay intends to acquire financing from BayCare Obligated Group. As a member of the group, Mease, the parent company of two hospitals that oppose North Bay's application, must approve the plan. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice, Inc., Case No. 02-0455. Although CON pro forma financial schedules typically show profitability within two to three years of operation, it is not a requirement. In fact, in some circumstances, such as the case of a replacement hospital, it may be unrealistic for the proposal to project profitability before the third or fourth year of operation. In this case, Community Hospital's utilization projections, gross and net revenues, and expense figures are reasonable. The evidence reliably demonstrates that its replacement hospital will be profitable by the fourth year of operation. The hospital's financial projections are further supported by credible evidence, including the fact that the hospital experienced financial improvement in 2002 despite its poor physical condition, declining utilization, and lost market share to providers outside of its district. In addition, the development and population trends in the Trinity area support the need for a replacement hospital in the area. Also, Community Hospital has benefited from increases in its Medicaid per diem and renegotiated managed care contracts. North Bay's long-term financial feasibility of its proposal is less certain. In calendar year 2001, North Bay incurred an operating loss of $306,000. In calendar year 2002, it incurred a loss of $1,160,000. In its CON application, however, North Bay projects operating income of $1,538,827 in 2007, yet omitted the ongoing expenses of interest ($1,600,000) and depreciation ($3,000,000) from its existing facility that North Bay intends to continue operating. Since North Bay's proposal does not project beyond year two, it is less certain whether it is financially feasible in the third or fourth year. In addition to the interest and depreciation issues, North Bay's utilization projections are less reasonable than Community Hospital's proposal. While possible, North Bay will have a difficult task achieving its projected 55 percent increase in acute care patient days in its second year of operation given its declining utilization, loss of obstetric/pediatric services and termination of two exclusive managed care contracts. Section 408.035(9), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Both applicants have substantial unused capacity. However, Community Hospital's existing facility is at a distinct competitive disadvantage in the market place. In fact, from 1994 to 1998, Community Hospital's overall market share in its service area declined from 40.3 percent to 35.3 percent. During that same period, Helen Ellis' overall market share in Community Hospital's service area increased from 7.2 percent to 9.2 percent. From 1995 to the 12-month period ending June 30, 2002, Community Hospital's acute care market share in its service area declined from 34.0 percent to 25.9 percent. During that same period, Helen Ellis' acute care market share in Community Hospital's service area increased from 11.7 percent to 12.0 percent. In addition, acute care average occupancy rates at Mease Dunedin Hospital increased each year from 1999 through 2002. Acute care average occupancy at Mease Countryside Hospital exceeded 90 percent in 2000 and 2001, and was approximately 85 percent for the period ending June 30, 2002. Some of the loss in Community Hospital's market share is due to an out-migration of patients from its service area to hospitals in northern Pinellas and Hillsborough Counties. Market share in Community's service area by out-of- market providers increased from 33 percent in 1995 to 40 percent in 2002. Community Hospital's outdated hospital has hampered its ability to compete for patients in its service area. Mease is increasing its efforts to attract patients and currently completing a $92 million expansion of Mease Countryside Hospital. The project includes the development of 1,134 parking spaces on 30 acres of raw land north of the Mease Countryside Hospital campus and the addition of two floors to the hospital. It also involves the relocation of 51 acute care beds, the obstetrics program and the Neonatal Intensive Care Units from Mease Dunedin Hosptial to Mease Countryside Hospital. Mease is also seeking to more than double the size of the Countryside emergency department to handle its 62,000 emergency visits. With the transfer of licensed beds from Mease Dunedin Hospital to Mease Countryside Hospital, Mease will also convert formerly semi-private patient rooms to private rooms at Mease Dunedin Hospital. The approval of Community Hospital's relocated facility will enable it to better compete with the hospitals in the area and promote quality and cost- effectiveness. North Bay, on the other hand, is not operating at a distinct disadvantage, yet is still experiencing declining utilization. North Bay is the only community-owned, not-for- profit provider in western Pasco County and is a valuable asset to the city. Section 408.035(10), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods or energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the project costs in both applications are reasonable to construct the replacement hospitals. Community Hospital's proposed construction cost per square foot is $175, and slightly less than North Bay's $178 proposal. The costs and methods of proposed construction for each proposal is reasonable. Given Community Hospital's severe site and facility problems, the evidence demonstrates that there is no reasonable, less costly, or more effective methods of construction available for its proposed replacement hospital. Additional "band-aide" approaches are not financially reasonable and will not enable Community Hospital to effectively compete. The facility is currently licensed for 401 beds, operates approximately 311 beds and is still undersized. The proposed replacement hospital will meet the standards in Florida Administrative Code Rule 59A-3.081, and will meet current building codes, including the Americans with Disabilities Act and the Guidelines for Design and Construction of Hospitals and Health Care Facilities, developed by the American Institute of Architects. The opponents' argue that Community Hospital will not utilize the 320 acute care beds proposed in its CON application, and therefore, a smaller facility is a less- costly alternative. In addition, Helen Ellis' architectural expert witness provided schematic design alternatives for Community Hospital to be expanded and replaced on-site, without providing a detailed and credible cost accounting of the alternatives. Given the evidence and the law, their arguments are not persuasive. While North Bay's replacement cost figures are reasonable, given the aforementioned reasons, including the fact that the facility is in reasonably good condition and can expand vertically, on balance, it is unreasonable for North Bay to construct a replacement facility in the Trinity area. Section 408.035(11), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Community Hospital has consistently provided the most health care services to Medicaid patients and the medically indigent in Sub-District 5-1. Community Hospital agreed to provide at least ten percent of its patient days to Medicaid recipients. Similarly, North Bay agreed to provide 9.7 percent of its total annual patient days to Medicaid and charity patients combined. North Bay, by contrast, provided only 3.56 percent of its total patient days to Medicaid patients in 2002, and would have to significantly reverse a declining trend in its Medicaid provision to comply with the imposed condition. Community Hospital better satisfies the criterion. Section 408.035(12) has been stipulated as not applicable in this case. Adverse Impact on Existing Providers Historical figures demonstrate that hospital market shares are not static, but fluctuate with competition. No hospital is entitled to a specific or historic market share free from competition. While the applicants are located in health planning Sub-District 5-1 and Helen Ellis and the two Mease hospitals are located in health planning Sub-District 5- 2, they compete for business. None of the opponents is a disproportionate share, safety net, Medicaid provider. As a result, AHCA gives less consideration to any potential adverse financial impact upon them resulting from the approval of either application as a low priority. The opponents, however, argue that the approval of either replacement hospital would severely affect each of them. While the precise distance from the existing facilities to the relocation sites is relevant, it is clear that neither applicants' proposed site is unreasonably close to any of the existing providers. In fact, Community Hospital intends to locate its replacement facility three miles farther away from Helen Ellis and 1.5 miles farther away from Mease Dunedin Hospital. While Helen Ellis' primary service area is seemingly fluid, as noted by its chief operating officer's hearing and deposition testimony, and the Mease hospitals are located 15 to 20 miles south, they overlap parts of the applicants' primary service areas. Accordingly, each applicant concedes that the proposed increase in their patient volume would be derived from the growing population as well as existing providers. Although it is clear that the existing providers may be more affected by the approval of Community Hosptial's proposal, the exact degree to which they will be adversely impacted by either applicant is unknown. All parties agree, however, that the existing providers will experience less adverse affects by the approval of only one applicant, as opposed to two. Furthermore, Mease concedes that its hospitals will continue to aggressively compete and will remain profitable. In fact, Mease's adverse impact analysis does not show any credible reduction in loss of acute care admissions at Mease Countryside Hospital or Mease Dunedin Hospital until 2010. Even then, the reliable evidence demonstrates that the impact is negligible. Helen Ellis, on the other hand, will likely experience a greater loss of patient volume. To achieve its utilization projections, Community Hospital will aggressively compete for and increase market share in Pinellas County zip code 34689, which borders Pasco County. While that increase does not facially prove that Helen Ellis will be materially affected by Community Hospital's replacement hospital, Helen Ellis will confront targeted competition. To minimize the potential adverse affect, Helen Ellis will aggressively compete to expand its market share in the Pinellas County zip codes south of 34689, which is experiencing population growth. In addition, Helen Ellis is targeting broader service markets, and has filed an application to establish an open- heart surgery program. While Helen Ellis will experience greater competition and financial loss, there is insufficient evidence to conclude that it will experience material financial adverse impact as a result of Community Hospital's proposed relocation. In fact, Helen Ellis' impact analysis is less than reliable. In its contribution-margin analysis, Helen Ellis utilized its actual hospital financial data as filed with AHCA for the fiscal year October 1, 2001, to September 30, 2002. The analysis included total inpatient and total outpatient service revenues found in the filed financial data, including ambulatory services and ancillary services, yet it did not include the expenses incurred in generating ambulatory or ancillary services revenue. As a result, the overstated net revenue per patient day was applied to its speculative lost number of patient days which resulted in an inflated loss of net patient service revenue. Moreover, the evidence indicates that Helen Ellis' analysis incorrectly included operational revenue and excluded expenses related to its 18-bed skilled nursing unit since neither applicant intends to operate a skilled nursing unit. While including the skilled nursing unit revenues, the analysis failed to include the sub-acute inpatient days that produced those revenues, and thereby over inflated the projected total lost net patient service revenue by over one million dollars.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Community Hospital's CON Application No. 9539, to establish a 376-bed replacement hospital in Pasco County, Sub- District 5-1, be granted; and North Bay's CON Application No. 9538, to establish a 122-bed replacement hospital in Pasco County, Sub-District 5- 1, be denied. DONE AND ENTERED this 19th day of March, 2004, in Tallahassee, Leon County, Florida. S WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2004. COPIES FURNISHED: James C. Hauser, Esquire R. Terry Rigsby, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Richard M. Ellis, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 Richard J. Saliba, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street, Suite 600 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308
The Issue The issue in this case is whether the Respondent, the Department of Health and Rehabilitative Services (HRS), should grant the application of the Petitioner, RHPC, Inc., d/b/a Riverside Hospital (Riverside), for a certificate of need, CON Action No. 6582, for the addition of 31 acute care beds.
Findings Of Fact The Applicant and the Application. The applicant, the Petitioner, RHPC, Inc., d/b/a Riverside Hospital (Riverside), is a 102 bed acute care hospital 1/ located at 6600 Madison Street, New Port Richey, Florida, in the West Pasco County Subdistrict of HRS Service District 5, which also includes Pinellas County and East Pasco County. Included among its complement of beds are 14 obstetrical (OB) beds. There are no existing pediatric beds. Riverside's application is for a certificate of need to spend approximately $2,000,000 to renovate its existing OB unit, add 14 beds to the OB unit, add 11 medical/surgical beds and add six pediatric beds. The addition of the pediatric unit will be accomplished by relatively minor alterations to existing space and existing beds, and the cost attributable to this phase of the application is negligible. Similarly, the 11 additional med/surg beds will be accomplished by adding beds to existing private rooms, to create semi-private rooms, at a cost of only approximately $44,000. (Gas and electric lines for the additional beds already have been run to the headwall of these rooms and can be connected without difficulty or much expense.) Most of the $2 million total capital expenditure proposed in the application is attributable to the cost of modernizing the OB unit, with the addition of 14 beds in the process. The addition of 14 beds to the unit does not add significantly to what the modernization effort would cost without the addition of the 14 beds. The proposed new OB unit would include private rooms, to go along with the semi-private rooms that make up the existing 14-bed unit. In addition, the proposed modernized 28-bed OB unit would consist of the combined labor/delivery/recovery/post-partum (LDRP) rooms now preferred by most patients. Pertinent State Health Plan Provision. The 1989 State of Florida Health Plan states at the outset of a list of preferences to be utilized in comparing applications for additional acute care beds: No additional acute care beds should generally be approved unless the subdistrict occupancy rate is at or exceeds 75 percent, or, in the event of an existing facility, an applicant shall demonstrate that the occupancy rate for the most recent 12 months is at or exceeds 80 percent. The Need Methodology. Using the F.A.C. Rule 10-5.038 methodology, the district and subdistrict would show numeric need of approximately 201 and 230, respectively. See F.A.C. Rule 10-5.038(5). Regardless of the calculated bed need, HRS does not normally approve additional beds in a subdistrict unless the annual average acute care bed occupancy rate is 75 percent or higher during the 12-month base period of July, 1989, through June, 1990. See F.A.C. Rule 10-5.038(7)(d). The 670 licensed beds in the West Pasco Subdistrict reported only 68.92% occupancy during the 12- month base period, resulting in no projected need for additional acute care beds in the subdistrict for the applicable 1996 planning horizon. Even when a subdistricts's need for additional acute care beds projected by the methodology is zero, an application by an existing hospital still may be approved where that hospital's annual average occupancy rate exceeds 75 percent for the 12-month base period (again, in this case, from July, 1989, through June, 1990.) See F.A.C. Rule 10-5.038(7)(e). During the 12-month base period from July, 1989, through June, 1990, Riverside's occupancy averaged 72.40%, not high enough to be approved under F.A.C. Rule 10-5.038(7)(e). Observation Bed Days. Three types of beds days are included in a category of so-called "outpatient observation bed days." First, "twenty-three hour patients" are patients who are not eligible for inpatient services under the Health Care Finance Administration (HCFA) criteria for the Medicare program. Second, "observation patients" are similar non-Medicare patients. Third, some outpatients (or ambulatory surgery patients) also use beds for part of a day. With new cost containment and review/regulation developments in hospital care, more patients are spending up to 23 hours in the hospital before a decision is made that further hospitalization in not needed. As a result, "observation" bed use has increased. Outpatient observation services have been recognized and defined by HCFA. Blue Cross and Blue Shield of Florida (the Medicare intermediary) and the Health Care Cost Containment Board (HCCCB) have addressed issues such as reimbursement, billing and reporting of observation beds. Services are provided to "observation bed" patients under doctor's orders, including diagnostic services, observation and monitoring by nursing personnel and/or medical intervention or treatment. Calculation of occupancy rates under the HRS need methodology does not take into account the so-called "observation bed days." 2/ There was no evidence that any part of District V or the West Pasco Subdistrict are inaccessible geographically. Other Need Factors. The evidence showed that there is a seasonal peak utilization and occupancy of acute care beds in District V and in the West Pasco Subdistrict during approximately October or November through March or April each year. This seasonal peak is reflected by the statistics. As previously stated, Riverside's occupancy averaged 72.40% during the period from July, 1989, through June, 1990. During the first quarter of 1990, occupancy was 86.83%. Riverside's average occupancy for calendar year 1990 was 73.87%. For the period from March, 1990, through February, 1991, average occupancy for Riverside's acute care beds was 71.2%. 3/ For the period from March, 1990, through February, 1991, occupancy for Riverside's obstetrics beds was 92.9%. There is no acute care pediatric unit in the West Pasco subdistrict. Subdistrict residents (as well as others in Riverside's general service area) needing level II pediatric services generally go to a Pinellas County or East Pasco County hospital for them. Given the choice, some but not all of these patients likely would prefer to get these services at Riverside, depending primarily on the severity of the particular medical needs. But the evidence did not quantify the number predicted to switch to Riverside. Also, occupancy of pediatric beds in Pasco county was less than 15% during 1987 and 1988. Medical Care for the Poor. The State Health Plan also notes that the uncompensated care burden on hospitals has grown during the 1980s because of a growing number of low-income persons; simultaneously, the proportion of persons covered by Medicaid has dropped. Numerous statewide studies, moreover, have shown that hospitals' uncompensated care is increasing at the same time that their ability to absorb the cost of care is decreasing. Riverside's predecessor bought the hospital from Pasco County in 1982. As a condition to the purchase, Riverside's predecessor agreed to provide Medicaid and indigent care for Pasco County in perpetuity. When Riverside purchased the hospital on December 29, 1983, it assumed the contractual obligation to provide Medicaid and indigent care in perpetuity. Riverside is a disproportionate share provider within the meaning of the State and local health plans. Approximately, 13% of Riverside's total annual patient days are for Medicaid patients. In 1990, 2,647 of Riverside's obstetrical, and 4,272 of its non-obstetrical patient days, were Medicaid. Riverside's charity care deduction from gross patient revenue for fiscal year 1990 was 1.07% of gross patient revenue. Riverside's Medicaid deduction from gross patient revenue for fiscal year 1990 was 5.96% of gross patient revenue. Approximately, 14.8% of Riversides's services go to Medicaid and indigent patients. Although Riverside has only 14% of the beds in the West Pasco subdistrict, it does more than 90% of the non-emergency, non-OB Medicaid care. Approval of the Riverside application would enable Riverside to spread its administrative and overhead costs over a larger base, thereby reducing average charges. Approval of the Riverside application also would make Riverside more profitable and thereby better able to absorb the cost of the Medicaid and indigent care it provides. If Riverside converts existing acute care beds to pediatric or OB beds, it probably would have to squeeze out paying patients during seasonal occupancy peaks, thereby losing more revenue and profits. Competition. If the Riverside application is approved, Riverside's share of the market represented by the West Pasco subdistrict will rise from approximately 14% to approximately 18%. HCA controls the rest of the market. There are no existing OB beds in the West Pasco subdistrict other than at Riverside. The HCA hospital in New Port Richey had an OB unit which it recently abandoned. As a result of the grant of Bayonet Point's application, CON Action No. 6583, with which Riverside had been in direct competition in this application review cycle, Bayonet Point now is approved for a seven-bed OB unit as part of its bed complement. Upgrading its existing OB unit and adding 14 more OB beds will enable Riverside to capture more private paying patients, which will better enable it to compete with the HCA hospitals. At present, Riverside's OB unit is utilized almost exclusively by indigent and Medicaid patients because of the hospital's contract with Pasco County. This unit now is operating at close to absolute capacity. With the upgrades and additional beds, Riverside can work to capture some private pay patients; without them, Bayonet Point will capture the private pay patients. Financial Feasibility. Riverside operated at a deficit from 1983 essentially to the present. By the end of 1990, Riverside had accumulated a deficit of $8.8 million. Riverside's corporate parent, American Healthcare Management, Inc. (AHM), was funding the deficit. From 1985 through December, 1989, AHM was in Chapter 11 bankruptcy proceedings. During that time period, there was legitimate concern whether AHM would be able to continue to fund Riverside deficits. AHM emerged from bankruptcy in December, 1989, stronger financially. It has since become stronger still. AHM reduced its debt by approximately $88 million. Part of the debt reduction was achieved by the sale of $43 million of underperforming assets. In addition, $45 million of bond debt was exchanged for common stock on September 30, 1991. The interest savings on the bond-for-stock exchange is $6 million a year. As a result, AHM's current debt-to-equity ratio is approximately $160 million to $130 million. AHM's corporate staff has been reduced from about 102 to 65. Its corporate office were transferred from expensive quarters in Dallas, Texas, to less expensive quarters in King of Prussia, Pennsylvania. Corporate expenses have been greatly reduced as a result. Accounts receivable have been reduced by better collection methods, and the $43 million of assets sold to reduce corporate debt had been underperforming. AHM had $21 million cash and short-term investments as of December 31, 1989. As of the date of the final hearing, it had $18 million cash and short- term investments. Riverside's gross margin (profit) for the first nine months of 1991 was $4 million. After depreciation, amortization, and interest and home office costs, Riverside generated approximately $1.2 million for the first nine months of 1991. Internal cash flow generated by AHM and Riverside would be sufficient to finance Riverside's application project. Since the capital costs of Riverside's proposed project are relatively small, financial feasibility is relatively easy to achieve. Besides costing relatively little, the 31 new beds will not increase intercompany interest or management fees significantly. In addition, the 31 new beds would enable Riverside to better compete for private pay patients. Given the expected utilization of the new beds, the proposed project will be to the financial benefit of the applicant. The pro forma bears this out. It projects 75.11% occupancy for the 31 new beds in the second year of operation (July, 1994, to June, 1995). (This projection does not include expected "observation bed days.") A profit of $2,477,199 for the 31 beds is projected for the second year of operation (not counting any portion of the preexisting intercompany interest or management fees).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that HRS enter a final order denying the Riverside application for a certificate of need, CON Action No. 6582, for the addition of 31 acute care beds. RECOMMENDED this 28th day of January, 1992, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1992.
The Issue Whether Certificate of Need (CON) Application No. 9992, filed by Sun City Hospital, Inc., d/b/a South Bay Hospital to establish a 112-bed replacement hospital in Riverview, Hillsborough County, Florida, satisfies, on balance, the applicable statutory and rule review criteria for approval.
Findings Of Fact The Parties A. South Bay South Bay is a 112-bed general acute care hospital located at 4016 Sun City Center Boulevard, Sun City Center, Florida. It has served south Hillsborough County from that location since its original construction in 1982. South Bay is a wholly-owned for-profit subsidiary of Hospital Corporation of America, Inc. (HCA), a for-profit corporation. South Bay's service area includes the immediate vicinity of Sun City Center, the communities of Ruskin and Wimauma (to the west and east of Sun City Center, respectively), and the communities of Riverview, Gibsonton, and Apollo Beach to the north. See FOF 68-72. South Bay is located on the western edge of Sun City Center. The Sun City Center area is comprised of the age- restricted communities of Sun City Center, Kings Point, Freedom Plaza, and numerous nearby senior living complexes, assisted- living facilities, and nursing homes. This area geographically comprises the developed area along the north side of State Road (SR) 674 between I–75 and U.S. Highway 301, north to 19th Avenue and south to the Little Manatee River. South Bay predominantly serves the residents of the Sun City Center area. In 2009, Sun City Center residents comprised approximately 57% of all discharges from SB. South Bay had approximately 72% market share in Sun City Center zip code 33573. (Approximately 32% of all market service area discharges came from zip code 33573.) South Bay provides educational programs at the hospital that are well–attended by community residents. South Bay provides comprehensive acute care services typical of a small to mid-sized community hospital, including emergency services, surgery, diagnostic imaging, non-invasive cardiology services, and endoscopy. It does not provide diagnostic or therapeutic cardiac catheterization or open-heart surgery. Patients requiring interventional cardiology services or open-heart surgery are taken directly by Hillsborough County Fire Rescue or other transport to a hospital providing those services, such as Brandon Regional Hospital (Brandon) or SJH, or are transferred from SB to one of those hospitals. South Bay has received a number of specialty accreditations, which include accreditation by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), specialty accreditation as an advanced primary stroke center, and specialty accreditation by the Society for Chest Pain. South Bay has also received recognition for its quality of care and, in particular, for surgical infection prevention and outstanding services relating to heart attack, heart failure, and pneumonia. South Bay's 112 licensed beds comprise 104 general medical-surgical beds and eight Intensive Care Unit (ICU) beds. Of the general medical-surgical beds, 64 are in semi-private rooms, where two patient beds are situated side-by-side, separated by a curtain. Forty-eight are in private rooms. Semi- private rooms present challenges in terms of infection control and patient privacy, and are no longer the standard of care in hospital design and construction. Over the years, SB has upgraded its hospital physical plant to accommodate new medical technology, including an MRI suite and state-of-the-art telemetry equipment. South Bay is implementing automated dispensing cabinets on patient floors for storage of medications and an electronic medication administration record system that provides an extra safety measure for dispensing medications. Since 2009, SB has implemented numerous programmatic initiatives that have improved the quality of care. South Bay is converting one wing of the hospital to an orthopedic unit. In 2001, South Bay completed a major expansion of its ED and support spaces, but has not added new beds. Patients presenting to the ED have received high quality of care and timely care. Since 2009, SB has improved its systems of care and triage of patients in the ED to improve patient flow and reduce ED wait times. Overall, South Bay has a reputation of providing high- quality care in a timely manner, notwithstanding problems with its physical plant and location. South Bay's utilization has been high historically. From 2006 to 2009, SB's average occupancy has been 79.5%, 80.3%, 77.2%, and 77.7%, respectively. Its number of patient discharges also increased in that time, from 6,190 in 2006 to 6,540 in 2009, at an average annual rate increase of 1.9%. (From late November until May, the seasonal months, utilization is very high, sometimes at 100% or greater.) Despite its relatively high utilization, SB has also had marginal financial results historically. It lost money in 2005 and 2007, with operating losses of $644,259 in 2005 and $1,151,496 in 2007 and bottom-line net losses of $447,957 (2005) and $698,305 (2007). The hospital had a significantly better year in 2009, with an operating gain of $3,365,113 and a bottom- line net profit of $2,144,292. However, this was achieved largely due to a reduction in bad debt from $11,927,320 in 2008 to $7,772,889 in 2009, an event the hospital does not expect to repeat, and a coincidence of high surgical volume. Its 2010 financial results were lagging behind those of 2009 at the time of the hearing. South Bay's 2009 results amount to an aberration, and it is likely that 2010 would be considerably less profitable. South Bay's marginal financial performance is due, in part, to its disproportionate share of Medicare patients and a disproportionate percentage of Medicare reimbursement in its payor mix. Medicare reimburses hospitals at a significantly lower rate than managed care payors. As noted, SB is organizationally a part of HCA's West Florida Division, and is one of two HCA-affiliated hospitals in Hillsborough County; Brandon is the other. (There are approximately 16 hospitals in this division.) Brandon has been able to add beds over the past several years, and its services include interventional cardiology and open-heart surgery. However, SB and Brandon combined still have fewer licensed beds than either St. Joseph's Hospital or Tampa General Hospital, and fewer than the BayCare Health System- affiliated hospitals in Hillsborough in total. South Bay's existing physical plant is undersized and outdated. See discussion below. Whether it has a meaningful opportunity for expansion and renovation at its 17.5-acre site is a question for this proceeding to resolve. South Bay proposes the replacement and relocation of its facility to the community of Riverview. In 2005, SB planned to establish an 80-bed satellite hospital in Riverview, on a parcel owned by HCA and located on the north side of Big Bend Road between I-75 and U.S. Highway 301. SB filed CON Application No. 9834 in the February 2005 batching cycle. The application was preliminarily denied by AHCA, and SB initially contested AHCA's determination. South Bay pursued the satellite hospital CON at that time because of limited availability of intercompany financing from HCA. By the time of the August 2007 batching cycle, intercompany financing had improved, allowing SB to pursue the bigger project of replacing and relocating the hospital. South Bay dismissed its petition for formal administrative hearing, allowing AHCA's preliminary denial of CON Application No. 9834 to become final, and filed CON Application No. 9992 to establish a replacement hospital facility on Big Bend Road in Riverview. St. Joseph's Hospital St. Joseph's Hospital was founded by the Franciscan Sisters of Allegany, New York, as a small hospital in a converted house in downtown Tampa in 1934. In 1967, SJH opened its existing main hospital facility on Martin Luther King Avenue in Tampa, Florida. St. Joseph's Hospital, Inc., a not-for-profit entity, is the licensee of St. Joseph's Hospital, an acute care hospital located at 3001 West Martin Luther King, Jr., Boulevard, Tampa, Florida. As a not-for-profit organization, SJH's mission is to improve the health care of the community by providing high- quality compassionate care. St. Joseph's Hospital, Inc., is a Medicaid disproportionate share provider and provided $145 million in charity and uncompensated care in 2009. St. Joseph's Hospital, Inc., is licensed to operate approximately 883 beds, including acute care beds; Level II and Level III neonatal intensive care unit (NICU) beds; and adult and child-adolescent psychiatric beds. The majority of beds are semi-private. Services include Level II and pediatric trauma services, angioplasty, and open-heart surgery. These beds and services are distributed among SJH's main campus; St. Joseph's Women's Hospital; St. Joseph's Hospital North, a newer satellite hospital in north Tampa; and St. Joseph's Children's Hospital. Except for St. Joseph's Hospital North, these facilities are land-locked. Nevertheless, SJH has continued to invest in its physical plant and to upgrade its medical technology and equipment. In February 2010, SJH opened St. Joseph's Hospital North, a state-of-the-art, 76-bed satellite hospital in Lutz, north Hillsborough County, at a cost of approximately $225 million. This facility is approximately 14 miles away from the main campus. This followed the award of CON No. 9610 to SJH for the establishment of St. Joseph's Hospital North, which was unsuccessfully opposed by University Community Hospital and Tampa General Hospital, two existing hospital providers in Tampa. Univ. Cmty. Hosp., Inc., d/b/a Univ. Cmty. Hosp. v. Agency for Health Care Admin., Case Nos. 03-0337CON and 03-0338CON. St. Joseph's Hospital North operates under the same license and under common management. St. Joseph's Hospital, Inc., is also the holder of CON No. 9833 for the establishment of a 90-bed state-of-the-art satellite hospital on Big Bend Road, Riverview, Hillsborough County. These all private beds include general medical-surgical beds, an ICU, and a 10-bed obstetrical unit. On October 21, 2009, the Agency revised CON No. 9833 with a termination date of October 21, 2012. This project was unsuccessfully opposed by TG, SB, and Brandon. St. Joseph's Hosp., Inc. v. Agency for Health Care Admin., Case No. 05-2754CON, supra. St. Joseph's Hospital anticipates construction beginning in October 2012 and opening the satellite hospital, to be known as St. Joseph's Hospital South, in early 2015. This hospital will be operating under SJH's existing license and Medicare and Medicaid provider numbers and will in all respects be an integral component of SJH. The implementation of St. Joseph's Hospital South is underway. SJH has contracted with consultants, engineers, architects, and contractors and has funded the first phase of the project with $6 million, a portion of which has been spent. The application for CON No. 9833 refers to "evidence- based design" and the construction of a state-of-the-art facility. (The design of St. Joseph's Hospital North also uses "evidence-based design.") St. Joseph's Hospital South will have all private rooms, general surgery operating rooms as well as endoscopy, and a 10-bed obstetrics unit. Although CON No. 9833 is for a project involving 228,810 square feet of new construction, SJH intends to build a much larger facility, approximately 400,000 square feet on approximately 70 acres. St. Joseph's Hospital Main's physical plant is 43 years old. The majority of the patient rooms are semi–private and about 35% of patients admitted at this hospital received private rooms. Notwithstanding the age of its physical plant and its semi–private bed configuration, SJH has a reputation of providing high quality of care and is a strong competitor in its market. St. Joseph's Hospital, Inc., has two facility expansions currently in progress at its main location in Tampa: a new five-story building that will house SJH neonatal intensive care unit, obstetrical, and gynecology services; and a separate, two-story addition with 52 private patient rooms. Of the 52 private patient rooms, 26 will be dedicated to patients recovering from orthopedic surgery, and will be large enough to allow physical therapy to be done in the patient room itself. The other 26 rooms will be new medical-surgical ICU beds at the hospital. At the same time that SJH expands its main location, it is pursuing a strategic plan whereby the main location is the "hub" of its system, with community hospitals and health facilities located in outlying communities. As proposed in CON Application No. 9610, St. Joseph's Hospital North was to be 240,000 square feet in size. Following the award of CON No. 9610, SJH requested that AHCA modify the CON to provide for construction of a larger facility. In its modification request, SJH requested to establish a large, state- of-the-art facility with all private patient rooms, and the desirability of private patient rooms as a matter of infection control and patient preference. AHCA granted the modification. St. Joseph's Hospital, Inc., thereafter planned to construct St. Joseph's Hospital North to be four stories in height. The plan was opposed. St. Joseph's Hospital, Inc., offered to construct a three-story building, large enough horizontally to accommodate the CON square footage modification. The offer was accepted. St. Joseph's Hospital, Inc., markets St. Joseph's Hospital North as "The Hospital of the Future, Today." The hospital was constructed using "evidence-based design" to maximize operational efficiencies and enhance the healing process of its residents –- recognizing, among other things, the role of the patient's family and friends. The facility's patient care units are all state-of-the-art and include, for example, obstetrical suites in which a visiting family member can spend the night. A spacious, sunlit atrium and a "healing garden" are also provided. The hospital's dining facility is frequented by community residents. In addition, SJH owns a physician group practice under HealthPoint Medical Group, a subsidiary of St. Joseph's Health Care Center, Inc. The group practice has approximately 19 different office locations, including several within the service area for the proposed hospital. The group includes approximately 106 physicians. However, most of the office locations are in Tampa, and the group does not have an office in Riverview, although there are plans to expand locations to include the Big Bend Road site. St. Joseph's Hospital, Inc., anticipates having to establish a new medical staff for St. Joseph's Hospital South, and will build a medical office building at the site for the purpose of attracting physicians. It further anticipates that some number of physicians on SB's existing medical staff will apply for privileges at St. Joseph's Hospital South. St. Joseph's Hospital, Inc., is the market leader among Hillsborough County hospitals and is currently doing well financially, as it has historically. For 2010, St. Joseph's Hospital Main's operating income was approximately $78 million. Organizationally, SJH has a parent organization, St. Joseph's Health Care Center, Inc., and is one of eight hospitals in the greater Tampa Bay area affiliated with BayCare. On behalf of its member hospitals, BayCare arranges financing for capital projects, provides support for various administrative functions, and negotiates managed care contracts that cover its members as a group. St. Joseph's Hospital characterizes fees paid for BayCare services as an allocation of expenses rather than a management fee for its services. In 2009, SJH paid BayCare approximately $42 million for services. St. Joseph's Hospital is one of three BayCare affiliates in Hillsborough County. The other two are St. Joseph's Hospital North and South Florida Baptist Hospital, a community hospital in Plant City. St. Joseph's Hospital South would be the fourth BayCare hospital in the county. Tampa General The Hillsborough County Hospital Authority, a public body appointed by the county, operated Tampa General Hospital until 1997. In that year, TG was leased to Florida Health Sciences Center, Inc., a non-profit corporation and the current hospital licensee. Tampa General is a 1,018-bed acute care hospital located at 2 Columbia Drive, Davis Island, Tampa, Florida. In addition to trauma surgery services, TG provides tertiary services, such as angioplasty, open-heart surgery, and organ transplantation. Tampa General operates the only burn center in the area. A rehabilitation hospital is connected to the main hospital, but there are plans to relocate this facility. Tampa General owns a medical office building. Tampa General is JCAHO accredited and has received numerous honors. Tampa General provides high-quality of care. Approximately half of the beds at TG are private rooms. Tampa General's service area for non-tertiary services includes all of Hillsborough County. Tampa General is also the teaching hospital for the University of South Florida's College of Medicine. As a statutory teaching hospital, TG has 550 residents and funds over 300 postgraduate physicians in training. Tampa General is the predominant provider of services to Medicaid recipients and the medically indigent of Hillsborough County. It is considered the only safety-net hospital in Hillsborough County. (A safety net hospital provides a disproportionate amount of care to indigent and underinsured patients in comparison to other hospitals.) A high volume of indigent (Medicaid and charity) patients are discharged from TG. In 2009, the costs TG incurred treating indigent patients exceeded reimbursement by $56.5 million. Approximately 33% of Tampa General's patients are Medicare patients and 25% commercial. Tampa General has grown in the past 10 years. It added 31 licensed acute care beds in 2004 and 82 more since SB's application was filed in 2007. In addition, the Bayshore Pavilion, a $300-million project, was recently completed. The project enlarged TG's ED, and added a new cardiovascular unit, a new neurosciences and trauma center, a new OB-GYN floor, and a new gastrointestinal unit. Facility improvements are generally ongoing. Tampa General's capital budget for 2011 is approximately $100 million. In 2010, TG's operating margin was approximately $43 million and a small operating margin in 2011. AHCA AHCA is the state agency that administers the CON law. Jeff Gregg testified that during his tenure, AHCA has never preliminarily denied a replacement hospital CON application or required consideration of alternatives to a replacement hospital. Mr. Gregg opined that the lack of alternatives or options is a relevant consideration when reviewing a replacement hospital CON application. T 468. The Agency's State Agency Action Report (SAAR) provides reasons for preliminarily approving SB's CON application. During the hearing, Mr. Gregg testified, in part, that the primary reasons for preliminary approval were issues related to quality of care "because the facility represents itself as being unable to expand or adapt significantly to the rapidly changing world of acute care. This is consistent with what [he has] heard about other replacement hospitals." T 413. Mr. Gregg also noted that SB focused on improving access "[a]nd as the years go by, it is reasonable to expect that the population outside of Sun City Center, the immediate Sun City Center area, will steadily increase and improve access for more people, and that's particularly true because this application includes both a freestanding emergency department and a shuttle service for the people in the immediate area. And that was intended to address their concerns based upon the fact that they have had this facility very conveniently located for them in the past at a time when there was little development in the general south Hillsborough area. But the applicant wants to position itself for the expected growth in the future, and we think has made an excellent effort to accommodate the immediate interests of Sun City Center residents with their promises to do the emergency, freestanding emergency department and the shuttle service so that the people will continue to have very comfortable access to the hospital." T 413-14. Mr. Gregg reiterated "that the improvements in quality outweigh any concerns that [the Agency] should have about the replacement and relocation of this facility; that if this facility were to be forced to remain where it is, over time it would be reasonable to expect that quality would diminish." T 435. For AHCA, replacement hospital applications receive the same level of scrutiny as any other acute care hospital applications. T 439-40. South Bay's existing facility and site South Bay is located on the north side of SR 674, an east-west thoroughfare in south Hillsborough County. The area around the hospital is "built out" with predominantly residential development. Sun City Center, an age-restricted (55 and older) retirement community, is located directly across SR 674 from the hospital as well as on the north side of SR 674 to the east of the hospital. Other residential development is immediately to the west of the hospital on the north side of SR 674. See FOF 3-6. Sun City Center is flanked by two north-south arterial roadways, I-75 to the west and U.S. Highway 301 to the east, both of which intersect with SR 674. The community of Ruskin is situated generally around the intersection of SR 674 and U.S. 41, west of I-75. The community of Wimauma is situated along SR 674 just east of U.S. Highway 301. South Bay is located in a three-story building that is well–maintained and in relatively good repair. The facility is well laid out in terms of design as a community hospital. Patients and staff at SB are satisfied with the quality of care and scope of acute care services provided at the hospital. Notwithstanding current space limitations, and problems in the ICU, see FOF 77-82, patients receive a high quality of care. One of the stated reasons for replacement is with respect to SB's request to have all private patient rooms in order to be more competitive with St. Joseph's Hospital South. South Bay's inpatient rooms are located within the original construction. The hospital is approximately 115,800 square feet, or a little over 1,000 square feet per inpatient bed. By comparison, small to mid-sized community hospitals built today are commonly 2,400 square feet per inpatient bed on average. All of SB's patient care units are undersized by today's standards, with the exception of the ED. ICU patients, often not ambulatory, require a higher level of care than other hospital patients. The ICU at SB is not adequate to meet the level of care required by the ICU patient. SB's ICU comprises eight rooms with one bed apiece. Eight beds are not enough. As Dr. Ksaibati put it at hearing: "Right now we have eight and we are always short . . . double . . . the number of beds, that's at least [the] minimum [t]hat I expect we are going to have if we go to a new facility." T 198-99 (emphasis added). The shortage of beds is not the only problem. The size of SB's ICU rooms is too small. (Problems with the ICU have existed at least since 2006.) Inadequate size prohibits separate, adjoining bathrooms. For patients able to leave their beds, therefore, portable bathroom equipment in the ICU room is required. Inadequate size, the presence of furniture, and the presence of equipment in the ICU room creates serious quality of care issues. When an EKG is conducted, the nurse cannot be present in the room. Otherwise, there would be no space for the EKG equipment. It is difficult to intubate a patient and, at times, "extremely dangerous." T 170. A major concern is when a life-threatening problem occurs that requires emergency treatment at the ICU patient's bedside. For example, when a cardiac arrest "code" is called, furniture and the portable bathroom equipment must be removed before emergency cardiac staff and equipment necessary to restore the function of the patient's heart can reach the patient for the commencement of treatment. Comparison to ICU rooms at other facilities underscores the inadequate size of SB's ICU rooms. Many of the ICU rooms at Brandon are much larger -- more than twice the size of SB's ICU rooms. Support spaces are inadequate in most areas, resulting in corridors (at times) being used for inappropriate storage. In addition, the hospital's general storage is inadequate, resulting in movable equipment being stored in mechanical and electrical rooms. Of the medical-surgical beds at SB, 48 are private and 64 are semi-private. The current standard in hospital design is for acute care hospitals to have private rooms exclusively. Private patient rooms are superior to semi-private rooms for infection control and patient well-being in general. The patient is spared the disruption and occasional unpleasantness that accompanies sharing a patient room –- for example, another patient's persistent cough or inability to use the toilet (many of SB's semi-private rooms have bedside commodes). Private rooms are generally recognized as promoting quality of care. South Bay's site is approximately 17.5 acres, bordered on all sides by parcels not owned by either SB or by HCA- affiliated entities. The facility is set back from SR 674 by a visitor parking lot. Proceeding clockwise around the facility from the visitor parking lot, there is a small service road on the western edge of the site; two large, adjacent ponds for stormwater retention; the rear parking lot for ED visitors and patients; and another small service road which connects the east side of the site to SR 674, and which is used by ambulances to access the ED. Dedicated parking for SB's employees is absent. A medical office building (MOB), which is not owned by SB, is located to the north of the ED parking lot. The MOB houses SB's Human Resources Department as well as medical offices. Most of SB's specialty physicians have either full or part-time offices in close proximity to SB. Employee parking is not available in the MOB parking lot. Some of SB's employees park in a hospital-owned parking lot to the north of the MOB, and then walk around the MOB to enter the hospital. South Bay's CEO and management employees park on a strip of a gravel lot, which is rented from the Methodist church to the northeast of the hospital's site. In 2007, as part of the CON application to relocate, SB commissioned a site and facility assessment (SFA) of the hospital. The SFA was prepared for the purpose of supporting SB's replacement hospital application and has not been updated since its preparation in 2007. The architects or engineers who prepared the SFA were not asked to evaluate proposed options for expansion or upgrade of SB on-site. However, the SFA concludes that the SB site has been built out to its maximum capacity. On the other hand, the SFA concluded that the existing building systems at SB met codes and standards in force when constructed and are in adequate condition and have the capacity to meet the current needs of the hospital. The report also stated that if SB wanted to substantially expand its physical plant to accommodate future growth, upgrades to some of the existing building systems likely would be required. Notwithstanding these reports and relative costs, expansion of SB at its existing site is not realistic or cost- effective as compared to a replacement hospital. Vertical expansion is complicated by two factors. First, the hospital's original construction in 1982 was done under the former Southern Standard Building Code, which did not contain the "wind-loading" requirements of the present-day Florida Building Code. Any vertical expansion of SB would not only require the new construction to meet current wind-loading requirements, but would also require the original construction to be retrofitted to meet current wind-loading requirements (assuming this was even possible as a structural matter). Second, if vertical expansion were to meet current standards for hospital square footage, the new floor or floors would "overhang" the smaller existing construction, complicating utility connections from the lower floor as well as the placement of structural columns to support the additional load. The alternative (assuming feasibility due to current wind-loading requirements) would be to vertically stack patient care units identical to SB's existing patient care units, thereby perpetuating its undersized and outdated design. Vertical expansion at SB has not been proposed by the Gould Turner Group (Gould Turner), which did a Master Facility Plan for SB in May 2010, but included a new patient bed tower, or by HBE Corporation (HBE). Horizontal expansion of SB is no less complicated. The hospital would more than double in size to meet the modern-day standard of 2,400 square feet per bed, and its site is too small for such expansion. It is apparent that such expansion would displace the visitor parking lot if located to the south of the existing building, and likely have to extend into SR 674 itself. South Bay's architectural consultant expert witness substantiated that replacing SB is justified as an architectural matter, and that the facility cannot be brought up to present-day standards at its existing location. According to Mr. Siconolfi, the overall building at SB is approximately half of the total size that would normally be in place for a new hospital meeting modern codes and industry standards. The more modest expansions offered by Gould Turner and HBE are still problematic, if feasible at all. Moreover, with either proposal, SB would ultimately remain on its existing 17.5-acre site, with few opportunities to expand further. Gould Turner's study was requested by SB's CEO in May 2010, to determine whether and to what extent SB would be able to expand on-site. (Gould Turner was involved with SB's recent ED expansion project area.) The resulting Master Facility Plan essentially proposes building a new patient tower in SB's existing visitor parking lot, to the left and right of the existing main entrance to SB. This would require construction of a new visitor parking lot in whatever space remained in between the new construction and SR 674. The Master Facility Plan contains no discussion of the new impervious area that would be added to the site and the consequential requirement of additional stormwater capacity, assuming the site can even accommodate additional stormwater capacity. This study also included a new 12-bed ICU and the existing ICU would be renovated into private patient rooms. For example, "[t]he second floor would be all telemetry beds while the third floor would be a combination of medical/surgical, PCU, and telemetry beds." In Gould Turner's drawings, the construction itself would be to the left and to the right of the hospital's existing main entrance. Two scenarios are proposed: in the first, the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 114 licensed beds (including two new beds), all private; in the second, some of the hospital's existing semi-private rooms would become private rooms and, with the new construction, the hospital would have 146 licensed beds (adding 34 beds), of which 32 would be semi-private. South Bay did not consider Gould Turner's alternative further or request additional, more detailed drawings or analysis, and instead determined to pursue the replacement hospital project, in part, because it was better not to "piecemeal" the hospital together. Mr. Miller, who is responsible for strategic decisions regarding SB, was aware of, but did not review the Master Facility Plan and believes that it is not economically feasible to expand the hospital. St. Joseph's Hospital presented testimony of an architect representing the hospital design/build firm of HBE, to evaluate SB's current condition, to provide options for expansion and upgrading on-site, and to provide a professional cost estimate for the expansion. Mr. Oliver personally inspected SB's site and facility in October 2010 and reviewed numerous reports regarding the facility and other documents. Mr. Oliver performed an analysis of SB's existing physical plant and land surrounding the hospital. HBE's analysis concluded that SB has the option to expand and upgrade on-site, including the construction of a modern surgical suite, a modern 10-bed ICU, additional elevators, and expansion and upgrading of the ancillary support spaces identified by SB as less than ideal. HBE's proposal involves the addition of 50,000 square feet of space to the hospital through the construction of a three-story patient tower at the south side of the hospital. The additional square footage included in the HBE proposal would allow the hospital to convert to an all-private bed configuration with either 126 private beds by building out both second and third floors of a new patient tower, or to 126 private beds if the hospital chose to "shell in" the third floor for future expansion. Under the HBE proposal, SB would have the option to increase its licensed bed capacity 158 beds by completing the second and third floors of the new patient tower (all private rooms) while maintaining the mix of semi-private and private patient rooms in the existing bed tower. The HBE proposal also provides for a phased renovation of the interior of SB to allow for an expanded post-anesthesia care unit, expanded laboratory, pharmacy, endoscopy, women's center, prep/hold/recovery areas, central sterile supply and distribution, expanded dining, and a new covered lobby entrance to the left side of the hospital. Phasing of the expansion would permit the hospital to remain in operation during expansion and renovation with minimal disruption. During construction the north entrance of the hospital would provide access through the waiting rooms that are currently part of the 2001 renovated area of the hospital with direct access to the circulation patterns of the hospital. The HBE proposal also provides for the addition of parking to bring the number of parking spaces on-site to 400. The HBE proposal includes additional stormwater retention/detention areas that could serve as attractive water features and, similar to the earlier civil engineering reports obtained by SB, proposes the construction of a parking garage at the rear of the facility should additional parking be needed in the future. However, HBE essentially proposes the alternative already rejected by SB: construction of a new patient tower in front of the existing hospital. Similar to Gould Turner, HBE proposes new construction to the left and right of the hospital's existing lobby entrance and the other changes described above. HBE's proposal recognizes the need for additional stormwater retention: the stand of trees that sets off the existing visitor parking lot from SR 674 would be uprooted; in their place, a retention pond would be constructed. Approval of the Southwest Florida Water Management District (SWFWMD) would be required for the proposal to be feasible. Assuming the SWFWMD approved the proposal, the retention pond would have to be enclosed by a fence. This would then be the "face" of the hospital to the public on SR 674. HBE's proposal poses significant problems. The first floor of the three-story component would be flush against the exterior wall of the hospital's administrative offices, where the CEO and others currently have windows with a vista of the front parking lot and SR 674. Since the three-story component would be constructed first in the "phased" construction, and since the hospital's administration has no other place to work in the existing facility, the CEO and other management team would have to work off-site until the new administrative offices (to the left of the existing hospital lobby entrance) were constructed. The existing main entrance to the hospital, which faces SR 674, would be relocated to the west side of the hospital once construction was completed in its entirety. In the interim, patients and visitors would have to enter the facility from the rear, as the existing main entrance would be inaccessible. This would be for a period of months, if not longer. For the second and third floors, HBE's proposal poses two scenarios. Under the first, SB would build the 24 general medical-surgical beds on the tower's second floor, but leave the third floor as "shelled" space. This would leave SB with a total of 106 licensed beds, six fewer than it has at present. Further, since HBE's proposal involves a second ICU at SB, 18 of the 106 beds are ICU beds, leaving 88 general medical-surgical beds. By comparison, SB currently has 104 general medical- surgical beds, meaning that it loses 16 general medical-surgical beds under HBE's first scenario. In the second scenario, SB would build 24 general medical-surgical beds on the third floor as well, and would have a total of 126 licensed beds. Since 18 of those beds would be ICU beds, SB would have 108 general medical-surgical beds, or only four more than it has at present. Further, the proposal does not make SB appreciably bigger. The second and third floors in HBE's proposal are designed in "elongated" fashion such that several rooms may be obscured from the nursing station's line of sight by a new elevator, which is undesirable as a matter of patient safety and security. Further, construction of the second and third floors would be against the existing second and third floors above the lobby entrance's east side. This would require 12 existing private patient rooms to be taken out of service due to loss of their vista windows. At the same time, the new second and third floors would be parallel to, but set back from, existing semi- private patient rooms and their vista windows along the southeast side of the hospital. This means that patients and visitors in the existing semi-private patient rooms and patients and visitors in the new private patient rooms on the north side of the new construction may be looking into each other's rooms. HBE's proposal also involves reorganization and renovation of SB's existing facility, and the demolition and disruption that goes with it. To accommodate patient circulation within the existing facility from the ED (at the north side of the hospital) to the new patient tower (at the south side of the hospital), two new corridors are proposed to be routed through and displace the existing departments of Data Processing and Medical Records. Thus, until the new administrative office space would be constructed, Data Processing and Medical Records (along with the management team) would have to be relocated off-site. Once the new first floor of the three-story component is completed, the hospital's four ORs and six PACU beds will be relocated there. In the existing vacated surgical space, HBE proposes to relocate SB's existing cardiology unit, thus requiring the vacated surgical space to be completely reconfigured (building a nursing station and support spaces that do not currently exist in that location). In the space vacated by the existing cardiology unit, HBE proposed expanding the hospital's clinical laboratory, meaning extensive demolition and reconfiguration in that area. The pharmacy is proposed to be relocated to where the existing PACU is located, requiring the building of a new pharmacy with a secure area for controlled substances, cabinets for other medications, and the like. The vacated existing pharmacy is in turn proposed to be dedicated to general storage, which involves still more construction and demolition, tearing out the old pharmacy to make the space suitable for general storage. HBE's proposal is described as a "substantial upgrade" of SB, but it was stated that a substantial upgrade could likewise be achieved by replacing the facility outright. This is SB's preference, which is not unreasonable. There have been documented problems with other hospital expansions, including patient infection due to construction dust. South Bay's proposal South Bay proposes to establish a 112-bed replacement hospital on a 39-acre parcel (acquired in 2005) located in the Riverview community, on the north side of Big Bend Road between I-75 and U.S. Highway 301. The hospital is designed to include 32 observation beds built to acute care occupancy standards, to be available for conversion to licensed acute care beds should the need arise. The original total project cost of $215,641,934, calculated when the application was filed in October 2007 has been revised to $192,967,399. The decrease in total project cost is largely due to the decrease in construction costs since 2007. The parties stipulated that SB's estimated construction costs are reasonable. The remainder of the project budget is likewise reasonable. The budgeted number for land, $9,400,000, is more than SB needs: the 39-acre parcel is held in its behalf by HCA Services of Florida, Inc., and was acquired in March 2005 for $7,823,100. An environmental study has been done, and the site has no environmental development issues. The original site preparation budgeted number of $5 million has been increased to $7 million to allow for possible impact fees, based on HCA's experience with similar projects. Building costs, other than construction cost, flow from the construction cost number as a matter of percentages and are reasonable. The equipment costs are reasonable. Construction period interest as revised from the original project budget is approximately $4 million less, commensurate with the revised project cost. Other smaller numbers in the budget, such as contingencies and start-up costs, were calculated in the usual and accepted manner for estimated project costs and are reasonable. South Bay's proposed service area (PSA) comprises six zip codes (33573 (Sun City Center), 33570 (Ruskin), 33569 (Riverview), 33598 (Wimauma), 33572 (Apollo Beach), and 33534 (Gibsonton)) in South Hillsborough County. These six zip codes accounted for 92.2% of SB's discharges in 2006. The first three zip codes, which include Riverview (33569), accounted for 76.1% of the discharges. Following the filing of the application in 2007, the U.S. Postal Service subdivided the former zip code 33569 into three zip codes: 33569, 33578, and 33579. (The proposed service area consists of eight zip codes.) The same geographic area comprises the three Riverview zip codes taken together as the former zip code 33569. In 2009, the three Riverview zip codes combined accounted for approximately 504 to 511/514 of SB's discharges, with 589 discharges in 2006 from the zip code 33569. Of SB's total discharges in 2009, approximately 8 to 9% originated from these three zip codes. In 2009, approximately 7,398 out of 14,424 market/service-area discharges, or approximately 51% of the total market discharges came from the three southern zip codes, 33573 (Sun City Center), 33570 (Ruskin), and 33598 (Wimauma). Also, approximately 81% of SB's discharges in 2009 originated from the same three zip codes. (The discharge numbers for SB for 2009 presented by St. Joseph's Hospital and SB are similar. See SB Ex. 9 at 11 and SJH Ex. 4 at 8-9. See also TG Ex. 4 at 3-4.) In 2009, SB and Brandon had an approximate 68% market share for the eight zip codes. See FOF 152-54 and 162-65 for additional demographic data. St. Joseph's Hospital had an approximate 5% market share within the service area and using 2009-2010 data, TG had approximately 6% market share in zip code 33573 and an overall market share in the three Riverview zip codes of approximately 19% and a market share of approximately 23% in zip code 33579. South Bay's application projects 37,292 patient days in year 1; 39,581 patient days in year 2; and 41,563 patient days in year 3 for the proposed replacement hospital. The projection was based on the January 2007 population for the service area as reflected in the application, and what was then a projected population growth rate of 20.8% for the five-year period 2007 to 2012. These projections were updated for the purposes of hearing. See FOF 246-7. The application also noted a downturn in the housing market, which began in 2007 and has continued since then. The application projected a five-year (2007-2012) change of 20.8% for the original five zip codes. At hearing, SB introduced updated utilization projections for 2010-2015, which show the service area population growing at 15.3% for that five-year period. South Bay's revised utilization projections for 2015- 2017 (projected years 1-3 of the replacement hospital) are 28,168 patient days in year 1; 28,569 patient days in year 2; and 29,582 patient days in year 3. The lesser utilization as compared with SB's original projections is partly due to slowed population growth, but predominantly due to SB's assumption that St. Joseph's Hospital will build its proposed satellite hospital in Riverview, and that SB will accordingly lose 20% of its market share. The revised utilization projections are conservative, reasonable, and achievable. With the relocation, SB will be more proximate to the entirety of its service area, and will be toward the center of population growth in south Hillsborough County. In addition, it will have a more viable and more sustainable hospital operation even with the reduced market share. Its financial projections reflect a better payor mix and profitability in the proposed location despite the projection of fewer patient days. Conversely, if SB remains in Sun City Center, it is subject to material operating losses even if its lost market share in that location is the same 20%, as compared to the 30 to 40% it estimates that it would lose in competition with St. Joseph's Hospital South. South Bay's medical staff and employees support the replacement facility, notwithstanding that their satisfaction with SB is very high. The proposal is also supported by various business organizations, including the Riverview Chamber of Commerce and Ruskin Chamber of Commerce. However, many of the residents of Sun City Center who testified opposed relocation of SB. See FOF 210-11. South Bay will accept several preconditions on approval of its CON application: (1) the location of SB on Big Bend Road in Riverview; (2) combined Medicaid and charity care equal to 7.0% of gross revenues; and (3) operating a free- standing ED at the Sun City location and providing a shuttle service between the Sun City location and the new hospital campus ("for patients and visitors"). SB Ex. 46, Schedule C. In its SAAR, the Agency preliminarily approved the application including the following: This approval includes, as a component of the proposal: the operation of a freestanding emergency department on a 24-hour, seven-day per week basis at the current Sun City location, the provision of extended hours shuttle service between the existing Sun City Center and the new campuses to transport patients and visitors between the facilities to locations; and the offering of primary care and diagnostic testing at the Sun City Center location. These components are required services to be provided by the replacement hospital as approved by the Agency. Mr. Gregg explained that the requirement for transport of patients and visitors was included based on his understanding of the concerns of the Sun City Center community for emergency as well as routine access to hospital services. Notwithstanding the Agency statement that the foregoing elements are required, the Agency did not condition approval on the described elements. See SB Ex. 12 at 39 and 67. Instead, the Agency only required SB, as a condition of approval, to provide a minimum of 7.0% of the hospital's patient days to Medicaid and charity care patients. (As noted above, SB's proposed condition says 7.0% of gross revenues.) Because conditions on approval of the CON are generally subject to modification, there would be no legal mechanism for monitoring or enforcement of the aspects of the project not made a condition of approval. If the Agency approves SB's CON application, the Agency should condition any approval based on the conditions referenced above, which SB set forth in its CON application. SB Ex. 12 at 39 and 67. See also T 450 ("[The Agency] can take any statement made in the application and turn that into a condition," although conditions may be modified.1 St. Joseph's Hospital and Tampa General are critical of SB's offer of a freestanding ED and proposed shuttle transportation services. Other than agreeing to condition its CON application by offering these services, SB has not evaluated the manner in which these services would be offered. South Bay envisions that the shuttle service (provided without charge) would be more for visitors than it would be for patients and for outpatients or patients that are ambulatory and able to ride by shuttle. Other patients would be expected to be transported by EMS or other medical transport. As of the date of hearing, Hillsborough County does not have a protocol to address the transport of patients to a freestanding ED. South Bay contacted Hillsborough County Fire Rescue prior to filing its CON application and was advised that they would support SB's establishment of a satellite hospital on Big Bend Road, but did not support the closure and relocation of SB, even with a freestanding ED left behind. See FOF 195-207. At hearing, SB representatives stated that SB would not be closed if the project is denied. Compliance with applicable statutory and rule criteria Section 408.035(1): The need for the health care facilities and health services being proposed The need for SB itself and at its current location is not an issue in this case. That need was demonstrated years ago, when SB was initially approved. For the Agency, consideration of a replacement hospital application "diminishes the concept of need in [the Agency's] weighing and balancing of criteria in this case." There is no express language in the CON law, as amended, which indicates that CON review of a replacement hospital application does not require consideration of other statutory review criteria, including "need," unless otherwise stipulated. Replacement hospital applicants, like SB, may advocate the need for replacement rather than expansion or renovation of the existing hospital, but a showing of "need" is still required. Nevertheless, institution-specific factors may be relevant when "need" is considered. The determination of "need" for SB's relocation involves an analysis of whether the relocation of the hospital as proposed will enhance access or quality of care, and whether the relocation may result in changes in the health care delivery system that may adversely impact the community, as well as options SB may have for expansion or upgrading on-site. In this case, the overall "need" for the project is resolved, in part, by considering, in conjunction with weighing and balancing other statutory criteria, including quality of care, whether the institution-specific needs of SB to replace the existing hospital are more reasonable than other alternatives, including renovation and whether, if replacement is recommended, the residents of the service area, including the Sun City Center area, will retain reasonable access to general acute care hospital services. The overall need for the project has not been proven. See COL 360-70 for ultimate conclusions of law regarding the need for this project. Section 408.035(2): The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant The "service district" in this case is acute care subdistrict 6-1, Hillsborough County. See Fla. Admin. Code R. 59C-2.100. The acute care hospital services SB proposes to relocate to Big Bend Road are available to residents of SB's service area. Except as otherwise noted herein with respect to constraints at SB, there are no capacity constraints limiting access to acute care hospital services in the subdistrict. The availability of acute care services for residents of the service area, and specifically the Riverview area, will increase with the opening of St. Joseph's Hospital South. All existing providers serving the service area provide high quality of care. Within the service district as a whole, SB proposes to relocate the existing hospital approximately 5.7 linear miles north of its current location and approximately 7.7 miles using I-75, one exit north. South Bay would remain in south Hillsborough County, as well as the southernmost existing health care facility in Hillsborough County, along with St. Joseph's Hospital South when it is constructed. The eight zip codes of SB's proposed service area occupy a large area of south Hillsborough County south of Tampa (to the northwest) and Brandon (to the northeast). Included are the communities of Gibsonton, Riverview, Apollo Beach, Ruskin, Sun City Center, and Wimauma. The service area is still growing despite the housing downturn, with a forecast of 15.3% growth for the five-year period 2010 to 2015. The service area's population is projected to be 168,344 in 2015, increasing from 145,986 in 2010. The service area is currently served primarily by SB, which is the only existing provider in the service area, and Brandon. For non-tertiary, non-specialty discharges from the service area in 2009, SB had approximately 40% market share, including market share in the three Riverview zip codes of approximately 10% (33569), 6% (33578), and 16% (33579). Brandon had approximately 28% of the market in the service area, and a market share in the three Riverview zip codes of approximately 58% (33569), 46% (33578), and 40% (33579). Thus, SB and Brandon have approximately a 61% market share in the Riverview zip codes and approximately a 68% market share service area-wide. The persuasive evidence indicates that Riverview is the center of present and future population in the service area. It is the fastest-growing part of the service area overall and the fastest-growing part of the service area for patients age 65 and over. Of the projected 168,334 residents in 2015, the three Riverview zip codes account for 80,779 or nearly half the total population. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County. At the same time, it will be between seven and eight minutes farther away from Sun City Center. In conjunction with St. Joseph's Hospital South when constructed, SB's proposed relocation will enhance the availability and accessibility of existing health care facilities and health services in south Hillsborough County, especially for the Riverview-area residents. However, it is likely that access will be reduced for the elderly residents of the Sun City Center area needing general acute care hospital services. St. Joseph's Hospital and Tampa General contend that: (1) it would be problematic to locate two hospitals in close proximity in Riverview (those being St. Joseph's Hospital South and the relocated SB hospital) and (2) SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. St. Joseph's Hospital seems to agree that the utilization projections for SB's replacement hospital are reasonable. Also, St. Joseph's Hospital expects St. Joseph's Hospital South to reach its utilization as projected in CON Application No. 9833, notwithstanding the decline in population growth and the proposed establishment of SB's proposed replacement hospital, although the achievement of projected utilization may be extended. There are examples of Florida hospitals operating successfully in close proximity. The evidence at hearing included examples where existing unaffiliated acute care hospitals in Florida operate within three miles of each another; in two of those, the two hospitals are less than one-half mile apart. These hospitals have been in operation for years. However, some or all of the examples preceded CON review. There are also demographic differences and other unique factors in the service areas in the five examples that could explain the close proximity of the hospitals. Also, in three of the five examples, at least one of the hospitals had an operating loss and most appeared underutilized. One such example, however, is pertinent in this case: Tallahassee Memorial Hospital and Capital Regional Medical Center (CRMC) in Tallahassee, which are approximately six minutes apart by car. CRMC was formerly Tallahassee Community Hospital (TCH), a struggling, older facility with a majority of semi-private patient rooms, similar to South Bay. Sharon Roush, SB's current CEO, became CEO at TCH in 1999. As she explained at hearing, HCA was able to successfully replace the facility outright on the same parcel of land. TCH was renamed CRMC and re-opened as a state-of-the-art hospital facility with all private rooms. The transformation improved the hospital's quality of care and its attractiveness to patients, better enabling it to compete with Tallahassee Memorial Hospital. St. Joseph's Hospital and Tampa General also contend that SB's relocation would deprive Sun City Center's elderly of reasonable access to hospital services. When the application was filed in 2007, Sun City Center residents in zip code 33573 accounted for approximately 52% of all acute care discharges to SB and SB had a 69% market share. By 2009, Sun City Center residents accounted for approximately 57% of all SB discharges and SB had approximately 72% market share. Approximately half of the age 65-plus residents in the service area reside within the Sun City Center area. This was true in 2010 and will continue to be true in 2015. The projected percentage of the total population in the Sun City Center zip code over 65 for 2009-2010 is approximately 87%. This percentage is expected to grow to approximately 91% by 2015. Sun City Center also has a high percentage of residents who are over the age of 75. Demand for acute care hospital services is largely driven by the age of the population. The age 65-plus population utilizes acute-care hospital services at a rate that is approximately two to three times that of the age 64 and younger population. South Bay plans to relocate its hospital from the Sun City Center zip code 33573 much closer to an area (Riverview covering three zip codes) that has a less elderly population. Elderly patients are known to have more transportation difficulties than other segments of the population, particularly with respect to night driving and congested traffic in busy areas. Appropriate transportation services for individuals who are transportation disadvantaged typically require door-to- door pickup, but may vary from community to community. At the time of preliminary approval of SB's proposed relocation, the Agency was not provided and did not take into consideration data reflecting the percentage of persons in Sun City Center area who are aged 65 or older or aged 75 and older. The Agency was not provided data reflecting the number of residents within the Sun City Center area who reside in nursing homes or assisted living facilities. In general, the 2010 median household incomes and median home values for the residents of Sun City Center, Ruskin, and Gibsonton are materially less than the income and home values for the residents from the other service areas. Freedom Village is located near Sun City Center and within walking distance to SB. Freedom Village is comprises a nursing home, assisted living, and senior independent living facilities, and includes approximately 120 skilled nursing facility beds, 90 assisted living beds, and 30 Alzheimer's beds. Freedom Village is home to approximately 1,500 people. There are additional skilled nursing and assisted living facilities within one to two miles of SB comprising approximately an additional 400 to 500 skilled nursing facility beds and approximately 1,500 to 2,000 residents in assistant or independent living facilities. Residents in skilled nursing facilities and assisted living facilities generally require a substantial level of acute- care services on an ongoing basis. Many patients 65 and older requiring admission to an acute-care facility have complex medical conditions and co-morbidities such that immediate access to inpatient acute care services is of prime importance. Area patients and caregivers travel to SB via a golf cart to access outpatient health care services and to obtain post-discharge follow-up care. Although there are some crossing points along SR 674, golf carts are not allowed on SR 674 itself, and the majority of Sun City Center residents who utilize SB in its existing location do not arrive by golf cart -– rather, they travel by automobile. The Sun City Center area has a long–established culture of volunteerism. Residents of Sun City Center provide a substantial number of man-hours of volunteer services to community organizations, including SB. Among the many services provided by community volunteers is the Sun City Center Emergency Squad, an emergency medical transport service that operates three ambulances and provides EMT and basic life support transport services in Sun City Center 24-hours a day, seven days a week. The Emergency Squad provides emergency services free of charge, but charges patients for transport which is deemed a non-emergency. Most patients transported by the Emergency Squad are taken to the SB ED. It is customary for specialists to locate their offices adjacent to an acute-care hospital. Most of the specialty physicians on the medical staff of SB have full-time or part-time offices adjacent to SB. The location of physician offices adjacent to the hospital facilitates access to care by patients in the provision of care on a timely basis by physicians. The relocation of SB may result in the relocation of physician offices currently operating adjacent to SB in Sun City Center, which may cause additional access problems for local residents. In 2009, the SB ED had approximately 22,000 patient visits. Approximately 25% of the patients that visit the South Bay ED are admitted for inpatient care. South Bay recently expanded its ED to accommodate approximately 34,000 patient visits annually. The average age of patients who visit the South Bay ED is approximately 70. Patients who travel by ambulance may or may not experience undue transportation difficulties as a result of the proposed relocation of SB; however, patients also arrive at the South Bay ED by private transportation. But, most patients are transported to the ED by automobile or emergency transport. In October 2010, the Board of Directors of the Sun City Center Association adopted a resolution on behalf of its 11,000 members opposing the closure of SB. The Board of Directors and membership of Federation of Kings Point passed a similar resolution on behalf of its members. Residents of the Sun City Center area currently enjoy easy access to SB in part because the roadways are low-volume, low-speed, accessible residential streets. SR 674 is the only east-west roadway connecting residents of the Sun City Center area to I-75 and U.S. Highway 301. The section of SR 674 between I-75 and U.S. Highway 301 is a four-lane divided roadway with a speed limit of 40-45 mph. To access Big Bend Road from the Sun City Center area, residents travel east on SR 674 then north on U.S. Highway 301 or west on SR 674 then north on I-75. U.S. Highway 301 is a two-lane undivided roadway from SR 674 north to Balm Road, with a speed limit of 55 mph and a number of driveways and intersections accessing the roadway. (Two lanes from Balm Road South, then widened to six lanes from Balm Road North.) U.S. Highway 301 is a busy and congested roadway, and there is a significant backup of traffic turning left from U.S. Highway 301 onto Big Bend Road. A portion of U.S. Highway 301 is being widened to six lanes, from Balm Road to Big Bend Road. The widening of this portion of U.S. Highway 301 is not likely to alleviate the backup of traffic at Big Bend Road. I-75 is the only other north-south alternative for residents of the Sun City Center area seeking access to Big Bend Road. I-75 is a busy four-lane interstate with a 70 mph speed limit. The exchange on I-75 and Big Bend Road is problematic not only because of traffic volume, but also because of the unusual design of the interchange, which offloads all traffic on the south side of Big Bend Road, rather than divide traffic to the north and south as is typically done in freeway design. The design of the interchange at I-75 in Big Bend Road creates additional backup and delays for traffic seeking to exit onto Big Bend Road. St. Joseph's Hospital commissioned a travel (drive) time study that compared travel times to SB's existing location and to its proposed location from three intersections within Sun City Center. This showed an increase of between seven and eight minutes' average travel time to get to the proposed location as compared to the existing location of SB. The study corroborated SB's travel time analysis, included in its CON application, which shows four minutes to get to SB from the "centroid" of zip code 33573 (Sun City Center) and 11 minutes to get to SB's proposed location from that centroid, or a difference of seven minutes. The St. Joseph's Hospital travel time study also sets forth the average travel times from the three Sun City Center intersections to Big Bend Road and Simmons Loop, as follows: Intersection Using I-75 Using U.S. 301 South Pebble Beach Blvd. and Weatherford Drive 12 min. 17 secs. 14 min. 19 secs. Kings Blvd. and Manchester Woods Drive 15 min. 44 secs. 20 min. 39 secs. North Pebble Beach Blvd. and Ft. Dusquesna Drive 13 min. 15 secs. 15 min. 41 secs. The average travel time from Wimauma (Center Street and Delia Street) to Big Bend Road and Simmons Loop was 15 minutes and 16 seconds using I-75 and 13 minutes and 52 seconds using U.S. Highway 301, an increase of more than six minutes to the proposed site. The average travel time from Ruskin (7th Street and 4th Avenue SW) to Big Bend Road and Simmons Loop was 15 minutes and 22 seconds using U.S. 41 and 14 minutes and 15 seconds using I-75, an increase of more than five minutes to the proposed site. Currently, the average travel time from Sun City Center to Big Bend Road using U.S. Highway 301 is approximately to 16 minutes. The average travel time to Big Bend Road via I-75 assuming travel with the flow of traffic is approximately 13 minutes. The incremental increase in travel time to the proposed site for SB for residents of the Sun City Center area, assuming travel with the flow of traffic, ranges from nine to 11 minutes. For residents who currently access SB in approximately five to 10 minutes, travel time to Big Bend Road is approximately 15 to 20 minutes. As the area develops, traffic is likely to continue to increase. There are no funded roadway improvements beyond the current widening of U.S. Highway 301 north of Balm Road. Most of the roadways serving Sun City Center, Ruskin, and Wimauma have a county-adopted Level of Service (LOS) of "D." LOS designations range from "A" to "F", with "F" considered gridlock. Currently, Big Bend Road from Simmons Loop Road (the approximate location of SB's propose replacement hospital) to I-75 is at LOS "F" with an average travel speed of less than mph. Based on a conservative analysis of the projected growth in traffic volume, SR 674 east of U.S. Highway 301 is projected to degrade from LOS "C" to "F" by 2015. By 2020, several additional links on SR 674 will have degraded to LOS "F." The LOS of I-75 is expected to drop to "D" in the entirety of Big Bend Road between U.S. Highway 301 and I-75 is projected to degrade to LOS "F" by 2020. The Hillsborough County Fire Rescue Department (Rescue Department) opposes the relocation of SB to Big Bend Road. The Rescue Department supports SB's establishment of a satellite hospital on Big Bend Road, but does not support the closure of SB in Sun City Center. The Rescue Department anticipates that the relocation of SB will result in a reduction in access to emergency services for patients and increased incident response times for the Rescue Department. The Rescue Department would support a freestanding ED should SB relocate. David Travis, formerly (until February 2010) the rescue division chief of the Rescue Department, testified against SB's proposal. The basis of his opposition is his concern that relocating the hospital from Sun City Center to Riverview would tend to increase response times for rescue units operating out of the Sun City Center Fire Station. The term response time refers to the time from dispatch of the rescue unit to its arrival on the scene for a given call. Mr. Travis noted that rescue units responding from the Sun City Center Fire Station would make a longer drive (perhaps seven to eight minutes) to the new location in Riverview to the extent that hospital services are needed, and during the time of transportation would necessarily be unavailable to respond to another call. However, Mr. Travis had not specifically quantified increases in response times for Sun City Center's rescue units in the event that SB relocates. Further, SB is not the sole destination for the Rescue Department's Sun City Center rescue units. While a majority of the patients were transported to SB, out of the total patient transports from the greater Sun City Center area in 2009, approximately one-third went to other hospitals other than SB, including St. Joseph's Hospital, Tampa General, and Brandon. The Rescue Department is the only advanced life support (ALS) ground transport service in the unincorporated areas of Hillsborough County responding to 911 calls. The ALS vehicles provide at least one certified paramedic on the vehicle, cardiac monitors, IV medications, advanced air way equipment, and other services. The Rescue Department has two rescue units in south Hillsborough County - Station 17 in Ruskin and Station 28 in Sun City Center. (Station 22 is in Wimauma, but does not have a rescue unit.) Stations 17 and 28 run the majority of their calls in and around the Sun City Center area, with the majority of transports to the South Bay ED. The Rescue Department had 3,643 transports from the Sun City Center area in 2009, with 54.5% transports to SB. If SB is relocated to Big Bend Road, the rescue units for Stations 17 and 28 are likely to experience longer out-of- service intervals and may not be as readily available for responding to calls in their primary service area. The Rescue Department seeks to place an individual on the scene within approximately seven minutes, 90% of the time (an ALS personnel goal) in the Sun City Center area. Relocation of SB out of Sun City Center may make it difficult for the Rescue Department to meet this response time, notwithstanding the proximity of I-75. A rapid response time is critical to providing quality care. The establishment of a freestanding ED in Sun City Center would not completely alleviate the Rescue Department's concerns, including a subset of patients who may need to be transported to a general acute care facility. There are other licensed emergency medical service providers in Hillsborough County, with at least one basic life support EMS provider in Sun City Center. The shuttle service proposed by SB may not alleviate the transportation difficulties experienced by the patients and caregivers of Sun City Center. Also, SB has not provided a plan for the scope or method of the provisional shuttle services. Six residents of Sun City Center testified against SB's proposed relocation to Riverview, including Ed Barnes, president of the Sun City Center Community Association. Mr. Barnes and two other Sun City Center residents (including Donald Schings, president of the Handicapped Club, Sun City Center) spoke in favor of St. Joseph's Hospital's proposed hospital in Riverview at a public land-use meeting in July 2010, thus demonstrating their willingness to travel to Riverview for hospital services. Mr. Barnes supported St. Joseph's Hospital's proposal for a hospital in Riverview since its inception in 2005, when St. Joseph's Hospital filed CON Application No. 9833 and thought that St. Joseph's Hospital South would serve the Sun City Center area. There are no public transportation services per se available within the Sun City Center area. Volunteer transportation services are provided. In part, the door-to-door services are provided under the auspices of the Samaritan Services, a non-profit organization supported by donations and staffed by Sun City Center volunteers. It is in doubt whether these services would continue if SB is relocated. There is a volunteer emergency squad using a few vehicles that responds to emergency calls within the Sun City Center area, with SB as the most frequent destination. Approval of SB's project will not necessarily enhance financial access to acute care services. The relocation of SB is more likely than not to create some access barriers for low- income residents of the service area. The relocation would also be farther away from communities such as Ruskin and Wimauma as there are no buses or other forms of public transportation available in Ruskin, Sun City Center, or Wimauma. However, it appears that the Sun City Center residents would travel not only to Riverview, but north of Riverview for hospital services following SB's relocation, notwithstanding the fact that Sun City Center residents are transportation- disadvantaged. The Hillsborough County Board of County Commissioners recently amended the Comprehensive Land-Use Plan and adopted the Greater Sun City Center Community Plan, which, in part, lists the retention of an acute care hospital in the Sun City Center area as the highest health care planning priority. For Sun City Center residents who may not want to drive to SB's new location, SB will provide a shuttle bus, which can convey both non-emergency patients and visitors. South Bay has made the provision of the shuttle bus a condition of its CON. As noted herein, the CON's other conditions are the establishment of the replacement hospital at the site in Riverview; combined Medicaid and charity care in the amount of 7.0% of gross revenues; and maintaining a freestanding ED at SB. SB Ex. 46, Schedule C. Section 408.035(3): The ability of the applicant to provide quality of care and the applicant's record of providing quality of care South Bay has a record of providing high quality of care at its existing hospital. It is accredited by JCAHO, and also accredited as a primary stroke center and chest pain center. In the first quarter of 2010, SB scored well on "core measures" used by the Centers for Medicare and Medicaid Services (CMS) as an indicator of the quality of patient safety. South Bay received recognition for its infection control programs and successfully implemented numerous other quality initiatives. Patient satisfaction is high at SB. AHCA's view of the need for a replacement hospital is not limited according to whether or not the existing hospital meets broad quality indicators, such as JCAHO accreditation. Rather, AHCA recognizes the degree to which quality would be improved by the proposed replacement hospital -– and largely on that basis has consistently approved CON applications for replacement hospitals since at least 1991. See FOF 64-66. South Bay would have a greater ability to provide quality of care in its proposed replacement hospital. Private patient rooms are superior in terms of infection control and the patient's general well-being. The conceptual design for the hospital, included in the CON application, is the same evidence- based design that HCA used for Methodist Stone Oak Hospital, an award-winning, state-of-the-art hospital in San Antonio, Texas. Some rooms at SB are small, but SB staff and physicians are able, for the most part, to function appropriately and provide high quality of care notwithstanding. (The ICU is the exception, although it was said that patients receive quality of care in the ICU. See FOF 77-82.) Most of the rooms in the ED "are good size." Some residents are willing to give up a private room in order to have better access of care and the convenience of care to family members at SB's existing facility. By comparison, the alternative suggested by St. Joseph's Hospital does not use evidence-based design and involves gutting and rearranging roughly one-third of SB's existing interior; depends upon erecting a new patient tower that would require parking and stormwater capacity that SB currently does not have; requires SB's administration to relocate off-site during an indeterminate construction period; and involves estimated project costs that its witnesses did not disclose the basis of, claiming that the information was proprietary. South Bay's physicians are likely to apply for privileges at St. Joseph's Hospital South. Moreover, if SB remains at its current site, it is reasonable to expect that some number of those physicians would do less business at SB or leave the medical staff. Many of SB's physicians have their primary medical offices in Brandon, or otherwise north of Sun City Center. Further, many of the specialists at SB are also on staff at Brandon. St. Joseph's Hospital South would be more convenient for those physicians, in addition to having the allure of a new, state-of-the-art hospital. South Bay is struggling with its nursing vacancy rate, which was 12.3% for 2010 at the time of the hearing and had increased from 9.9% in 2009. The jump in nursing vacancies in 2010 substantially returned the hospital to its 2008 rate, which was 12.4%. As with its physicians, SB's nurses generally do not reside in the Sun City Center area giving its age restrictions as a retirement community; instead, they live further north in south Hillsborough County. In October 2007 when the application was filed, SB had approximately 105 employees who lived in Riverview. It is reasonable to expect that SB's nurses will be attracted to St. Joseph's Hospital South, a new, state-of-the-art hospital closer to where they live. Thus, if it is denied the opportunity to replace and relocate its hospital, SB could also expect to lose nursing staff to St. Joseph's Hospital South, increasing its nursing vacancy rate. Section 408.035(4): The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation The parties stipulated that Schedule 2 of SB's CON application was complete and required no proof at hearing. South Bay will not have to recruit nursing or physician staff for its proposed replacement hospital. Its existing medical and nursing staff would not change, and would effectively "travel" with the hospital to its new location. Conversely, the replacement hospital should enhance SB's ability to recruit specialty physicians, which is currently a challenge for SB in its existing facility. The parties stipulated to the reasonableness of SB's proposed staffing for the replacement hospital as set out in Schedule 6A, but SJH and TG contend that the staffing schedule should also include full-time equivalent positions (FTEs) for the freestanding ED that SB proposes to maintain at its existing hospital. This contention is addressed in the Conclusions of Law, concerning application completeness under section 408.037, at COL 356-57. South Bay has sufficient funds for capital and operating expenditures for project accomplishment and operation. The project cost will be underwritten by HCA, which has adequate cash flow and credit opportunities. It is reasonable that SB's project will be adequately funded if the CON is approved. Section 408.035(5): The extent to which the proposed services will enhance access to health care for residents of the service district The specific area that SB primarily serves, and would continue to serve, is the service area in south Hillsborough County as identified in its application and exhibits. The discussion in section IV.B., supra, is applicable to this criterion and incorporated herein. With its proposed relocation to Riverview, SB will be situated in the most populous and fastest-growing part of south Hillsborough County; will be available to serve Sun City Center, Ruskin, and Wimauma; and will be between seven and eight minutes farther away from Sun City Center than it is at present. However, while the relocated facility will be available to the elderly residents of the Sun City Center area, access for these future patients will be reduced from current levels given the increase in transportation time, whether it be by emergency vehicle or otherwise. Section 408.035(6): The immediate and long-term financial feasibility of the proposal Immediate or "short-term" financial feasibility is the ability of the applicant to secure the funds necessary to capitalize and operate the proposed project. The project cost for SB's proposed replacement hospital is approximately $200 million. The costs associated with the establishment and operation of the freestanding ED and other services were not included in the application, but for the reasons stated herein, were not required to be projected in SB's CON application. South Bay demonstrated the short-term financial feasibility of the proposal. The estimated project cost has declined since the filing of the application in 2007, meaning that SB will require less capital than originally forecast. While Mr. Miller stated that he does not have authority to bind HCA to a $200 million capital project, HCA has indicated that it will provide full financing for the project, and that it will go forward with the project if awarded the CON. Long-term financial feasibility refers to the ability of a proposed project to generate a profit in a reasonable period of time. AHCA has previously approved hospital proposals that showed a net profit in the third year of pro forma operation or later. See generally Cent. Fla. Reg. Hosp., Inc. v. Agency for Health Care Admin. & Oviedo HMA, Inc., Case No. 05-0296CON (Fla. DOAH Aug. 23, 2006; Fla. AHCA Jan. 1, 2007), aff'd, 973 So. 2d 1127 (Fla. 1st DCA 2008). To be conservative, SB's projections, updated for purposes of hearing, take into account the slower population growth in south Hillsborough County since the application was originally filed. South Bay also assumed that St. Joseph's Hospital South will be built and operational by 2015. The net effect, as accounted for in the updated projections, is that SB's replacement hospital will have 28,168 patient days in year 1 (2015); 28,569 patient days in year 2 (2016); and 29,582 patient days in year 3 (2017). That patient volume is reasonable and achievable. With the updated utilization forecast, SB projects a net profit for the replacement hospital of $711,610 in 2015; $960,693 in 2016; and $1,658,757 in 2017. The financial forecast was done, using revenue and expense projections appropriately based upon SB's own most recent (2009) financial data. Adjustments made were to the payor mix and the degree of outpatient services, each of which would change due to the relocation to Riverview. The revenue projections for the replacement hospital were tested for reasonableness against existing hospitals in SB's peer group, using actual financial data as reported to AHCA. St. Joseph's Hospital opposed SB's financial projections. St. Joseph's Hospital's expert did not take issue with SB's forecasted market growth. Rather, it was suggested that there was insufficient market growth to support the future patient utilization projections for St. Joseph's Hospital South and SB at its new location and, as a result, they would have a difficult time achieving their volume forecasts and/or they would need to draw patients from other hospitals, such as Brandon, in order to meet utilization projections. St. Joseph's Hospital's expert criticized the increase in SB's projected revenues in its proposed new location as compared to its revenues in its existing location. However, it appears that SB's payor mix is projected to change in the new location, with a greater percentage of commercial managed care, thus generating the greater revenue. South Bay's projected revenue in the commercial indemnity insurance classification was also criticized because SB's projected commercial indemnity revenues were materially overstated. That criticism was based upon the commercial indemnity insurance revenues of St. Joseph's Hospital and Tampa General, which were used as a basis to "adjust" SB's projected revenue downward. St. Joseph's Hospital and Tampa General's fiscal-year 2009 commercial indemnity net revenue was divided by their inpatient days, added an inflation factor, and then multiplied the result by SB's year 1 (2015) inpatient days to recast SB's projected commercial indemnity net revenue. The contention is effectively that SB's commercial indemnity net revenue would be the same as that of St. Joseph's Hospital and Tampa General. There is no similarity between the three hospitals in the commercial indemnity classification. The majority of SJH's and TG's commercial indemnity net revenue comes from inpatients rather than outpatient cases; whereas the majority of SB's commercial indemnity net revenue comes from outpatient cases rather than inpatients. This may explain why SB's total commercial indemnity net revenue is higher than SJH or TG, when divided by inpatient days. The application of the lower St. Joseph's Hospital-Tampa General per-patient-day number to project SB's experience does not appear justified. It is likely that SB's project will be financially feasible in the short and long-term. Section 408.035(7): The extent to which the proposal will foster competition that promotes quality and cost-effectiveness South Bay and Brandon are the dominant providers of health care services in SB's service area. This dominance is likely to be eroded once St. Joseph's Hospital South is operational in and around 2015 (on Big Bend Road) if SB's relocation project is not approved. The proposed relocation of SB's facility will not change the geography of SB's service area. However, it will change SB's draw of patients from within the zip codes in the service area. The relocation of SB is expected to increase SB's market share in the three northern Riverview zip codes. This increase can be expected to come at the expense of other providers in the market, including TG and SJH, and St. Joseph's Hospital South when operational. The potential impact to St. Joseph's Hospital may be approximately $1.6 million based on the projected redirection of patients from St. Joseph's Hospital Main to St. Joseph's Hospital South, population growth in the area, and the relocation of SB. Economic impacts to TG are of record. Tampa General estimates a material impact of $6.4 million if relocation is approved. Notwithstanding, addressing "provider-based competition," AHCA in its SAAR noted: Considering the current location is effectively built out at 112 beds (according to the applicant), this project will allow the applicant to increase its bed size as needed along with the growth in population (the applicant's schedules begin with 144 beds in year one of the project). This will shield the applicant from a loss in market share caused by capacity issues and allow the applicant and its affiliates the opportunity to maintain and/or increase its dominant market share. SB Ex. 12 at 55. AHCA's observation that replacement and relocation of SB "will shield the applicant from a loss in market share caused by capacity issues" has taken on a new dimension since the issuance of the SAAR. At that time, St. Joseph's Hospital did not have final approval of CON No. 9833 for the establishment of St. Joseph's Hospital South. It is likely that St. Joseph's Hospital South will be operational on Big Bend Road, and as a result, SB, at its existing location, will experience a diminished market share, especially from the Riverview zip codes. In 2015 (when St. Joseph's Hospital proposes to open St. Joseph's Hospital South), SB projects losing $2,669,335 if SB remains in Sun City Center with a 20% loss in market share. The losses are projected to increase to $3,434,113 in 2016 and $4,255,573 in 2017. It follows that the losses would be commensurately more severe at the 30% to 40% loss of market share that SB expects if it remains in Sun City Center. St. Joseph's Hospital criticized SB's projections for its existing hospital if it remains in Sun City Center with a 20% loss in market share; however, the criticism was not persuasively proven. It was assumed that SB's expenses would decrease commensurately with its projected fewer patient days, thus enabling it to turn a profit in calendar year 2015 despite substantially reduced patient service revenue. However, it was also stated that expenses such as hospital administration, pharmacy administration, and nursing administration, which the analysis assumed to be variable, in fact have a substantial "fixed" component that does not vary regardless of patient census. South Bay would not, therefore, pay roughly $5 million less in "Administration and Overhead" expenses in 2015 as calculated. To the contrary, its expenses for "Administration and Overhead" would most likely remain substantially the same, as calculated by Mr. Weiner, and would have to be paid, notwithstanding SB's reduced revenue. The only expenses that were recognized as fixed by SJH's expert, and held constant, were SB's calendar year 2009 depreciation ($3,410,001) and short-term interest ($762,738), shown in the exhibit as $4,172,739 both in 2009 and 2015. Other expenses in SJH's analysis are fixed, but were inappropriately assumed to be variable: for example, "Rent, Insurance, Other," which is shown as $1,865,839 in 2009, appears to decrease to $1,462,059 in 2015. The justification offered at hearing, that such expenses can be re-negotiated by a hospital in the middle of a binding contract, is not reasonable. St. Joseph's Hospital's expert opined that SB's estimate of a 30 to 40% loss of market share (if SB remained in Sun City Center concurrent with the operation of St. Joseph's Hospital South) was "much higher than it should be," asserting that the loss would not be that great even if all of SB's Riverview discharges went to St. Joseph's Hospital South. (Mr. Richardson believes the "10 to 20 percent level is likely reasonable," although he opines that a 5 to 10% impact will likely occur.) However, this criticism assumes that a majority of the patients that currently choose SB would remain at SB at its existing location. The record reflects that Sun City Center area residents actively supported the establishment of St. Joseph's Hospital South, thus suggesting that they might use the new facility. Further, SB's physicians are likely to join the medical staff of St. Joseph's Hospital South to facilitate that utilization or to potentially lose their patients to physicians with admitting privileges at St. Joseph's Hospital South. Tampa General's expert also asserted that SB would remain profitable if it remained in its current location, notwithstanding the establishment of St. Joseph's Hospital South. It was contended that SB's net operating revenues per adjusted patient day increased at an annual rate of 5.3% from 2005 to 2009, whereas the average annual increase from 2009 to 2017 in SB's existing hospital projections amounts to 1.8%. On that basis, he opined that SB should be profitable in 2017 at its existing location, notwithstanding a loss in market share to St. Joseph's Hospital South. However, the 5.3% average annual increase from 2005 to 2009 is not necessarily predictive of SB's future performance, and the evidence indicated the opposite. Tampa General's expert did not examine SB's performance year-by-year from 2005 to 2009, but rather compared 2005 and 2009 data to calculate the 5.3% average annual increase over the five-year period. This analysis overlooks the hospital's uneven performance during that time, which included operating losses (and overall net losses) in 2005 and 2007. Further, the evidence showed that the biggest increase in SB's net revenue during that five-year period took place from 2008 to 2009, and was largely due to a significant decrease in bad debt in 2009. SB Ex. 16 at 64. (Bad debt is accounted for as a deduction from gross revenue: thus, the greater the amount of bad debt, the less net revenue all else being equal; the lesser the amount of bad debt, the greater the amount of net revenue all else being equal.) The evidence further showed that the 2009 reduction in bad debt and the hospital's profitability that year, is unlikely to be repeated. Overall, approval of the project is more likely to increase competition in the service area between the three health care providers/systems. Denial of the project is more likely to have a negative effect on competition in the service area, although it will continue to make general acute care services available and accessible to the Sun City Center area elderly (and family and volunteer support). Approval of the project is likely to improve the quality of care and cost-effectiveness of the services provided by SB, but will reduce access for the elderly residents of the Sun City Center area needing general acute care hospital services who will be required to be transported by emergency vehicle or otherwise to one of the two Big Bend Road hospitals, unless needed services, such as open heart surgery, are only available elsewhere. For example, if a patient presents to SB needing balloon angioplasty or open heart surgery, the patient is transferred to an appropriate facility such as Brandon. The presence of an ED on the current SB site may alleviate the reduction in access somewhat for some acute care services, although the precise nature and extent of the proposed services were not explained with precision. If its application is denied, SB expects to remain operational so long as it remains financially viable. Section 408.035(8): The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that the costs and methods of the proposed construction, including the costs and methods of energy provision, were reasonable. St. Joseph's Hospital and Tampa General did not stipulate concerning the availability of alternative, less costly, or more effective methods of construction, and take the position that SB should renovate and expand its existing facility rather than replace and relocate the facility. Whether section 408.035(8) requires consideration (weighing and balancing with other statutory criteria) of potential renovation costs as alternatives to relocation was hotly debated in this case. For the reasons stated herein, it is determined that this subsection, in conjunction with other statutory criteria, requires consideration of potential renovation versus replacement of an existing facility. St. Joseph's Hospital offered expert opinion that SB could expand and upgrade its existing facility for approximately $25 million. These projected costs include site work; site utilities; all construction, architectural, and engineering services; chiller; air handlers; interior design; retention basins; and required movable equipment. This cost is substantially less than the approximate $200 million cost of the proposed relocation. It was proven that there are alternatives to replacing SB. There is testimony that if SB were to undertake renovation and expansion as proposed by SJH, such upgrades would improve SB's competitive and financial position. But, the alternatives proposed by SJH and TG are disfavored by SB and are determined, on this record, not to be reasonable based on the institutional- specific needs of SB. Section 408.035(9): The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Approval of SB's application will not significantly enhance access to Medicaid, charity, or underserved population groups. South Bay currently provides approximately 4% of its patient days to Medicaid beneficiaries and about 1% to charity care. South Bay's historic provision of services to Medicaid patients and the medically indigent is reasonable in view of its location in Sun City Center, which results in a disproportionate share of Medicare in its current payor mix. South Bay also does not offer obstetrics, a service which accounts for a significant degree of Medicaid patient days. South Bay proposes to provide 7% of its "gross patient revenue" to Medicaid and charity patients as part of its relocation. South Bay's proposed service percentage is reasonable. Section 408.035(10): The applicant's designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility The parties stipulated that this criterion is not applicable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying CON Application No. 9992. DONE AND ENTERED this 8th day of August, 2011, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 2011.
Findings Of Fact MCH was constructed circa 1973 as an acute care hospital and before 1980 had 126 medical-surgical beds authorized including eight intensive care beds. MCH is a for-profit hospital owned by Hospital Corporation of America. It is financially able to fund the proposed addition. In 1980 it received a certificate of need (CON) to add 64 medical-surgical beds for a total bed capacity of 190 medical-surgical beds. These beds came on line in January 1982. MCH here proposes to add a 54-bed unit for oncology patients; to add six operating rooms to use primarily for eye, ear, nose and throat surgical procedures on an outpatient basis; and a new eight-bed surgical intensive care unit located on the first floor adjacent to the existing surgery department. Currently, the hospital has two oncologists on staff who use a 16-bed unit dedicated to the treatment of cancer. Space exists for the additional operating room so the net result is an application for an additional 62 beds. The application also included expansion of general stores and maintenance and the addition of a parking structure, which were granted, leaving only the issue of need for the 62 additional beds requested at a cost of $7 million. When constructed MCH had an eight-bed ICU primarily for coronary care patients located on the second floor of the hospital in the opposite wing from the surgery department on the first floor. It has added a four-bed ICU on the fourth floor by converting two semiprivate medical-surgical rooms. The ratio of ICU beds to total beds in 1973 was 8:126 which is nearly identical to the current ratio of 12:190. The evidence was unrebutted that the ICU at MCH is usually full, that on occasion patients have to wait in the emergency room until a less ill patient can be moved from a bed in ICU, and that the more ICU beds are available the more they will be used. This use was attributed to the doctors desiring their patients to be in an ICU and to testimony that current surgical procedures are more sophisticated than formerly and a greater need exists today for a surgery patient to go to an ICU than existed 15 years ago. In its application for a CON (Exhibit 18) MCH's estimated charge for a medical-surgical bed is $100-150 per day and its estimated charge for ICU beds and SICU beds is $350 per day. The primary service area for MCH is Marion County. Petitioner submitted evidence that nearly 20 percent of the cancer patients diagnosed in Marion County in 1981 came from the surrounding counties of Citrus, Lake, Sumter, and Levy. Accordingly, MCH contends that its primary service area for oncology patients should include these counties. Evidence was also submitted that MCH has been certified by medical associations as an approved cancer treatment hospital; that oncology service is a service generally provided in regional hospitals which provide Level III medical treatment; and, therefore, MCH should be considered on a different scale than Level II services. No evidence was presented that any health systems plan ever considered MCH as a regional cancer hospital or established any bed need for cancer patients at MCH. The evidence was also unrebutted that cancer patients at MCH are primarily treated by chemotherapy; that the drugs used in the treatment are extremely toxic, some have a short life span after being mixed and must be used almost immediately; that having a mini-pharmacy in the cancer ward is highly desirable; that special training of nurses is required to safely administer these drugs to patients; that patients develop nausea, ulcers in the mouth and throat, and present special feeding problems, and because of these special feeding problems it is advantageous to have some facilities in the cancer ward to prepare food at odd hours for patients; that cancer is a "personal" disease, patients desire more privacy, and should have private rooms; that an area away from the patient's room where the patient can visit with his or her family and the family can consult with the doctor in some privacy is desirable; that some newer drugs require hospitalization of the patient for treatment with these drugs, but the hospital stay is shorter and the drugs may be used over longer periods of time; and that the patient needs the security that comes from developing a feeling of trust by the patient of the nurses and doctors who are administering to his needs. MCH has no radiation treatment facilities in the hospital. However, the hospital staff has access to a Linear Accelerator which is located in a private physician's office on MCH's campus. Several witnesses testified to the need for additional beds for cancer patients at MCH; that patients have had to wait several days for a vacant bed; some oncology patients have had to be placed in other wards at MCH; and that special treatment and special training for nurses are required for oncology patients. Marion Regional Medical Center (MRMC) is a nonprofit hospital owned by the Marion County Hospital District, a public body established by statutes with taxing powers in Marion County. MRMC is currently expanding its facilities by 80 beds to the authorized 314-bed hospital pursuant to a CON approved in 1981. The $23 million for that project was financed by revenue bonds issued by Marion County Hospital District. Preliminary bids indicate the original project will be under the estimated cost resulting in a $2-3 million savings. If the additional beds here requested are approved and the construction associated therewith can be accomplished concurrently with the present construction, a saving of nearly $1 million can be obtained. MRMC is the only full service hospital in Marion County and provides medical, surgical, obstetrical, pediatric, psychiatric, intensive care, coronary care, and neurological/neurosurgical services. It has the third most active Emergency Room in the state and receives approximately 45 percent of its admissions through this service. MRMC's proposed project calls for the construction of a sixth floor on the hospital, construction of 66 inpatient beds, and the conversion of a 20-bed pediatric unit for use as a labor and delivery suite, a net gain of 46 beds. As initially proposed, this would provide for eight additional pediatric beds, four pediatric intensive care beds, and 34 medical-surgical beds to be used as a pulmonary medicine unit. Before the hearing the request for additional pediatric beds was withdrawn, leaving a request for 34 additional hospital beds and four pediatric intensive care beds, a total of 38 medical-surgical beds, at a cost of $2.8 million. It was stipulated that both MCH and MRMC provide an acceptable quality of care and operate efficiently. The application satisfied the criteria in Section 381.494(6)(c) with the possible exception of need, and need is the only issue in dispute in these proceedings. Both applicants submitted evidence that they accept all patients regardless of their ability to pay; however, MCH is a private for-profit hospital whose bad debt and charity care amounts to two percent of its gross revenues. MRMC's patient load is four percent indigent and bad debts, and charity care amounts to 12 percent of its gross revenues. Exhibit 18 shows MCH patient utilization to be 61 percent Medicare and one percent Medicaid, and MRMC patient utilization to be 51 percent Medicare and five percent Medicaid, in 1981. There is currently "applicable district plan" or "annual implementation" as provided for in Section 381.494(6)(c)1, Florida Statutes (1982). The implementation of this statute has been stayed by rule challenges. The North Central Florida Health Planning Council, Inc. (NCFHPC), was the Health Systems Agency (HSA) for what was formerly known as Health Service Region II which included only Marion County as a district sub-area. Prior to the July 1, 1982, amendment of Florida's CON law, the HSA reviewed applications and made recommendations with written findings of fact to DHRS. The 1982 CON law eliminated HSA, accordingly the NCFHPC no longer exists. The former HSA recommended approval of the applications of both MCH and MRMC; however, the staff of the HSA recommended disapproval of both applications. For the determination of need in these proceedings, a planning horizon of five years is acceptable and was used by all parties. Thus, the need for the requested CON is assessed for the year 1988. At this time the population of Marion County is forecast to be 165,880. The percentage of persons 65 and older in Marion County is increasing in proportion to the remainder of Marion County's population, and this increase will continue through 1988. This "aging" of the population is occurring throughout the United States as people live longer and demographics change with differing birth rates at differing periods. No evidence was submitted that the percentage of people over 65 is greater in Marion County than in other parts of Florida. MCH has 190 authorized medical-surgical beds and MRMC has 244 authorized medical-surgical beds, for a total of 434 such beds authorized in Marion County in two hospitals across the street from each other in Ocala, Florida. With the 1982 amendment to the CON statute the HSA in Marion County ceased to exist and has been replaced by a local health council. Rule challenges have stayed the promulgation of a comprehensive state health plan and the only Health Systems Plan in being for Marion County is the revised 1983 Health Systems Plan (HSP). This plan was approved by the HSA for Marion County in June of 1982 and contains goals, objectives and standards for planning for the health services required in Marion County. Standard 1-1 provides the need for medical-surgical beds within each Level II planning area (Marion County) should be based on the actual 1980 medical-surgical bed need per 1,000 population in this area. Standard 2-1 provides no additional beds should be added to a community's total bed supply until the occupancy rate of medical- surgical beds in the community exceeds 85 percent if more than 200 such beds are available in the community. The generally accepted standard for occupancy rate above which more beds may be needed is 80 percent. However, where beds are concentrated in one area, which is the case in Marion County where 434 medical- surgical beds are authorized, 85 percent occupancy leaves a reasonable surplus of beds to cover most emergencies or unusual situations that would cause the bed availability to be exceeded. The need for medical-surgical beds per 1,000 population (use rate) in Marion County in 1980 was 2.41. The HSP has a goal of 3.5 beds per 1,000 population and an objective of 4.0 beds per 1,000 population by 1987 in Region II. Applying the 1980 use rate to the 1988 forecast population of Marion County results in a need for 400 medical-surgical beds. The Health Systems Plan update for Marion County defines medical- surgical beds as all hospital beds which are not reserved solely for the use of pediatric, obstetrics, or psychiatric patients. At the time the revised Health Systems Plan for Marion County was promulgated, the two hospitals, MRMC and MCH, had been authorized an additional 80 and 65 beds, respectively, and these beds were being placed in service. By prescribing a use rate for 1980 as the standard to be used in considering applications for additional medical-surgical beds in 1983 and for a year or two thereafter, it would be reasonable to conclude the HSA expected the use rate for the years 1981 and 1982 to be influenced by the addition of the recently authorized 144 beds and to not accurately reflect a reliable use rate for planning purposes. MRMC and MCH presented expert witnesses who, by using different modalities, containing different assumptions, arrived at a need for additional beds in Marion County in 1988 ranging from 97 to 200. Most of these modalities used an occupancy rate of 3.5 beds per 1,000 population and 80 percent utilization of beds. All assume increasing usage of medical-surgical beds by the increasing and aging population. In their application MRMC and MCH planned to finance these projects with rate increases of 11 percent per year (to keep even with inflation) and a continuing increase in the number of patients handled at these higher rates. While inflation may again be up to 11 percent or higher, it is generally accepted today that the current inflation rate is five percent or less. More than 50 percent of both MRMC and MCH patients are presently covered by Medicare, which pays 80 percent of the charges generated by these patients. To assume that this situation will not only continue in the face of current federal deficits, but grow to cover the increased use of these facilities predicted in the assumptions used to show increased bed need for 1988, is not necessarily a valid assumption. Evidence was presented that the number of doctors in Marion County has doubled in the last five years. The ratio of doctors to the population of Marion County for 1977-78 and 1982-83 was not presented nor was the percent increase in the number of doctors in the United States over the past five years. Without some basis for comparison, the fact that the number of doctors in a particular community doubled over a five-year period has no relevancy.
The Issue The parties have stipulated that these cases are properly before the Division of Administrative Hearings for de novo review of the Petitioners' applications for a certificate of need and that this action is controlled by the provisions of Chapters 120 and 381, Florida Statutes, and Chapters 10-5 and 28- 5, F.A.C. The parties have further stipulated that portions of Section 481.494(6)(c), Florida Statutes (1984 Suppl.), and its counterparts under Section 10-5.11, F.A.C., have either been met or are not applicable. The portions of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), which the parties have stipulated have been met or do not apply and the parties' summary of the content of those subsections are as follows: (3) both applicants have the ability to manage and operate facilities such as those applied for; (6) need in the services district for special equipment and services not reasonably and economically accessible in adjoining areas; (7) need for research and training programs; (8) health and management manpower and personnel only. The remaining parts of (8) remain in issue; (10) special needs and circumstances of health maintenance organizations; (11) needs and circumstances of those entities which provide a special portion of their services or resources, or both, to individuals not residing in the service district. The parties stipulated that the remaining portions of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), remain in issue. Based upon the stipulations of the parties, the following issues require resolution: Is there a need for a 100-bed acute care hospital in Orange County, Florida? Do the Petitioners' proposals meet the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), which have not been stipulated to as having been met or as not being applicable? If a need exists for only one proposal and both Petitioners meet the appropriate criteria, which of the Petitioners should be granted a certificate of need? Should a certificate of need for a computerized axial tomography scanner (hereinafter referred to as a "CAT Scanner") be issued to AMI? Does Florida Hospital and/or OGH have the requisite standing to take part as parties in these proceedings?
Findings Of Fact AMI is a publicly traded for-profit Delaware corporation which owned, managed or operated 103 hospitals in the United States and 29 hospitals outside the United States as of January, 1985. AMI also owns, manages or operates a number of other health care facilities, i.e., psychiatric care facilities and freestanding outpatient surgery centers. AMI also owns a number of subsidiary corporations which provide a variety of technologies and services in support of its hospitals. In Florida, AMI owns 100 percent or a majority interest of 9 hospitals. In its proposed findings of fact AMI has indicated that it "operates" these 9 hospitals. The record supports this finding, although the record also supports a finding that the 9 hospitals are separate legal entities. AMI initially filed a letter of intent to file a certificate of need application with the Department for a 175-bed hospital in Orange County, Florida, for review in the August 15, 1983, batching cycle. The letter of intent was rejected because it had not been timely submitted to the local health council. On October 12, 1983, AMI filed a second letter of intent with the Department in which it informed the Department that AMI "or a to-be-formed wholly-owned subsidiary of AMI intends to file a Certificate of Need application for a 175-bed hospital to be located along Highway 50 in the vicinity of the University of Central Florida in Orange County, Florida." On October 19, 1983, seven days after the letter of intent was filed, Articles of Incorporation were filed for University Community Hospital of Orlando, Inc. (hereinafter referred to as "UCH, Inc."). UCH, Inc., is a for-profit Florida corporation. It currently owns no assets. AMI's application, which was reviewed in the November 15, 1983, batching cycle, was denied by the Department. AMI subsequently reduced the number of beds it had requested in its application from 175 to 100 beds. No change in the application with regard to the services to be provided has been made by AMI. Based upon its amended application AMI has proposed to construct and operate a 100-bed "full-service" acute care hospital to be located in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposed hospital will include a separate outpatient unit, an on-site stationary CAT Scanner, a 24-hour a day emergency room and birthing rooms and will provide therapeutic and diagnostic inpatient services, and community outreach and wellness programs. Tertiary care services will not be provided at the proposed hospital but AMI intends to contract with existing providers of tertiary care services to provide those services to its patients. AMI has projected that the total cost of its proposal will be $19,698,831.00. This figure includes $566,700.00 for architectural and engineering fees, $6,268,747.00 for equipment, $1,025,000.00 for the acquisition of land, $10,095,000.00 for construction, $250,000.00 for start-up costs and $1,285,385.00 for capitalized interest. The proposed AMI facility will include separate entrances for outpatient surgery and the emergency room. The facility has been designed to take into account the trend in health care to provide outpatient and ambulatory services. Two of the four proposed operating rooms in the facility will be used primarily for outpatient surgery. The 8 birthing rooms to be included in the facility are designed in recognition of the trend in health care to provide a room in which the family can participate in the birthing process. A delivery room will also be provided. Finally, classroom space will be provided in the facility for allied health services training and continuing education. Winter Park. Winter Park Memorial Hospital Association, Inc., is a not for-profit Florida corporation. It operates Winter Park, a 301 bed hospital in Winter Park, Orange County, Florida. The hospital provides a full range of medical services including a full-body CAT Scanner. Winter Park Memorial Hospital Association, Inc., qualifies for exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1954, as amended (hereinafter referred to as the "Code"), because it is an organization designated in Section 501(c)(3) of the Code. On October 31, 1983, Winter Park filed its letter of intent to file an application for a certificate of need with the Department in the same batching cycle as AMI. In its application Winter Park proposed to build a 100-bed acute care hospital in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposal does not include a CAT Scanner. Winter Park has projected that the total cost of its proposed facility will be $16,015,000.00. This amount includes $75,000.00 for project development, $50,000.00 for financing, $685,000.00 for professional services, $10,395,900.00 for construction, $4,457,700.00 for equipment and $351,400.00 for other related cost. Florida Hospital Florida Hospital is a not-for-project hospital owned by Adventist Health Systems Sunbelt, a division of the Adventist Church. Florida Hospital presently consists of 3 campuses: the main campus in Orlando and satellite campuses in Altamonte Springs, Seminole County, Florida and Apopka, Orange County, Florida. In the 75 years since the hospital was begun it has grown from a 20 bed hospital to its present size of 959 beds. Florida Hospital is a tertiary acute care hospital providing a full range of services including ambulatory surgery, a stationary full-body CAT Scanner, general inpatient medical and surgical services, obstetrics, pediatrics, psychiatric services, substance abuse treatment, open heart surgery, oncology and other services. Florida Hospital is involved in a number of teaching programs and internship programs. It is a teaching hospital with a number of positions dedicated to teaching, including a director of education. Florida Hospital would be substantially affected if a certificate of need is granted to either Petitioner. Florida Hospital has standing to intervene. OGH OGH is a not-for-profit 171-bed hospital located in Orlando, Orange County, Florida. It was founded in 1941 and has operated as a not-for-profit facility since 1945. OGH is licensed by the State of Florida as an acute care general hospital. The services provided by OGH include obstetrics, outpatient services, general inpatient medical and surgical services, pediatrics, a mobile CAT Scanner and other services. OGH would be substantially affected if a certificate of need is issued to either Petitioner. OGH has standing to intervene. THE NEED FOR ACUTE CARE HOSPITAL BEDS. Section 10-5.11(23), F.A.C. Pursuant to Section 381.494(6)(c), Florida Statutes (1984 Suppl.), the Department is responsible for determining whether health care facilities and services are needed in the State of Florida. To fulfill its responsibility with regard to acute care hospital beds, the Department has promulgated Section 10 5.11(23), F.A.C. Section 10-5.11(23)(b), F.A.C., provides the following Department goal: The Department will consider applications for acute care hospital beds in context with all applicable statutory and rule criteria. The Department will not normally approve applications for new or additional acute care hospital beds in any departmental service district if approval of an application would cause the number of beds in that district to exceed the number of beds calculated to be needed according to the methodology included in paragraphs (f),(g) and (h) below. A favorable Certificate of Need determination may be made when the criteria, other than bed need, as provided for in Section 381.494(6)(c), Florida Statutes, demonstrate need. An unfavorable Certificate of Need determination may be made when a calculated bed need exists but other criteria specified in Section 381.494(6)(c), Florida Statutes, are not met. Based upon this Department goal, the need for acute care hospital beds is first determined by service district based upon the methodology included in Section 10-5.11(23)(f)-(h), F.A.C. (Hereinafter referred to as the "Formula"). For purposes of the Formula, acute care beds include general medical and surgical, intensive care, pediatric and obstetrical beds. Section 10 5.11(23)(c), F.A.C. The Petitioners are proposing to build a hospital with general medical and surgical, intensive care and obstetrical beds. Therefore, the Formula must be applied to determine if there is a need for their proposed hospitals. Under the Formula, acute care bed need is to be determined five years in the future: 1990 in these cases. Generally, acute care bed need is determined under the Formula based upon two age cohort population projections, statewide service-specific discharge rates, statewide service-specific lengths of stay, statewide service-specific occupancy standards and patient flow adjustments. See Section 10-5.11(23)(f), F.A.C. The bed need for the service district determined in accordance with Section 10-5.11(23)(f), F.A.C., is adjusted based upon the service district's historical use rate and projected occupancy rate. Section 10-5.11(23)(g), F.A.C. The historical use rate to be used under the Formula is for the three most recent years and is based upon utilization of hospitals located in the service district. After applying the adjustment of Section 10-5.11(23)(g), F.A.C., one final adjustment is required to complete the determination of acute care bed need under the Formula. Section 10-5.11(23)(h), F.A.C. provides for an adjustment to reflect peak demand in the service district. Based upon the evidence presented at the final hearing of these cases, application of the Formula results in a net acute care bed need of 89 beds or 146 beds, or an excess of 464 beds. These projections are all for the Department's District 7, which consists of Orange, Seminole, Osceola and Brevard Counties, The Petitioners are proposing to build new hospitals in Orange County. The Formula projection of a net acute care bed need in District 7 of 89 beds is an outdated Department application of the Formula. The 146 net acute care bed need projection for District 7 is the Department's most current application of the Formula, dated March 12, 1985. The Department's most recent application of the Formula is not based upon a proper application of the adjustment for the District 7 projected occupancy rate and historical use rate under Section 10-5.11(23)(g), F.A.C. In making this adjustment, the Department relied upon utilization data in determining the District 7 historical use rate from 1981, 1982 and 1983. Section 10-5.11(23)(g), F.A.C., requires that the historical use rate be based upon the most recent three years available. In these cases 1982, 1983 and 1984 utilization data was available to the Department. The fact that incorrect utilization data was used in determining the District 7 historical use rate was confirmed by Mr. Eugene Nelson, the Director of the Office of Community Medical Facilities of the Department, Mr. Steve Windham, the Executive Director of the Local Health Council of East Central Florida, Inc., and Mr. Lawrence W. Margolis, an expert health planner. Mr. Nelson also indicated that if 1982, 1983 and 1984 utilization data had been used by the Department in applying the Formula a more "contemporary picture of what's actually happening" would have be given. Mr. Margolis did apply the Formula using the most current utilization data to calculate the historical use rate of District 7. Based upon the data used by the Department in its most recent projection of acute care bed need for District 7, but substituting the current utilization data of 1982, 1983 and 1984, an application of the Formula results in a projected total acute care bed need in 1989 for District 7 of 4,416 beds. There are currently 4,880 licensed and approved beds in District 7. Therefore, a proper application of the Formula based upon the most current data indicates that District 7 will have an excess of 464 acute care beds in 1989. A finding that District 7 will have an excess of acute care beds in 1989 is supported by the trend toward reduced utilization of hospitals in District 7. This reduction in hospital utilization, which began in 1982, has been evidenced by reductions in occupancy rates, average lengths of stay and admissions. This trend is likely to continue for an additional two to four years. The trend is sufficient to cause an excess in acute care beds despite increases in population. To add another 100 acute care hospital beds to Orange County would further reduce utilization. The reduced utilization of hospitals could become worse when new hospital beds are opened by Florida Hospital (210 beds) and Holmes Regional Medical Center in Brevard County (81 beds). The opening of these beds could create a further excess of beds in District 7. There are a number of factors which have contributed to the decline in the use of hospitals: (1) there has been an increase in the use of health maintenance organizations and preferred provider organizations; (2) the introduction of Diagnostic Related Groups, a method of reimbursement now being used by Medicare; and (3) there has been an increase in the use of outpatient medical services. Health maintenance organizations in Orange County alone could decrease patient days in hospitals from 800 days per 1,000 population to 350 days per 1,000 population. Because of the introduction of Diagnostic Related Groups by Medicare, hospitals are trying to discharge patients as quickly as possible. Finally, there are 8 to 10 freestanding ambulatory surgery centers approved for Orange County which are, or will be, providing outpatient medical services. All of these factors have reduced hospital utilization in District 7. The current trend of reduced utilization of hospitals was recognized by Mr. Mark Richardson, AMI's expert in health planning. Mr. Richardson therefore recommended that AMI reduce its application for a certificate of need to construct and operate a hospital in Orange County from 175 acute care beds to 100 beds, which AMI did. Based upon the foregoing, it is concluded that District 7 will have an excess of at least 464 acute care beds in 1989 according to a proper application of the Formula of Section 10 5.11(23), F.A.C. Although insufficient evidence was presented at the final hearing to forecast the exact acute care bed need for District 7 under the Formula for 1990, it does not appear that there will be any need for acute care beds in District 7 in 1990 in light of the fact that the trend toward decreased utilization of hospitals will probably continue for 2 to 4 more years. In fact, the evidence supports the conclusion that District 7 will continue to have an excess of beds in 1990. AMI has proposed findings of fact to the effect that there has been too much concern with "over-bedding" based upon computations such as those provided in the Formula. AMI further proposed findings of fact to the effect that a more rational approach to health planning "should be assuming adequate supply as opposed to considering a negative approach." These proposed findings of fact are rejected. The Department's rules and in particular, the Formula, are the law and will be followed in these cases. Whether "over-bedding" is over emphasized, the Formula clearly indicates that District 7 will be greatly overbedding in 1990. In addition to requiring an application of the Formula to determine acute care bed need for each Department service district, Section 10-5.11(23), F.A.C., requires that local health councils adopt acute care service subdistricts as an element of their local health plans. Section 10-5.11(23)(d), F.A.C. District 7 has been divided along county lines into four subdistricts: Orange, Seminole, Osceola and Brevard Counties. Section 10-17.008, F.A.C. Prior to this proceeding AMI challenged the validity of Section 10- 17.008, F.A.C., the rule establishing subdistricts along county lines in District 7. The rule was upheld as valid in American Medical International, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83- 3092R, September 28, 1984. Therefore, Orange, Seminole, Brevard and Osceola Counties constitute the only recognized subdistricts in District 7 for purposes of allocating acute care bed need in District 7. Section 10-5.11(23)(e), F.A.C., further provides that the district acute care bed need as determined by application of the Formula is to be allocated to each subdistrict established pursuant to Section 10-5.11(23)(d), F.A.C. This allocation of acute care bed need to the subdistricts is to be made consistent with Section 381.494(7)(b), Florida Statutes (1984 Suppl.), which provides that the local health council is to develop a district health plan and submit it to the Department. Elements of the district health plan necessary in the Department's review of certificate of need applications are required to be adopted by the Department as a part of its rules. Section 381.494(7)(b), Florida Statutes (1984 Suppl.). The Local Health Council of East Central Florida, Incorporated (hereinafter referred to as the "Council"), has developed a district health plan which includes the methodology it employs to allocate the District 7 acute care bed need to the subdistricts of District 7. That plan has also been submitted to the Department. The Department, however, has not adopted the district health plan for District 7 in its rules. This does not mean, however, that evidence pertaining to the Council's method of allocation is not relevant to, or should be ignored for purposes of, this proceeding. Based upon the evidence presented at the final hearing, Orange County has an excess of acute care beds. This is true even if it is assumed that the Department's determination under the Formula that there is a need for 89 or 146 acute care beds in District 7 is correct. According to Mr. Windham, application of the Council's subdistrict allocation methodology to the Department's determination under the Formula that there is a need in District 7 for 89 acute care beds indicates that Orange County ",4 will have an excess of 81 acute care beds and that Seminole County will have an excess of 36 acute care beds. Mr. Windham's application of the Council's methodology for allocating bed need to the subdistricts of District 7 was based upon the Department's application of the Formula without the benefit of the more current utilization data. Therefore, if the most current data had been used, the projected excess beds for Orange County would be even greater. In light of the foregoing, it is clear that the Petitioners have failed to prove that there is any need under Section 10-5.11(23), F.A.C., for additional acute care beds in District 7 or in Orange or Seminole Counties. In fact, under Section 10- 5.11(23), F.A.C., there is a significant excess of acute care beds projected for Orange and Seminole Counties and District 7 as a whole. Winter Park has conceded this conclusion. AMI has in essence argued that any evidence as to the application of the Formula based upon the most current utilization data should be ignored because the Department has not yet officially applied the Formula based upon such data. Mr. Margolis, an expert in health planning, was clearly capable of applying the Formula based upon the most current information. His conclusions were also supported by Mr. Nelson's and Mr. Windham's testimony. AMI has in essence also argued that any evidence as to how acute care bed need in District 7 under the Formula should be allocated to the properly designated subdistricts should be ignored because the Council's methods of allocation have not been adopted as part of the Department's rules. Mr. Windham's unrebutted testimony, however, supports a finding that the Council's method of allocating the District 7 acute care bed need to the subdistricts is a reasonable method for health planning purposes. The determination that there is no need for additional acute care beds in Orange County does not necessarily preclude the issuance of a certificate of need for a new hospital to either or both of the Petitioners. Section 10- 5.11(23)(b), F.A.C., provides that the Department will "not normally" approve an application if such an approval would result in acute care beds in excess of those needed as determined under the Formula. The rule goes on to provide that an application may be approved "when the criteria, other than bed need, as provided in Section 381.494(6)(c), Florida Statutes, demonstrate need." Bed Need Based upon the Petitioner's Alternative to the Formula. AMI has suggested in its proposed recommended order that there is a need for 146 acute care beds in District 7 based upon an application of the Formula. That finding of fact has been rejected, supra, because it was based upon the use of outdated utilization data. The Petitioner also failed to prove that there is a need for beds in Orange County based upon an application of the Formula. Winter Park's position throughout this proceeding and AMI's alternative position has been essentially that the population of east Orange County where the Petitioners propose to locate their facilities and parts of Seminole County do not have adequate accessibility to acute care hospital beds. In determining whether an application for a certificate of need should be issued for acute care hospital beds, Section 381.484(6)(c)2, Florida Statutes (1984 Suppl.), provides that the accessibility . . of like and existing health care services and hospitals in the service district of the applicant" should be considered. The Petitioners have attempted to prove that like and existing health care services are not accessible in portions of Orange and Seminole Counties and therefore there is a need for their proposed hospitals. The Petitioners' Medical Service Areas. AMI has identified and proposed to serve portions of Orange and Seminole Counties which purportedly have an access problem which it has designated as a "medical service area." AMI projects that the majority of its patients will be attracted from its medical service area (hereinafter referred to as an MSA) AMI's MSA consists of most of east Orange County and southeastern Seminole County. Generally, the MSA boundary runs south along most of the western shore of Lake Jessup in Seminole County, to and along Tuscawilla Road (Seminole and Orange County), to and along Highway 436 in Orange County, south to the Bee Line Expressway, east along the Bee Line Expressway to Highway 15, south along Highway 15 to the Orange-Osceola County line, east and then north along the Orange County line to the Seminole County line and along the Seminole County line north and then west to Lake Jessup. Winter Park has also identified and proposed to serve a MSA very similar to, although a little smaller than, AMI's MSA. The difference in size amounts to only a difference of 1000 less population in Winter Park's MSA. The portion of east Orange County included in the MSAs represents a distinct geopolitical and economic base. Each of the Petitioners and Florida Hospital presented testimony by experts in the field of demographics. Frederick A. Raffa, Ph.D., for AMI, William J. Serow, Ph.D, for Winter Park and Stanley Smith, Ph.D., for Florida Hospital. Based upon their testimony, it is clear that the MSAs have experienced a great deal of population and economic growth since 1970 and that this growth will probably continue through 1990. During the period 1980 to 1985, the rate of population growth for Orange and Seminole Counties was 16 percent (23 percent for Seminole County alone). The rate of growth in Winter Park's MSA during this same period was 32 percent. For the period 1985 through 1990 the projected rate of growth for Orange County is 12 percent. The projected rate of growth from 1985 through 1990 for Winter Park's MSA is 23.3 percent. These figures indicate that the rate of growth for Orange County and the MSAs is slowing down. The figures also show that the MSA rate of growth is twice that of Orange and Seminole Counties. Looking at only the rate of growth of an area can be misleading. For example, a 50 percent rate of growth may not be as significant when applied to a population base of 10 as when applied to a larger population base. In terms of actual growth, the evidence proves that Orange County's population growth in terms of additional people is greater than the population growth of the MSAs. The evidence also establishes that population growth in the MSAs is projected to be greater for young adults and women of child bearing age (15 to 44 years of age), that there will be larger families and a greater number of children under 18 years of age in the MSAs than in Orange County as a whole and that the projected population of the MSAs will be newer to the area and generally more mobile than Orange County as a whole. Florida Hospital has suggested that "logic" leads to the conclusion that some of these projected trends will cause a decrease in utilization. No evidence was presented at the hearing to support such a finding of fact. The evidence clearly establishes that population growth in the MSAs will be concentrated between the western boundary of the MSAs at Highway 436 and Alafaya Trail (Highway 419), which is located in the western portion of the MSAs, during the next five years. In fact, more than half of the projected growth of east Orange County will occur in a one and a half mile corridor between Highway 436 and Goldenrod. It will be 5 to 10 years before population growth will begin to expand into any area east of Highway 419. Accessibility under Section 10-5.11(23)(i), F.A.C. The Department has promulgated Section 10-5.11(23)(i)1 and 2, F.A.C., for purposes of determining accessibility: Acute care hospital beds should be available and accessible within an automobile travel time of 30 minutes under average travel conditions to at least 90 percent of the population in an urban area subdistrict. Acute care hospital beds should be available and accessible within a maximum automobile travel time of 45 minutes under average travel conditions to at least 90 percent of the population residing in a rural area subdistrict. The terms "urban area" and "rural area" are defined in Section 10- 5.11(23)(a)4 and 5, F.A.C., as follows: Urban Area. Urban area means a county designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, and having 50,000 or more persons residing in one or more incorporated areas. Rural Area. Rural area means a county not designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, or a county so designated but having fewer than 50,000 persons residing in one or more incorporated areas. Orange County meets the definition of an "urban area." It has been designated as part of a Standard Metropolitan Statistical Area and has 50,000 or more persons residing in one or more incorporated areas. Orange County is not also a "rural area" as defined above as suggested by OGH although it does have some incorporated areas with less than 50,000 persons. AMI has suggested in its proposed recommended order that Section 10- 5.11(23)(i), F.A.C., is to be used only by local health councils in determining subdistrict allocations of acute care bed need and where a subdistrict allocation reveals a surplus of beds in a subdistrict. Although Section 10 5.11(23)(i), F.A.C., is to be used in the manner suggested by AMI, Section 10- 5.11(23)(i), F.A.C., is not clearly limited to such use. This section of the rule is titled "Geographic Accessibility Considerations." Its provisions are applicable in determining whether a geographic accessibility problem exists in District 7 or in the subdistricts of District 7. AMI, Winter Park and Florida Hospital presented testimony of expert traffic engineers: Mr. William A. Tipton for AMI, Mr. R. Sans Lassiter, P.E., for Winter Park and Mr. Sven Kansman for Florida Hospital. All three of these gentlemen based their travel studies on travel times to and from certain control points. The travel times were then averaged. Florida Hospital has suggested in its proposed recommended order that this method of determining travel times to and from control points and Mr. Tipton's testimony that "you probably wouldn't get as far in a given time going outbound [east" is significant because travel times from the MSAs west into Orlando, where the majority of the existing hospitals are presently located, would be shorter. This conclusion is reasonable. Therefore, travel times for the population of the MSAs to existing Orange County hospitals would be less than indicated by the traffic engineers. Also, the 30 minute contour lines on the traffic engineers' exhibits would extend farther into the MSAs. The studies performed by all three traffic engineers were performed in the same general manner as to the speed of the test vehicles. Test vehicle drivers were instructed to drive at average speed employing the "average car method," the "floating car technique" or the "moving car method." All three methods are essentially the same. The test runs were conducted in November and February by AMI'S expert, in the fall by Winter Park's expert and during the last two weeks of January by Florida Hospital's expert. January to March is the most congested time of the year in Orange County. Only two of the traffic engineers testified that their tests were conducted under "average travel conditions" as required by Section 10- 5.11(23)(i), F.A.C.: Winter Park's and Florida Hospital's traffic engineers. These traffic engineers properly conducted their tests during off-peak and peak hours. Mr. Tipton, AMI's traffic engineer, conducted his tests only during the peak hours of 4:00 p.m. to 6:00 p.m. and only on week days (Monday to Thursday). According to Mr. Tipton, average travel conditions "doesn't mean anything" to a traffic engineer. Average travel conditions does mean something under the rule and to the other two traffic engineers. Mr. Tipton also indicated that the peak hours he conducted his tests during would not show "average travel conditions." Mr. Tipton also admitted that he averaged what amounted to the "worst case scenario" because it represented "real world conditions." Mr. Tipton's "real world conditions," however, is not the test of Section 10-5.11(23)(i)1, F.A.C. Mr. Tipton's tests have been given little weight because of his failure to take into account average travel conditions. None of the exhibits prepared by the three traffic engineers and accepted in evidence (AMI'S composite exhibit 8, Winter Park's exhibit 11 and Florida Hospital's exhibit 10) are totally consistent with the requirements of Section 10-5.11(23)(i), F.A.C. AMI's composite exhibit 8 includes 30 minute contour lines representing Mr. Tipton's 30 minute drive times from only three hospitals in Orange County and one hospital in Seminole County and only shows the travel times to the east of those hospitals. Winter Park's exhibit 11 shows the 30 minute contour lines for seven hospitals in Orange County and two hospitals in Seminole County and generally only showns the travel times to the east. Florida Hospital's exhibit 10 shows the location of eight hospitals in Orange County, three in Seminole County and three in Brevard County but only shows the total 30 minute contour line for Florida Hospital's Orlando campus. The test under Section 10-5.11(23)(i)1, F.A.C., is whether existing acute care hospital beds are available and accessible within 30 minutes by automobile by 90 percent of the subdistrict's population. In order for AMI and Winter Park to prove that acute care hospital beds are not available and accessible within 30 minutes in Orange County, they needed to prove that more than 10 percent of the population of Orange County cannot access on existing acute care hospital bed within 30 minutes by automobile. In order to prove this crucial fact it is necessary to show the travel time based upon average travel conditions of the entire population of Orange County to all existing acute care hospitals. AMI and Winter Park have failed to do so. The evidence fails to show that more than 10 percent of Orange County's population is more than 30 minutes by automobile from existing Orange County hospitals. The evidence does not support a conclusion that there is an accessibility problem under Section 10-5.11(23)(i), F.A.C. Only 1 percent of the population of Orange County residing in the MSAs is located more than 30 minutes by automobile from existing hospitals in Orange and Seminole Counties. This is based upon the 1985 population and the projected 1990 population. In 1985 there are 4,232 people residing in the MSAs more than 30 minutes from existing Orange and Seminole County hospitals. By 1990, there will only be 5,276 people projected to live more than 30 minutes from existing hospitals. These figures are maximum numbers. As indicated, supra, the evidence with regard to population growth in the MSAs proves that the projected population growth will be concentrated in the western portion of the MSAs--the portion of the MSAs closest to where existing hospitals are located. Most of the projected population growth through 1990 in the MSAs will clearly be within 30 minutes of existing hospitals. The projected 1990 population of 5,276 people who will reside more than 30 minutes from an existing Orange County or Seminole County hospital is well below 10 percent of Orange County's total projected population of 596,713. Additionally, the people in the MSAs who reside more than 30 minutes from existing Orange and Seminole County hospitals are probably within 30 minutes of Jess Parrish Hospital in Titusville, Brevard County, Florida. There are no natural obstacles in Orange County which impede or prevent access to existing health care facilities. Well over 90 percent of Orange County's population can access a hospital within 30 minutes driving time. OGH has proposed findings of fact pertaining to the availability of motor vehicle and air ambulance services in Orange County. The accessibility test of Section 10-5.11 (23)(i), F.A.C., requires a consideration of automobile travel times under "average travel conditions," not emergency services. Therefore, these proposed findings of fact and OGH's proposed findings of fact as to the requirements of obtaining a trauma level designation are unnecessary. The evidence also clearly establishes that there are acute care hospital beds available in Orange County. The average occupancy rates in District 7, Orange County and Seminole County for 1982, 1983 and 1984 were as follows: 1982 1983 1984 District 7 71.8% 70.34% 61.71% Orange County 69.5% 68.68% 60.80% Seminole County 76.0% 74.20% 59.39% Florida Hospital and OGH have experienced similar declines in utilization similar to those evidenced by these figures. Florida Hospital's utilization rate dropped from 86.3 percent in 1982 to 78.6 percent in 1984 and OGH's rate dropped from 88.5 percent in 1982 to 44.4 percent in 1984. There are currently 4,880 licensed and approved acute care hospital beds in District 7. Based upon the 1984 utilization rate for District 7, over 1,800 acute care beds were empty on an average day in District 7 during 1984; In Orange County, approximately 1,000 acute care beds were empty on average during 1984. As indicated, supra, the decreasing acute care bed utilization rate is expected to continue for 2 to 4 years. Therefore, there are acute care hospital beds available in Orange County at existing hospitals and there will be in 1990. Additionally, new acute care hospital beds have been approved for Orange County and Seminole County which are not yet open: 134 acute care beds to be opened by Florida Hospital at its Orlando campus and 76 acute care beds to be opened by Florida Hospital at its Altamonte Springs campus. Also 81 new beds will be opened in Brevard County. These additional beds will further increase the number of available acute care hospital beds in Orange and Seminole Counties and in District 7. Based upon the foregoing and the fact that there is a large number of unoccupied acute care beds available on average in Orange County, there is no geographic accessibility problem in Orange County or Seminole County under Section 10-5.11(23)(i), F.A.C. Other Accessibility Considerations. Despite the evidence with regard to geographic accessibility under Section 10-5.11(23)(i), F.A.C., the Petitioners have argued that accessibility to acute care beds is a problem in the MSAs. Mr. Willard Wisler, Winter Park's administrator, although agreeing that "planning studies" indicated no need for additional acute care beds in Orange County, stated: But our posture has been that they have been misallocated, and that the east Orange County [sic) is a greatly underserved area on the basis of the number of hospital beds that are available to the people that live there. The evidence does establish that the majority of the hospitals in Orange County are located in the center of the County, in the City of Orlando, where the majority of the population is located and that there is only one hospital currently located in the MSAs. Currently, 6 percent of Orange County's acute care hospital beds are located in the MSAs at OGH while 19 percent of Orange County's population is located in the MSAs. The Petitioners have characterized this geographic distribution of acute care beds and population as a "maldistribution" of acute care beds. The disparity between the precentage of population and acute care beds in the MSAs will increase in the future because the projected rate of growth in the MSAs is greater than that of Orange County. It is projected that by 1990 22 percent of the Orange County population will be located in the MSAs. The centralization of acute care beds in Orange County, according to Mr. Van Talbert, Winter Park's expert health planner, constitutes irresponsible health planning: "It tends to perpetuate the old patterns of centralization, and I think that is inconsistent with contemporary thought in American society." Mr. Talbert also testified that the MSAs and particularly east Orange County, are greatly underserved based upon the number of hospital beds conveniently available to the people who live there. Even if Mr. Talbert's conclusions are correct and even if there is a "maldistribution" of acute care beds as defined by the Petitioners, this does not mean there is an accessibility problem in the MSAs sufficient to conclude that additional acute care beds are needed in District 7, Orange County or the MSAs. The fact that 22 percent of the population of Orange County may reside in the MSAs by 1990 with only 6 percent of the County's acute care beds is not the test. Even if it is true that "contemporary planning may indicate that centralization of acute care beds is poor planning," the pertinent statutes and rules only require a determination of whether acute care beds are available and accessible. The evidence in these cases clearly indicates that the population of the MSAs can access available acute care hospital beds in District 7. All the Petitioners have shown is that some residents of the MSAs "will be forced to make inconvenient drives to downtown hospitals," as stated in Winter Park's proposed recommended order. Likewise, AMI's proposed finding of fact that ",the realities of the situation reveal that the residents of the MSA and their physicians perceive serious access problems due to excessive travel distance, traffic congestion, the lack of convenience for patients who have to go to hospitals for tests, and the lack of convenience for families and friends having to make several trips a day to see a person in a hospital" does not prove there is an access problem. The perception of patients and physicians as to the inconvenience in accessing acute care beds does not prove there is an access problem sufficient to warrant a new hospital. In conjunction with the Petitioners' position with regard to "maldistribution" of acute care beds, the Petitioners have proposed findings of fact to the effect that previous Department responses to shifts in population growth away from where hospitals are located have been to authorize new hospitals. New hospitals in Altamonte Springs and Longwood in Seminole County, and in southwest Orange County (Sand Lake) have been cited as examples. Although Mr. Talbert's testimony supports these proposed findings of fact to some extent, there is insufficient evidence to conclude why those hospitals were authorized by the Department. If the evidence showed that additional acute care beds were needed in Seminole and Orange Counties when those hospitals were approved it would be consistent with the Department's rules to locate the additional acute care beds where population growth had occurred. In these cases, if there was an established need for an additional acute care hospital in Orange County, the evidence would probably justify placing it in east Orange County. The facts, however, do not indicate any need for additional acute care beds in Orange County. Other MSA Considerations. It is not essential to identify a MSA for purposes of considering an application for a new acute care hospital as suggested by AMI. As discussed, infra, the designation of a MSA by an applicant may be helpful for some purposes, but not to determine whether there is a need for a new hospital. AMI has proposed a finding of fact that Orlando Regional Medical Center and Florida Hospital's Orlando campus, both of which are located in Orlando, are tertiary care facilities providing services of higher complexity for patients; they therefore attract a substantial number of referral patients in need of more extensive, complex services which are not available from primary care hospitals. The existence of these tertiary facilities has justified the allocation of more acute care beds to Orange and Seminole Counties in the past. Although these facts were proved at the hearing, the overriding fact remains clear that there is no need for additional acute care beds in Orange County. AMI attempted to prove through Mr. Mark Richardson an expert in health planning, that there is a need for acute care beds in AMI's MSA based upon the characteristics of the MSA. Mr. Richardson testified that his projections were not based or contingent on the Formula of Section 10-5.11(23), F.A.C., and acknowledged the decline in utilization of acute care hospital beds in Orange County. Mr. Richardson did state that the Department's projection of a net acute care bed need of 89 beds under the Formula supported his projections. The projection of a need for 89 beds was clearly based upon outdated data. Use of current utilization data indicates an excess of 464 acute care beds. Therefore, if application of the Formula resulting in a bed need of 89 beds supports Mr. Richardson's projections, an application of the Formula which results in an excess of 464 acute care beds must indicate that Mr. Richardson's projections are suspect. Mr. Richardson's projections were clearly based primarily on the characteristics of AMI's MSA. Because of the narrow scope of Mr. Richardson's analysis, the trend in Orange County and District 7 as to reduced occupancy rates did not affect his projections. In particular, Mr. Richardson used an 80 percent occupancy rate for all beds except obstetric beds, for which he used a 75 percent rate. These occupancy rates are excessive when compared to the occupancy rates for District 7, and Orange and Seminole Counties. Additionally, Mr. Richardson failed to consider the effect of unopened acute care beds in Orange County on occupancy rates. On average, there are over 1,800 unoccupied acute care beds in District 7 and 1,000 unoccupied beds in Orange County. This does not include 134 acute care beds to be opened at Florida Hospital's Orlando campus, 76 acute care beds to be opened at Florida Hospital's Altamonte Springs campus or 81 acute care beds to be opened at Holmes Regional Medical Center in Brevard County. When opened, these additional acute care beds will further decrease occupancy rates in Orange County and District 7. Even if Mr. Richardson's projections were totally accurate, such a finding would not be relevant to the question of whether there is a need for additional acute care beds in Orange County. That is the crucial question in these cases. Mr. Richardson and AMI have attempted to justify Mr. Richardson's projections by suggesting that the Department does not consider itself precluded from assessing the need for acute case beds on an area within a subdistrict based upon Mr. Nelson's testimony. Mr. Nelson's testimony clearly does not support the use of a MSA to determine if there is a need for additional acute care beds in Orange County. Mr. Nelson, when asked whether an applicant could determine bed need based upon the character of a part of Orange County replied: There's nothing to preclude an Applicant from doing that, from carving out what I would call an Applicant's service area, running their own calculations of bed need, and doing whatever they feel they want to do in that regard. And we're not ,precluded from looking at it, either. But our position is that that has no official basis in determinations of bed need. We do look at those subdistricts but not to determine bed need. We look at them to get a better understanding of an application, because we get a sense, from looking at the unique service areas, what they' re trying to accomplish. That would be number one. Number two, and from having worked on the private side, I know one of the reasons why this is done, this is an attempt to define a market share or market area and a percent of all the considerations of what the existing hospitals that are already in the area have in the way of markets and market shares, and so on. So on the second hand, looking at the subdistricts is very important, from the standpoint of helping us to assess the financial feasibility of these proposals, which is another criterion, of course, altogether, specifically in the longer term. Because, you know, you have to know who is getting patients from where in order to be able to fully understand that. And I think the third way in which these subdistricts, these Applicants -- pardon the expression, subdistricts, that's not what these things are -- the Applicant's medical services areas are useful is in those cases where we may have a need helping us to decide where, within, let's say a subdistrict that need should be met. For example, let's suppose in this case, we were showning a need of sufficient magnitude to approve a hospital. But instead of having two applications within a few miles of each other, we had one for east Orange County, and one in west Orange County, and portions of other counties, each of which had carved out their own service area, then it would be very important for us, in that case, to look at these things very carefully, to consider them to help us determine which location was preferable. But in terms of calculating bed need from the Department's perspective, we don't put any stock in those whatsoever from that perspective. ,Emphasis added. Based upon the above testimony, it is clear that MSAs may be looked at if an applicant uses one in order to provide a better understanding of the applicant's proposal, to assess financial feasibility and, where there is an established need for acute care beds, to decide where in the subdistrict the need is the greatest. MSAs are clearly not relied upon to determine the initial question of whether there is a need for acute care beds. To determine acute care bed need based upon a MSA without considering `the' entire subdistrict of Orange County is not appropriate. The Department, as the statute and rules require, determines need at the district level and allocates the district bed need to the subdistricts. In fact, the Department has ruled that it is improper to divide a district into subdistricts smaller than those designated by a local health council for purposes of determining need as pointed out by Winter Park in its proposed recommended order. Southeastern Palm Beach County Hospital District v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1091A (1983). For purposes of determining whether there is a need for additional acute care hospital beds in Orange County, Mr. Richardson's testimony is of very little value. STATUTORY CRITERIA. Section 10-5.11(23)(b), F.A.C., provides that a certificate of need may be issued when the criteria, other than bed need, as provided in Section 38l.494(6)(c), Florida Statutes (1984 Suppl.), demonstrate need. The Petitioners have attempted to prove that there is an accessibility problem in Orange County which demonstrates acute care bed need under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). The facts do not support such a conclusion as discussed, supra. This section of the Recommended Order contains findings of fact with regard to the other criteria contained in Section 381.494(6)(c) and (d) Florida Statutes (1984 Suppl.). Consistency with the State and Local Health Plan: Section 381.494(6(c)1, Florida Statutes. The applications of the Petitioners are only partly consistent with the State Health Plan and the Council's Local Health Plan. The Council's Local Health Plan establishes the following occupancy levels for acute care beds which should be met before new acute care beds are approved: TYPE OF BEDS OCCUPANCY LEVEL Medical - Surgical 80% Obstetrical 75% As already discussed, occupancy levels for acute care beds in District 7, and in Orange and Seminole Counties were below 70 percent in 1984. The declining utilization of acute care beds will continue for the next 2 to 4 years and therefore it does not appear that the occupancy level goals in the Local Health Plan will be met by either applicant. These occupancy level goals are intended to be used as checks on the bed need methodologies. The importance of existing occupancy levels in determining whether to add additional acute care beds to a district is recognized in Section 10-5.11(23)(g), F.A.C. The Petitioners have projected that they will achieve an occupancy rate of 45-50 percent after one year of operation. South Seminole Community Hospital, which was opened in May of 1984 in Longwood, Seminole County, Florida, achieved only a 27 percent occupancy rate after 8 months of operation. In light of the fact that South Seminole Community Hospital is located in Longwood, it is doubtful the Petitioners will achieve their projected occupancy rate. The Petitioners have projected that their proposed hospitals will achieve an 80 percent occupancy rate, which is an optimal occupancy rate. Their projections, based upon the findings of fact as to acute care bed need in Orange County and current occupancy levels, are highly unlikely to be reached. Especially in light of the fact that the average occupancy rate in Orange County was only 60.80 percent in 1984. The proposals are also inconsistent with the Local Health Plan goal that a proposal be consistent with the state's acute care bed need methodology. Based upon an application of the Formula, using current data, District 7 and Orange County will have an excess of acute care beds in 1990. Winter Park's proposal is consistent with several other portions of the Local Health Plan. Winter Park's facility will have an active outpatient program, its beds can be available within 24 hours and it will meet several priorities under the Local Health Plan such as being accredited and licensed, and being willing to serve indigents and other patients without regard to payment source. AMI's proposal also meets some of these goals. The Local Health Plan also contains a provision to the effect that "needed" beds should be approved at existing hospitals unless the addition of a new hospital would substantially improve access by at least 15 minutes for 25,000 or more residents. Winter Park has suggested a finding of fact that this provision has been met. If there was a need for additional acute care beds in Orange County such a finding would be appropriate. There is, however, clearly no need for additional acute care beds in Orange County. This portion of the Local Health Plan therefore does not apply. Finally, the Local Health Plan provides that applicants should be able to document community and provider support for their proposals. Community support for the proposals has been demonstrated. Provider support, however, has not been demonstrated. In fact, there is opposition from some providers to the proposed new hospitals, i.e., Florida Hospital and OGH. The proposals are also partially consistent with the State's health plan. The evidence does not clearly establish, however, that the proposals are totally consistent with the goals of the State health plan. Mr. Talbert did testify that Winter Park's proposal is consistent with the goals of the State health plan. It was not clear, however, whether all of the goals were met. Also, Mr. Talbert's testimony was inconsistent with other evidence in this proceeding in some respects. For example, Mr. Talbert testified that one goal of the State health plan is to provide adequate access to acute care resources. The evidence clearly shows that adequate access is already available in Orange County. To the extent it can be inferred that Mr. Talbert's testimony also applies to AMI's proposal, the same problems exist. The evidence does not support a finding that AMI's proposal is totally consistent with the State health plan. Based upon the foregoing, it does not appear that either proposal is totally consistent with the Local Health Plan or the State health plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services in the Service District; Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires that the availability, quality of care, efficiency, appropriateness, extent of utilization and adequacy of like and existing health care services in the service district be considered. The service district for this purpose is District 7. The designation of subdistricts in District 7 is specifically for purposes of allocating district bed need to the subdistricts. The parties, to the extent they addressed this criterion, presented evidence primarily for Orange County only, however. The availability, accessibility and extent of utilization of like and existing acute care hospitals in Orange County has been discussed and findings of fact with regard thereto have been made, supra. To summarize, like and existing services in Orange County are available and accessible and are underutilized. The Petitioners have not shown that like an existing services in District 7 do not provide quality of care or that they are not efficient, appropriate or adequate. Winter Park has argued that like and existing services are not accessible. The evidence does not support such a finding of fact. AMI has argued that there are no like and existing services accessible in the MSAs. That is not the test. The determination to made under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), is whether there are like and existing services in the service district. The service district in these cases is all of District 7, not the MSAs. There are currently seven acute care hospitals in Orange County: Florida Hospital, OGH, Orlando Regional Medical Center, Brookwood Hospital, Humana Lucerne, Winter Park Hospital and West Orange Memorial Hospital. Additionally, Orlando Regional Medical Center - Sand Lake is expected to be opened before 1990. These district. The evidence does not support a finding that some or all of these facilities or others in District 7 are not available, providing quality of care, efficient, appropriate, accessible, over utilized or adequate. AMI and OGH spent an inordinate amount of time and effort presenting evidence on the issue of whether OGH is a like and existing service. The evidence supports a finding that OGH is a like and existing service. Even if OGH was not a like and existing service, such a conclusion would only be relevant if it were concluded that like and existing services must exist within the boundaries of the MSAs or that OGH was the only accessible acute care hospital to the residents of the MSAs. As stated, supra, the pertinent area is not the MSA but District 7 and there are clearly other acute care hospitals in District 7 and some of those hospitals are accessible. If Orange County alone is the appropriate service area for purposes of applying this criterion, the evidence clearly proves that the Petitioners do not meet the criterion. The evidence proves that there are available, quality, appropriate, efficient and adequate like and existing health care services in Orange County and District 7. The Ability of the Applicants to Provide Quality of Care; Section 381.494(6)(c)3. Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion has been meet. 113.. The Availability and Adequacy of Other Health Care Facilities and Services in the Service District which may Serve as Alternatives: Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.). There are clearly other health care facilities in Orange County providing like and existing services. The evidence does not, however, establish that there are other health care facilities and services in Orange County which are alternatives to a 100 bed acute care hospital. Transferring beds from existing facilities has been suggested as an alternative to the proposed new hospitals. This suggested "alternative" could be achieved as easily by approving a new hospital and closing some existing beds. The cost would be essentially the some. Transferring beds is not an alternative. Use of existing beds which are not being occupied is not a viable alternative either, as suggested by OGH in its proposed findings of fact. Probable Economies and Improvements in Service that may be Derived from Operation of Joint, Cooperative or Shared Health Care Resources; Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.). AMI's proposed facility may eventually share some services with Brookwood Community Hospital in the area of administrative management. Brookwood Community Hospital (hereinafter referred to as "Brookwood") is a 157 bed general acute care hospital owned and operated by a limited partnership. The general partner and owner of 82.5 percent of the partnership is Brookwood Medical Center of Orlando, Inc., which in turn is owned by AMI. AMI presented its proposal assuming that there would not be any shared services with Brookwood. Through AMI, UCH, Inc., can receive price discounts for its purchases, typically 15 percent to 20 percent lower than the lowest price available in the market generally. UCH, Inc., will also be able to participate in Brookwood's preferred provider organization agreement. This could result in enhanced utilization of UCH, Inc., which could result in decreased health care costs. Winter Park will share some resources with its new hospital. The resources to be shared include Winter Park's incinerator, CAT Scanner, cardiac catheterization ion laboratory, and certain personnel. Centralized accounting, centralized purchasing and some centralized management would also be employed. Both proposals will have joint, cooperative or shared health care resources which would result in probable economics and improvements in service. The Need in the Service District of the Applicant for Special Equipment and Services not Reasonably and Economically Accessible in Adjoining Areas; Section 381.494(6)(c)6, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Need for Research and Educational Facilities: Section 81.494(6)(c) 7, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. The Availability of Resources; the Effects on Clinical Needs of Health Professional Training Programs in the Service District: Accessibility to Schools for Health Professionals: the Availability of Alternative Uses of Resources: Extent Accessible to All Residents; Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.). The parties have stipulated that Section 81.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met to the extent it deals with "health and management manpower and personnel only." The other factors to be considered under this criterion were not stipulated to. The first factor to be considered is the availability of resources, including physicians and funds for capital and operating expenditures. The availability of funds will be discussed, infra. As to the availability of physicians, the weight of the evidence supports a finding that physicians are available to staff either of the proposed facilities. AMI proposed a finding of fact that ", unlike WPMH, AMI demonstrated that the major medical specialty areas will be represented by various physicians who will joint the UCH medical staff." AMI did demonstrate that various medical specialty physicians would be willing to work at UCH, Inc. It is also true that Winter Park did not demonstrate that all of the medical specialty physicians would be willing to work at its proposed facility. Despite these facts, several physicians testified that they would use Winter Park's proposed facility if it were approved instead of UCH, Inc., and Mr. Willard Wisler's unrebutted testimony establishes that Winter Park would have no difficulty staffing its proposed hospital. Both Petitioners have established that physician resources are available for project accomplishment and operation. The second and third factors to be considered are the effect the projects will have on clinical needs of health professional training programs in Orange County and, if available in a limited number of facilities, the extent to which services will be available to schools for health professionals in Orange County. The weight of the evidence does not establish that professional training programs are available in a limited number of facilities. In fact the evidence establishes that the University of Central Florida (hereinafter referred to as "UCF"), which is located in east Orange County, has fifty-two affiliation agreements with hospitals and other medical facilities. These affiliation agreements include agreements involving clinical training of radiology technicians at Florida Hospital and, in Brevard County, at Halifax Hospital. Approximately 32 radiology students are currently involved in hospital training programs. AMI presented evidence proving the existence of a proposed "affiliation agreement" between its proposed hospital and UCF. AMI and UCF have in fact entered into an Agreement of Intent. The Agreement of intent essentially provides, in relevant part, that AMI's proposed hospital, if approved, would provide clinical training to UCF radiology technician students. Approximately three to six UCF students per semester would receive training at the new hospital. The program with UCF will clearly have a positive effect on "clinical needs of health professional training programs" in Orange County. The agreement also provides for certain other benefits to UCF in the form of certain gifts. Those benefits, however, are not relevant in considering whether a certificate of need should be issued to AMI. The portion of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), at issue in this proceeding requires only that the effect on "clinical needs of health professional training programs" be considered. AMI's gifts will not meet the "clinical needs" of health professional training programs. AMI's proposed findings of fact with regard to its gifts to UCF are unnecessary. Florida Hospital and Winter Park have proposed several findings of fact concerning AMI's motive in entering into the agreement with UCF. Those proposed findings are not supported by the evidence and are not relevant. Florida Hospital also has proposed findings of fact concerning whether a tertiary hospital would be a better facility for training, the effect of patient mix on training, the lack of any study by UCF to assess the benefits of the agreement and the fact that AMI's proposed facility will not be a teaching hospital or have full-time teachers. Those proposed findings are unnecessary. The fact is, the clinical training to be provided by AMI's facility will be a benefit to the clinical needs of health professional training programs in District 7. Because of the substantial amount of gifts to be made to UCF, which will be paid for by patients of AMI's facility, the costs of AMI's clinical program will be substantial. Winter Park is currently involved in meeting clinical needs of health professional training programs at a number of educational institutions, including UCF. Winter Park's involvement includes radiology and several other programs. Although no agreements have been entered into, programs to meet such clinical needs will be provided at Winter Park's new facility. Because Winter Park has not committed to make any gifts to educational institutions, the costs of its programs will probably be less than AMI's program. The fourth factor to be considered is the availability of alternative uses of resources for the' provision of other health services. The evidence presented at the hearing does not establish that there are not alternative uses of resources. The petitioners failed to present evidence sufficient to conclude that there are not alternative uses for available resources. Finally, the extent to which the proposed services will be accessible to all residents of the service district is to be considered. Both Petitioners are willing to accept all patients regardless of age, sex, race, color or national origin, and medically underserved groups. The Petitioners have met most, but not all, of the requirements of this criterion. Immediate and Long-Term Financial Feasibility; Section 1.494(6)(c)9. Florida Statutes (1984 Suppl.). Immediate Financial Feasibility. AMI's proposed facility will be financed by a 50 percent equity contribution from AMI to UCF, Inc., and 50 percent debt financing from AMI at a maximum interest rate of 12 percent amortized over 30 years. AMI has sufficient lines of credit to cover the amount needed for debt financing. AMI also has sufficient cash and unrestricted liquid assets (almost $300,000,000.00 by the end of its 1984 fiscal year) and generates enough capital ($300,000,000.00 to $400,000,000.00 a year) to fund its equity contribution and the debt. AMI also has sufficient funds to provide working capital needs of UCF, Inc. Exactly how Winter Park's proposed facility will be financed is less clear. Both of the Petitioners have suggested that the other has not proved that it has "committed" itself to funding their respective proposals. Although the evidence does raise questions as to whether AMI or Winter Park has finally committed the total funds necessary to complete their proposals, the weight of the evidence supports a finding that both Petitioners are committed to funding their proposals. More importantly, the test is whether the Petitioners have available financing sources. University Community Hospital, et ala v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1346-A, 1360-A (1983). AMI clearly proved that its Executive Committee had approved its proposal. One of its witnesses, however, testified that the approval of capital expenditures of over $1,000,000.00 took approval of the full AMI Board of Directors. Winter Park clearly proved that its Board of Trustees had approved only $4,000,000.00 of the costs of its facility. Despite these facts, the evidence establishes that, although final approval of all the funds necessary to fund the proposals may not have been given, the funds necessary to insure the immediate, financial feasibility of both proposals are available. Where the funds will come from in Winter Park's case and the total amount of funds needed by Winter Park is far from being crystal clear. Winter Park failed to take into account several expenses it will incur, including sewer capacity reserve fees (approximately $160,500.00), telephone lease costs ($20,000.00) and possibly some interest expenses. There may also be an underestimate of the cost of debt financing, depending upon whether tax-exempt loans are available to Winter Park. The costs of sewer capacity reserve and the telephone lease can probably be covered by the contingency funds projected by Winter Park. AMI's proposed findings of fact with regard to equipment costs underestimates are rejected as unsupported by the weight of all of the evidence. Even with the understatement of project costs, the evidence supports a conclusion that Winter Park's proposal is immediately financial feasible. Winter Park currently has set aside "over $7,000,000.00" which can be applied to fund its proposal. (Although Winter Park has certain planned or ongoing capital improvements, the evidence does not prove that these improvements will be funded out of the funds set aside for the proposed new hospital, as suggested by AMI)'. Winter Park also has lines of credit with Barnett Bank and Sun Bank of $5,000,000.00 each. Neither line of credit has been used in the past. The Sun Bank line of credit was recently renewed and is available for one year. The Barnett Bank line of credit is also good for only one year. Both lines of credit have been renewed in the past. These lines of credit will have to be renewed before construction of Winter Park's facility begins. Winter Park presented no evidence as to whether the lines of credit would be renewed by either bank, however. Therefore, the record does not contain evidence as to whether the lines of credit will be available. Winter Park is also the sole beneficiary of the Winter Park Memorial Hospital Association Foundation, a not-for-profit foundation set upon to receive donations for the support of Winter Park. The Foundation "would make funds available to it [Winter Parka when needed." (Although testimony concerning Winter Park's alleged ability to "request" funds from the Foundation was struck, the quoted testimony was not objected to). The Foundation currently has $2,000,000.00 which could be provided to Winter Park. Finally, Winter Park has a commitment from Barnett Bank for a loan of $9,181,648.00. The loan has been committed whether interest on the loan is tax- free or taxable to Barnett Banks. Whether the loan is tax-free will affect the immediate and long- term financial feasibility of the proposal. If the loan is not tax-free, additional interest expense will be incurred; instead of being financed at a 7.696 interest rate, Winter Park will be charged approximately 11.5 percent interest if the loan is not tax- free. If the loan is tax-free, Winter Park may have failed to take into account costs associated with obtaining tax-free financing, i.e., underwriter's fees. AMI has proposed a number of findings of fact concerning additional costs associated with whether the Barnett Bank loan is tax-free. Those findings of fact are not relevant, however, in determining immediate financial `feasibility of Winter Park's proposal. The evidence establishes that the funds available to Winter Park are sufficient to cover Winter Park's projected costs and the costs it failed to include in its proposal (including the $1,20 0,000.00 of working capital which will be needed by the and of 1988). Both proposals are financially feasible in the short-term. Long Term Financial Feasibility. The Petitioners have failed to prove that their proposals are financially feasible in the long run. The projections of the Petitioners with regard to expected gross revenue depends upon whether their utilization projections are correct. Based upon the conclusion that there is no need for the proprosed facilities it is unrealistic to expect the facilities to be financially feasible. AMI's projections as to gross revenue depend on Mr. Richardson's need analysis for AMI's MSA. As discussed, supra, Mr. Richardson's projections were based upon unrealistic occupancy rates. Winter Park's projected utilization is based upon Winter Park's historical experience with its MSA for 1983. Mr. Talbert's and Mr. John Winfrey's reliance on this data in light of the trend toward reduced utilization of hospitals in Orange County is misplaced. Determining utilization of Winter Park's proposed hospital in future years based on utilization of an existing hospital in light of the trend toward reduced utilization of hospitals is very suspect. The fact that east Orange County is expected to grow in terms of population does not eliminate the concern with regard to utilization. Orange County has been growing since 1980 and before. Despite that growth, hospital utilization has declined. As to the projected expenses of the proposed hospitals which effect the financial feasibility of the proposals, it appears that AMI's projections are reasonable. A number of questions concerning Winter Park's expenses were raised, however, by the evidence. The evidence supports a finding that Winter Park has failed to take into account some expenses which will affect the long term financial feasibility of its proposal. Expenses not taken into account include phone lease expenses ($15,000.00 to $20,000.00), indigent care assessments ($58,000.00 in the second year of operation) and start-up costs ($22,680.00 a year). The evidence, however, also supports a finding that Winter Park's estimate of medicare contractual allowances was $318,900.00 too high and that depreciation expense was $130,000.00 too high. These overstatements of expenses are more than sufficient to cover the understatements of expenses discussed in this paragraph. The primary problem with Winter Park's estimate of expenses is that Winter Park has projected interest expense at a tax- exempt rate of 7.6 percent. The evidence does not prove that Winter Park can, however, obtain tax-exempt financing. Winter Park only presented evidence that Barnett Bank is willing to loan funds on a tax-exempt or taxable basis. Winter Park must, however, obtain approval of its proposed tax-exempt financing from the Orange County Health Facilities Authority. See Chapter 154, Florida Statutes (1983). No evidence that such approval could be obtained was presented at the hearing. Winter has therefore failed to prove that its estimated interest expenses can be achieved. The evidence also shows that if Winter Park cannot obtain tax-exempt financing, it will have to borrow funds at an 11.5 percent interest rate. This rate of interest can be obtained, but the additional interest expense would result in a net loss for the second year of operation. Based upon the foregoing, Winter Park has failed to prove that its proposal is financially feasible in the long-term. Winter Park has proposed findings of fact to the effect that it could charge a higher rate for its services to cover understated expenses. No evidence was presented, however, that proves that Winter Park would be willing or committed to a higher charge for its services. AMI's proposed findings of fact with regard to expenses for utilities, food and drugs, other operating expenses, incinerator costs and equipment costs are rejected. AMI's proposed findings of fact with regard to the goal of Winter Park to achieve an optimum profit margin of 5 percent to 7 percent are rejected because that goal does not apply to the proposed facility. The projected profit margin of the proposed facility is only seven-tenths of one percent. AMI's proposed findings of fact as to the years projections were made for (two years instead of five), the manner of making those projections (no balance sheet, no cash flow statements and no quarterly breakdowns) and the lack of a feasibility study are not necessary. AMI's remaining proposed findings of facts concerning "soft spots" in Winter Park's projections are also rejected. Special Needs and Circumstances of Health Maintenance Organizations; Section 381.494(6)(c)10, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Needs and Circumstances of Entities which Provide Services or Resources to Individuals not Residing in the Service District or Adjacent Service Districts; Section 381.494(6)(c)11, Florida Statutes (1984 Suppl.). The parties have stipulated that this criterion does not apply. Probable Impact of the Proposal on the Costs of Providing Health Services; Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.). The weight of the evidence clearly supports a conclusion that if either of the proposed hospitals is approved, the probable impact on the costs of providing health services would be negative. The only real question raised by the evidence is the degree of the negative impact. It has already been found that there will be an excess of beds in Orange County in 1990 and that utilization rates are decreasing and will continue to do so. To add 100 acute care beds to an already over-bedded subdistrict can only further add to the number of excessive beds. Patients who would occupy 100 new acute care beds would have access to other hospitals in Orange County if a new hospital is not approved. If it is assumed that patients could be attracted to a new hospital in the MSA's it necessarily follows that those patients will not use an existing, already underutilized, hospital in Orange County, Seminole County or the rest of District 7. Additionally, the evidence clearly shows that some patients who currently use existing Orange and Seminole County hospitals would be attracted to a new hospital in the MSAs. AMI has suggested that such a loss of patients would be "minimal." Minimal or not, the loss of any number of patients would result in a loss of patient days and revenue to existing hospitals which are on average already underutilized. If patients are lost by existing hospitals, the ability to serve indigents could be adversely affected. The projected population growth for the MSA's does not solve the problem either. Orange County has been experiencing population growth during the 1980's, as well as prior to 1980. Despite this population growth, utilization rates have been decreasing. Even Mr. Richardson, AMI's expert health planner, admitted there would be an impact on existing hospitals. Mr. Richardson indicated that there would a "1.5 percent occupancy impact on the system" by 1990 based upon Mr. Margolis' analysis. Mr. Richardson indicated that such an impact would be "minimal." Whether a 1.5 percent impact is minimal is not the issue. The issue is what effect such an impact would have. The weight of the evidence clearly supports the finding that the impact would be negative and the citizens of Orange County would suffer the consequences of that "minimal" impact. Florida Hospital's expert health planner, Mr. Margolis, was the most credible witness with regard to this criterion. His testimony proves that Florida Hospital and OGH could lose 5,400 to 6,000 patient days if a new 100 acute care hospital is approved. How much the dollar loss would be as a result of such a decrease in patient days is not clear. There was testimony that OGH could lose $1,000,000.00 to $3,500,000.00 in gross revenue. AMI has again suggested that the loss in patient days and revenue to OGH would be minimal and that OGH's testimony as to the amount of loss was misleading. Mr. Patrick Deegan, who testified as an expert in finance for OGH, did fail to take into account any reduction in expenses which might be associated with a loss in revenue and also failed to take into account increases in revenue as a result of growth. Although these factors could influence the amount of projected losses in revenue, the fact remains that a new acute care hospital could and probably would have a negative impact on OGH. AMI has also suggested that OGH could and should reduce its staff. This suggestion is based upon a comparison of OGH's staffing patterns and UCH Inc's proposed staffing. The record does not support AMI's proposed findings of fact. The record does not prove that UCH, Inc's, proposed staff will be at a more appropriate staffing level. Nor does the record establish that a reduction in staff at OGH would be detrimental, as suggested by OGH. As to Florida Hospital, AMI also suggests that any impact to its campuses would be minimal, if any. It is true that there probably would be no impact on Florida Hospital's Apopka campus. Florida Hospital's Orlando campus, however, gets 20 percent of its admission from the MSAs and its Altamonte Springs campus gets 3 percent of its admissions from the MSAs, as AMI points out in its proposed findings of fact. If any of those patients utilize a new hospital in the MSAs, Florida Hospital will lose patients and will be adversely affected. AMI suggested several findings of fact with regard to the financial well-being of Florida Hospital, the addition of beds at its Altamonte Springs and Orlando campuses and its motives in intervening in these cases. These proposed facts do not support a finding that Florida Hospital would not be negatively affected by the opening of a new 100 acute care bed hospital in Orange County. Finally, Winter Park has proposed findings of fact to the effect that a new Winter Park hospital in the MSAs will foster competition and thereby lower costs in Orange County for hospital services. The record does not support these proposed findings of fact in light of the excess of beds in District 7 and the underutilization of existing beds. Based upon the foregoing, Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), has not been met by the Petitioners' proposals. Costs and Methods of Construction; Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.). The Petitioners only partially proved that Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), will be met. This section requires proof as to the costs and methods of construction, including methods of energy provision and the availability of alternative, less costly or more effective methods of construction. The Petitioners only proved that the costs of construction would be reasonable. AMI's proposed facility will have 99,000 square feet. The total cost of construction will be $10,095,000.00 including $650,000.00 for site preparation, $8,161,000.00 for labor, materials, overhead and profit, $406,000.00 for contingencies and $878,000.00 for inflation. Architectural and engineering fees will cost an additional $566,700.00. AMI's costs of construction do not include the $236,800.00 cost of reserving sewage capacity or the costs of obtaining appropriate rezoning of its property. These costs will add to the total cost of construction and the total cost of the proposal. AMI's contingency funds are sufficient to cover these amounts. AMI's additional findings of fact concerning construction costs are cumulative or unnecessary for purposes of determining if this criterion has been met. Winter Parks's proposed facility will have 98,763 square feet. Total cost of construction projected by Winter Park is $10,415,000.00, consisting of $375,000.00 for site preparation, $9,000,000.00 for labor, materials, overhead and profit, $468,700.00 for contingencies and $552,200.00 for inflation. Winter Park's projections do not include the costs of reserving sewage capacity which will add approximately $150,000.00 in costs. This additional amount can be covered by the contingency amount. Although the evidence was contradictory, Winter Park did not inadvertently leave out the cost of an incinerator--there will be no incinerator at the new hospital. Although the Petitioners presented testimony to the effect that their projected costs of construction are reasonable, no consideration was given to whether the proposed facilities would be developments of regional impact (hereinafter referred to as "DRI") under Chapter 380, Florida Statutes (1983), and the costs associated with such a determination. The evidence supports conclusion that there will be some costs associated with the determination of whether the proposals are DRIs. The additional cost, however, does not appear to be significant. The Petitioners have failed to prove that the methods of construction are reasonable. They have also failed to prove that the provision of energy will be reasonable or that there are not alternative, less costly, or more efficient methods of construction available. Section 381.494(6)(d). Florida Statutes (1984 Suppl.). In addition to considering the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), Section 381.494(6)(d), Florida Statutes (1984 Suppl.), requires findings of fact in cases of capital expenditure proposals for new health services to inpatients as follows: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. The existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, that the addition will be consistent with the plans of other agencies of the state responsible for the provision and financing of long-term care, including home health services. The facts concerning the first three items quoted are favorable to the Petitioners. The last one does not apply. The fourth item has not been proved to be true in this case. Summary. In summary, the evidence proves that an application of the criteria of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate the need for either of the proposed facilities. The Petitioners have only proved that they can provide quality of care, that there are not alternatives to their proposals, that they will have shared resources, that personnel are available, that they have the capital to create the facilities, that they will improve the clinical needs of health professional training programs, and that their proposals are `financially feasible in the short-run. The Petitioners, however, have failed to prove any need for the facilities. Their proposals are not consistent with the local health plan or the State health plan. There are sufficient, underutilized existing hospitals to meet any need for hospital care and they will be adversely affected by the proposed facilities. The proposed facilities are not financially feasible in the long run. THE NEED FOR A CAT SCANNER AMI is also seeking a certificate of need for a CAT Scanner in this proceeding. The determination of whether such a certificate of need should be issued is governed by Section 10-5.11(13), F.A.C. In order to qualify for CAT Scanner, AMI must first obtain approval of its proposed hospital. Because it has been concluded that a certificate of need for a new hospital should not be granted, AMI should not be granted a certificate of need for a CAT Scanner; it will not qualify under Section 10- 5.11(13), F.A.C. In an abundance of caution, the following findings of fact are made as to whether a certificate of need for a CAT Scanner should be issued if AMI's application for a certificate of need for an acute care hospital is approved by the Department. Section 10-5.11(13)(b), F.A.C., provides that a favorable determination will not be given to applicants failing to meet the standards and criteria of Section 10-5.11(13)(b)1-10, F.A.C. The evidence clearly establishes that AMI's CAT Scanner application meets the standards of Sections 10- 5.11(13)(b) 1-3 and 7-9, F.A.C. Section 10-5.11(13)(b)4, F.A.C., does not apply. Section 10-5.11(13)(b)5, F.A.C., requires that an applicant document that there is a need for at least 1,800 scans to be accomplished in the first year of operation and at least 2,400 scans per year thereafter. Mr. Richardson testified that this standard is intended to apply to existing providers and that for a new hospital the need should apply to a five year horizon (1990 in this case). Mr. Richardson indicated that in 1990, this standard can be met. The language of Section 10-5.11(13(b)5, is clear; there must be a need documented for the first year of operation and each year thereafter. In this case, the first year of operation will be 1987. AMI has not documented that there is a need for 1800 scans in 1987 or 2,400 scans per year thereafter. Section 10-5.11(13)(b)6, F.A.C., requires that the applicant document that the number of scans per existing scanner exceeded 2,400 during the "preceding 12 months." The evidence establishes that during the 12 months preceding the hearing all of the fixed CAT Scanners located at hospitals except two were being used for more than 2,400 scans. Again, Mr. Richardson indicated that this standard should be applied to the 12 months preceding 1990. That is not what the rule specifies. The standard applies to the 12 months preceding the hearing. The two units that have not been used for 2,400 scans just started operation, however. Because the rule requires that in the first year of operation only 1,800 scans need to be performed, those units should not be considered in determining if AMI meets this standard. Therefore, AMI meets the requirements of Section 10-5.11(13)(b)6, F.A.C. The last standard, Section 10-5.11(13)(b)10, F.A.C., provides that extenuating circumstances pertaining to health care quality or access problems, improved cost benefit consideration or research needs may be considered. The facts do not support a finding that there are extenuating circumstances in this case. The facts do prove that any hospital such as the AMI proposed hospital should have access to a CAT Scanner. This need, however, can be met by a mobile CAT Scanner or by transferring patients to a facility with a CAT Scanner, although the latter alternative is less desirable. The evidence clearly proves that there is not access problem with regard to obtaining the services of a CAT Scanner. AMI has not met the requirements of Section 10-5.11(13)(b), F.A.C. Taking into account the factors to be considered under Section 10-5.11(13)(a)1- 8, F.A.C., also supports a finding that a certificate of need for a CAT Scanner should not be issued to AMI even if there is a need for its proposed hospital.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the certificate of need applications for a 100-bed acute care hospital and CAT Scanner filed by AMI, case number 84-1819, be denied. It is further DONE and ENTERED this 26th day of July, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 26th day of July, 1985. COPIES FURNISHED: Fred Baggett, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302 Michael Von Eckhardt, Esquire American Medical International, Inc. 414 Camden Drive Beverly Hills, California 90210 Kenneth F. Hoffman, Esquire OERTEL & HOFFMAN, P.A. Suite C 2700 Blair Stone Road Tallahassee, Florida 32301 J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A. P.O. Box 880 Winter Park, Florida 32790-0880 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 E. G. "Dan" Boone, Esquire Stephen K. Boone, Esquire E.G. BOONE, P.A. P.O. Box 1596 Venice, Florida 34284 Steven R. Bechtel, Esquire Brain D. Stokes, Esquire MATEER & HARBERT, P.A. 100 East Robinson Street P.O. Box 2854 Orlando, Florida 32802 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 LIST OF WITNESSES AMI NAME EXPERTISE Jim Palmer Phillip L. Coppage Hospital administration including staffing. Thomas C. Wohlford Patient group and insurance programs in the health care industry. J.D. Garland Health care facilities, including hospital construction management and budgeting and cost estimating. Manuel Viamonte, M.D. Radiology. Dick Chadbourne Manpower staffing requirements for health care facilities. Jan Stirrat Health care facility equipment planning and equipment cost budgeting. Preston Thompson Physician relations and recruiting. Joseph Akerman, M.D. Peter Hiribarnc, M.D. Louis Trefonas, Ph.D. Need, development and operation of sponsored research projects at UCF. Thomas S. Mendenhall, Ph.D. Need, development and operation of health education and affiliation programs. Alan Denner, M.D. Louis C. Murray, M.D. Joseph Sandberg, M.D. Myles Douglas, M.D. Robert D. Fennell Corporate health facilities planning, processing, implementation and development. Manuel J. Coto, M.D. Jerold J. Faden, M.D. Zivko Z. Gajk, M.D. Don Steigman Hospital operations and administration. William A. Tipton Traffic and transportation. Neal B. Hiler Civil engineering and property site analysis. Trevor Colbourn Ben E. Whisenant Frederick A. Raffa, Ph.D. Demographics and socioeconomic forecasting. Nilo Regis, M.D. Richard Pajot Mark Richardson Health planning. Richard Altman Hospital management engineering. Walter Wozniak Armond Balsano Health care facility financial feasibility and analysis and third- party reimbursements. Rick Knapp Health care facility financial feasibility and analysis, third- party reimbursement and rate-setting for health care facilities. Richard Anderson Edward E. Weller Real estate appraisal. John Winfrey Health care accounting and financial feasibility analysis. Van Talbert Health care planning. Margo Kelly Financial management, analysis and feasibility. WINTER PARK NAME EXPERTISE Katherine J. Brown Florida Hospital Cost Containment Board procedures; hospital costs and charges, data gathering and review; and hospital costs and charges comparisons. Karl Schramm, Ph.D. Hospital cost and charges and comparisons thereof and health care financing, including the impact upon the health care consumer. Willard Wisler Hospital administration including staffing and operating hospitals. John H. Roger Construction design and costs, including site preparation, and analysis thereof, in central Florida; including health care facilities construction. R. Sans Lassiter Traffic engineering, travel times and access in central Florida. Richard Anderson Sarah Mobley Equipment and cost of equipment. William J. Serow, Ph.D. Demographics. Van Talbert Health care planning. John Winfrey Health care accounting and financial feasibility analysis. Robert C. Liden Investment banking, including tax-exempt financing of health care facilities. Lewis A. Siefert Hospital accounting and Medicare Reimbursement. FLORIDA HOSPITAL NAME EXPERTISE Steven Windham Health planning. W. Eugene Nelson Health planning, CON administration and transportation planning. Ronald J. Skantz Radiology training and management. Sven Kansman Traffic engineering and travel time studies. John Crissey Stan Smith, Ph.D. Demographics. Gabriel Mayer, M.D. Physician. Larry Margolis Health care planning, hospital administration, facility planning, HMO's and PPO's. Scott Allen Miller Health care accounting and financial feasibility. OGH NAME EXPERTISE Patrick J. Carson, D.O. Medical emergencies and operation of an emergency room. Tracey Watson Michael Sherry B. Jean Martell Walter J. Wozniak Lawrence Kramer, O.D. Family practice. Patrick Deegan Accounting, hospital finance and budgeting. Andrea Walsh DEPARTMENT NAME EXPERTISE W. Eugene Nelson Health planning, CON administration and transportation planning. PUBLIC WITNESSES Mike Baumann Bob Mandell Luddy Goetz Martin Goodman Yvonne Opfell Martin Lebnick
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 At all times relevant hereto Respondent was licensed as a physician in the State of Florida having been issued license number ME0040318. Respondent completed a residency in internal medicine and later was a nephrology fellow at Mayo Clinic. He was recruited to Florida in 1952 by Humana. In 1984 he became associated with a Health Maintenance Organization (HMO) in an administrative position but took over treating patients when the owner became ill. This HMO was affiliated with IMC who assimilated it when the HMO had financial difficulties. At all times relevant hereto Respondent was a salaried employee of IMC and served as Assistant Medical DIRECTOR in charge of the South Pasadena Clinic. On October 17, 1985, Alexander Stroganow, an 84 year old Russian immigrant and former cossack, who spoke and understood only what English he wanted to, suffered a fall and was taken to the emergency Room at a nearby hospital. He was examined and released without being admitted for inpatient treatment. Later that evening his landlady thought Stroganow needed medical attention and again called the Emergency Medical Service. When the ambulance with EMS personnel arrived they examined Stroganow, and concluded Stroganow was no worse than earlier when he was transported to the emergency Room, and refused to again take Stroganow to the emergency Room. The landlady then called the HRS hotline to report abuse of the elderly. The following morning, October 18, 1985, an HRS case worker was dispatched to check on Stroganow. Upon arrival, she was admitted by the landlady and found an 84 year old man who was incontinent, incoherent, and apparently paralyzed from the waist down, with whom she could not engage in conversation to determine his condition. She called for a Cares Unit team to come and evaluate Stroganow. An HRS Cares Unit is a two person team consisting of a social worker and nurse whose primary function is to screen clients for admission to nursing homes and adult congregate living facilities (ACLF). The nurse on the team carries no medical equipment such as stethoscope, blood pressure cuff, or thermometer, but makes her evaluation on visual examination. Upon arrival of the Cares Unit, and, after examining Stroganow, both members of the team agreed he needed to be placed where he could be attended. A review of his personal effects produced by his landlady revealed his income to be above that for which he could qualify for medicaid placement in a nursing home; that he was a member of IMC's Gold-Plus HMO; his social security card; and several medications, some of which had been prescribed by Dr. Dayton, Respondent, a physician employed by IMC at the South Pasadena Clinic. The Cares team ruled out ACLF placement because Stroganow was not ambulatory, but felt he needed to be placed in a hospital or nursing home and not left alone with the weekend approaching. To accomplish this, they proceeded to the South Pasadena HMO clinic of IMC to lay the problem on Dr. Dayton, who was in charge of the South Pasadena Clinic, and, they thought, was Stroganow's doctor. Stroganow had been a client of the South Pasadena HMO for some time and was well known at the clinic as well as by EMS personnel. There were always two, and occasionally three, doctors on duty at South Pasadena Clinic between 8:00 and 5:00 daily and, unless the patient requested a specific doctor he was treated by the first available doctor. Stroganow had not specifically requested to be treated by Respondent. When the Cares unit met with Respondent they advised him that Stroganow had been taken to Metropolitan General Hospital Emergency Room the previous evening but did not advise Respondent that the EMS squad had refused to return Stroganow to the emergency Room when they were recalled for Stroganow the same evening. Respondent telephoned the Metropolitan General Emergency Room and had the emergency Room medical report on Stroganow read to him. With the information provided by the Cares unit and the hospital report, Respondent concluded that Stroganow needed emergency medical treatment and the quickest way to obtain such treatment would be to call the EMS and have Stroganow taken to an emergency Room for evaluation. When the Cares unit arrived, Respondent was treating patients at the clinic. A clinic, or doctors office, is not a desirable or practical place to have an incontinent, incoherent, and non-ambulatory patient brought to wait with other patients until a doctor is free to see him. Nor is the clinic equipped to perform certain procedures that may be required for emergency evaluation of an ill patient. At a hospital emergency Room such equipment is available. EMS squads usually arrive within minutes of a call being placed to 911 for emergency medical treatment and it was necessary that someone be with Stroganow when the EMS squad arrived. Accordingly, Respondent suggested that the Cares team return to Stroganow and call 911 to transport Stroganow to an emergency Room for an evaluation. Upon leaving the South Pasadena clinic the Cares team returned to Stroganow. Enroute they stopped to call a supervisor at HRS to report that the HMO had not solved their problem with Stroganow. The supervisor then called the Administrator at IMC Tampa Office to tell them that one of their Gold-Plus HMO patients had an emergency situation which was not being property handled. Respondent left the South Pasadena Clinic around noon and went to IMC's Tampa Office where he was available for the balance of the afternoon. There he spoke with Dr. Sanchez, the INC Regional Medical Director, but Stroganow was not deemed to be a continuing problem. By 2:00 p.m. when no ambulance had arrived the Cares Unit called 911 for EMS to take Stroganow to an emergency Room. Upon arrival shortly thereafter the EMS squad again refused to transport Stroganow. The Cares team communicated this to their supervisor who contacted IMC Regional Office to so advise. At this time Dr. Sanchez authorized the transportation of Stroganow to Lake Seminole Hospital for admission. Although neither Respondent nor Sanchez had privileges at Lake Seminole Hospital, IMC had contracted with Lake Seminole Hospital to have IMC patients admitted by a staff doctor at Lake Seminole Hospital. Subsequent to his meeting with the Cares team Respondent received no further information regarding Stroganow until well after Stroganow was admitted to Lake Seminole Hospital. No entry was made on Stroganow's medical record at IMC of the meeting between Respondent and the Cares Unit. Respondent was a salaried employee whose compensation was not affected by whether or not he admitted an IMC Gold-Plus patient to a hospital.
Findings Of Fact Introduction Orlando General Hospital applied in April, 1987, for a certificate of need to allow it to convert 24 existing medical-surgical beds to short term psychiatric beds. O.G. Ex. 2, p. 1. It did not explicitly apply for beds limited to serve adults. It did, however, state that adolescent care would not be provided "at this time," leaving open the use of the 24 beds in the future for possible adolescent use. Id. at p. 5. Charter Medical-Orange County, Inc., applied for a certificate of need for a 50 bed short term psychiatric specialty hospital. It explicitly applied for a specialty hospital having 50 beds of "short term adult psychiatric care." C.M. Ex. 1, application, section I. In the executive summary, it characterized its proposal as a specialty hospital "for adults." Id. at p. 1. Charter does not intend to treat child or adolescent short term psychiatric patients. T. 23. The applications were filed in early 1987 to meet need in the January, 1992, planning horizon. The rule that applies in this case is the one contained in the prehearing stipulation. T. 392. It is rule 10-5.011(1)(o), Fla. Admin. Code. A copy of the rule is contained in O.G. Ex. 7, p. 33. The provisions of the local health plan at issue in this case are accurately reproduced in the State Agency Action Report (SAAR) which is C.M. Ex. 5. Net Short Term Psychiatric Bed Need (Numeric Need) Rule 10-5.011(1)(o)4a-c, Fla. Admin. Code, provides that the projected number of beds shall be based on a bed need ratio of .35 beds per 1,000 population projected five years into the future and based, in this case, on the January, 1987, projections for January, 1992. That 1992 population for District VII is projected to be 1,505,564, and thus the gross short term psychiatric bed need is 527 beds. For this batching cycle, the inventory of licensed and approved short term psychiatric beds was 410. These were: General Hospitals Florida Hospital-Altamonte 20 Florida Hospital-Orlando 85 Orlando Regional Med. Center 32 Wuesthoff Memorial Hospital 25 Subtotal 162 Specialty Hospitals Brevard Mental Health Center 52 CPC Palm Bay (began 10/86) 40 Laurel Oaks (began 10/86) 60 Lynnhaven (approved only) 39 Park Place (approved only) 17 West Lake 40 Subtotal 248 TOTAL (Licensed and approved) 410 TOTAL (Licensed only) 354 Thus, there is a net need for 117 short term psychiatric beds In District VII by 1992. The rule further specifies that a minimum of .15 per 1,000 population should be allocated to hospitals holding a general license, and that .20 per 1,000 of the beds may be located in either speciality hospitals or hospitals holding a general license. HRS interprets the word "should" in the rule with respect to .15 per 1,000 allocated to hospitals with a general license as being mandatory. C.M. Ex. 5, pp. 13-14. This is a reasonable construction of the rule. By 1992 there must be 226 short term psychiatric beds located in hospitals holding a general license. Since currently there are 162 beds in such hospitals, there is a net need by January, 1992, for 64 short term psychiatric beds to be opened in hospitals holding a general license. The remainder of the net bed need, 53 beds, may be located in either a specialty hospital or a hospital holding a general license. T. 500-02. The Occupancy Rate for "All Existing Adult Short Term Inpatient Psychiatric Beds" Rule 10-5.011(1)(o)4e, Fla. Admin. Code, provides in part that "no additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75 percent for the preceding 12 month period." (E.S.). Calendar year 1986 is the period of time accepted by all parties as the "preceding 12 month period" as specified by the rule, that is, the period of time to calculate the occupancy rate for this batching cycle. See, e.g., T. 285; C.M. Ex. 5. The State Agency Action Report Occupancy Rate The State Agency Action Report computed the occupancy rate for all licensed short term psychiatric beds in District VII in calendar year 1986 at 70.13 percent. C.M. Ex. 5, p. 10. This figure was based upon data as to patient days as reported by District hospitals to the District VII local health council and was based upon 354 licensed beds in the District during the full calendar year, but excluded 56 beds the re approved but not opened. O.G. Ex. 7, p. 6. Exclusion of CPC Palm Bay and Laurel Oaks CPC Palm Bay and Laurel Oaks have been designated by certificate of need issued by HRS to serve only children and adolescents. T. 507. Since those facilities by law cannot serve adults, their beds are not "adult beds," their patient days are not adult patient days, and their occupancy rate is not an adult occupancy rate. T. 1128. If CPC Palm Bay and Laurel Oaks were excluded from the calculation of the occupancy rate in the SAAR, the occupancy rate would be 73.7 percent. This rate is a weighted average based upon a 86,779 patient days that were possible at 100 percent occupancy of all licensed short term psychiatric beds in District VII in 1986, excluding Palm Bay and Laurel Oaks. C.M. Ex. 17, p. 11, fn. 9. How Many Adult Patient Days and Beds? HRS often issues certificates of need without age restrictions, allowing the facility to provide short term psychiatric treatment to everyone, regardless of age. Such hospitals can and do serve all ages, and their licensed short term psychiatric beds are not designated as, or restricted to, adults. T. 1128-29. With the exception of Palm Bay and Laurel Oaks, none of the other licensed short term psychiatric hospitals in the District are restricted by HRS by patient age. HRS does not have data to enable it to determine which short term psychiatric beds were used by adult patients in the District in 1986. T. 1169. Use of beds for age cohorts can dramatically and continuously change during a calendar year, and 41 has no reliable means to know about such changes. T. 1229-30. Hospitals issued certificates of need without limitation as to the age of the patient are not required by HRS to report the number of patient days served by the hospital by age or age group of the patient. See T. 1218-19; HRS Ex. 2. HRS Ex. 2. Consequently, the reported short term psychiatric patient days for District VII for calendar year 1986 mix adult patient days with patient days for children and adolescents. Thus, with the exception of Laurel Oaks and Palm Bay, it is impossible in this case for the applicants and other parties in this batching cycle to untangle pure adult psychiatric patient days from the available data. T. 392, 353, 287, 291, 371, 1169-71. It is impossible on this record to make a finding of fact as to what would happen to the mixed occupancy rate all patient days attributable to adolescents and children could be excluded from the adult patient days. The only bit of evidence is found in C.M. Ex. 17, the data from Florida Hospital, which shows for that hospital that the 16 adolescent unit in 1986 had an occupancy rate of 60.92 percent, and the open adult unit had an occupancy rate of 82.42 percent. C.M. Ex. 17, p. 3. But that percentage is more a reflection of Florida Hospital's choice in how it set up the beds in the two programs than it is a reflection of need. For example, had Florida Hospital chosen to allocate only 12 beds to its adolescent program, instead of 16, the 1986 occupancy rate for that unit, based on 3,558 patients a day, would have been 81.23 percent. One wonders why Florida Hospital did not simply allocate a lower number of beds to the adolescent unit, since it had only 13 admissions to that unit in 1986. In any event, since a hospital like Florida Hospital has discretion as to how it sets up its beds with respect to the ages of patients. In those beds, the fact that it had an occupancy rate of 60.92 percent in the subunit it called the adolescent unit in 1986 is relatively meaningless when trying to predict which way a pure adult occupancy rate might change if adolescent and child patient days could be excluded. In summary, there is no accurate count of beds licensed only as adult beds, there is no accurate count of beds used only as adult beds, and there is no accurate count of adult patient days. The Problem of West Lake Hospital The record has an additional data problem with respect to calculation of the occupancy rate of adult short term psychiatric beds. West Lake Hospital is licensed for 40 short term beds (not restricted by age), and 30 long term psychiatric beds. Data for calendar year 1986, the only year relevant in this case, is a mixture of short term and long term patient days. C.M. Ex. 17. As will be discussed ahead, additional evidence as to the patient days at West Lake Hospital was excluded from evidence for failure to comply with the prehearing order. The Problem of Short Term Psychiatric Patient Days Occurring in General Hospitals Without Licensed Short Term Psychiatric Beds A general hospital with no licensed short term psychiatric care can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. T. 1191. In calendar year 1986, Orlando General Hospital reported to the Hospital Cost Containment Board that it provided 4,969 psychiatric (MDC 19) patient days of care. O.G. Ex. 7, p. 11. By 1988, it had over 30 psychiatric patients in the hospital at any given time. T. 753. Orlando General Hospital does not have any beds licensed for short term psychiatric care, or for long term psychiatric care, for that matter. Orlando General Hospital's psychiatric patients are currently receiving inpatient psychiatric care that is substantially the same as would be provided in a licensed short term psychiatric bed, with the exception that the care is osteopathic in nature. See T. 797, 1355-58, 1360-62, 788-90, 792-93. HRS Policy as to the Data Problems HRS stated that it "... would not attempt to fix a specific occupancy for a specific age cohort" in this case, T. 1220. A good faith attempt was made, however. Following a new policy, HRS argued that the adult bed occupancy rate should exclude the beds and patient days of hospitals having certificates of need explicitly limited to service of the needs of children and adolescents (Palm Bay and Laurel Oaks), but should include all of the licensed short term psychiatric beds at any other facility that is not restricted by patient age. T. 1127-29. It was acknowledged that the information is faulty, but the Department urges that it is the best that it can do under the circumstances. T. 1174. With respect to patient days, HRS also urges that only the patient days reported to the local health council by hospitals having licensed adult short term psychiatric beds should be counted in the mixed rate. In particular, HRS argues that it should not use patient day data reported to the Hospital Cost Containment Board because such data is not limited to hospitals having "designated" psychiatric units. T. 1126-27. This argument is not reasonable. Hospitals that are legally authorized to provide short term psychiatric care to adults (i.e., having a certificate of need and a license) can provide such care in any licensed bed in the hospital, even though the bed is not licensed as a psychiatric bed. Moreover, a general hospital with no licensed short term psychiatric care, according to HRS witnesses, can lawfully provide temporary and sporadic short term psychiatric care in its medical-surgical beds. It may even provide such care on a continuous, ongoing basis, as in the case of Orlando General Hospital, although the legality of doing so is questioned by HRS. The critical question is not whether these licensed hospitals have legal authority to provide short term psychiatric care, but whether the care in fact given results in a short term psychiatric patient day in the District. If the care given is essentially the same as if the patient had been in a licensed short term psychiatric bed, it would be unreasonable not to treat the resulting statistic as a short term psychiatric patient day. What is at stake is a true measurement of District capacity. If tomorrow all of the District short term psychiatric patients and the patient days generated by such patients transferred to the District licensed short term psychiatric beds, these short term psychiatric patient days would certainly be counted in the occupancy rate. When trying to assess the real extent of availability of District capacity, a false picture of excess and unused capacity would be shown if real short term psychiatric patient days are occurring somewhere in the District, but are not counted in determining the occupancy rate. On the other hand, if the facility is not even a licensed hospital, it is presumptively providing an alternative kind of inpatient psychiatric care that is different from a licensed psychiatric hospital. Thus, its patient days are irrelevant absent some specific proof that the care given in such a bed is essentially the same as a short term psychiatric patient day in a licensed general or specialty hospital. What is an "Existing" Adult Short Term Bed? Rule 10-5.011(1)(o)4e, Fla. Admin. Code, calls for the occupancy rate for "all existing" adult short term psychiatric beds in the service district, and does not define the word "existing." Petitioners assert that "existing" adult beds of the facility for purposes of determining occupancy rate is the number of beds characterized by the facility as having been in fact used for psychiatric care during the year, but only if that number is less than the number of licensed short term psychiatric beds. T. 391, 354-55. The Respondent and the Intervenor argue that "existing" adult beds is fixed by the number of licensed short term psychiatric beds granted to the facility by the state if available to serve adult patients. Normally, to be licensed a bed must be available within 24 hours. T. 1121. Orlando Regional Medical Center In calendar year 1986, Orlando Regional Medical Center had 32 licensed short term psychiatric beds. T. 348. These 32 beds were not restricted by patient age. In calendar year 1986, Orlando Regional Medical Center characterized as "in service" 32 beds for the first 7 months of 1986, 22 beds for the month of August, 18 beds for the month of September, and 12 beds for the remaining 3 months of the year. The figure of 25 beds used by the Petitioners is the weighted average. T. 348. These licensed short term psychiatric beds at Orlando Regional Medical Center were temporarily not in service because of the construction of new facilities at the hospital. Orlando Regional Medical Facility intended to reopen those beds in the future because the hospital reminded the party seeking discovery that it had 32 licensed beds, and characterized the missing beds as having been "warehoused," that is, saved for future use. T. 509-10; O.G. Ex. 7, appendix 3. Thus, all 32 of Orlando Regional Medical Center's licensed beds would be available and would be used for adult short term psychiatric care if demand existed. Florida Hospital Florida Hospital has two facilities relevant to this case, one in Orlando, in Orange County, and one in Altamonte Springs, in Seminole County. In calendar year 1986, Florida Hospital had 105 beds licensed as short term psychiatric beds. Florida Hospital would serve patients of any age in these 105 beds. C.M. Ex. 18 is a document which was obtained from Florida Hospital through discovery. T. 286. The document is entitled "Florida Hospital Center for Psychiatry Monthly Operating Statistics," and thus was assumed by Charter's expert to be Florida Hospital's characterization of its data as psychiatric data. T. 289. C.M. Ex. 18 could not have been obtained by Charter at the time it made application. It was obtainable only through the discovery process after commencement of section 120.57(1), Fla. Stat., proceedings. T. 314-16, 386-87. Florida Hospital reported in discovery that in calendar year 1986, it had 113 beds operating in its "Center for Psychiatry." Of these, 16 were substance abuse beds, 13 were beds in an eating disorders unit, and 16 were adolescent beds. That left 24 beds in the intensive care unit, 24 beds in an open unit, and 20 beds at a unit at Altamonte Springs. C.M. Ex. 18. The 16 substance abuse beds clearly were not psychiatric beds. If the 13 eating disorders beds were short term psychiatric beds, Florida Hospital had 97 of its 105 licensed short term psychiatric beds in actual operation in 1986. If they were not, Florida Hospital had 84 of its 105 licensed short term psychiatric beds in actual operation in 1986. There is no evidence in this record that Florida Hospital could not and would not have readily opened 8 more short term psychiatric beds during 1986 if demand for those beds had existed, thus having "open" all 105 of its licensed beds. There is no evidence in this record that in 1986, Florida Hospital could not have closed its 16 bed adolescent unit and devoted all of those beds to adult short term psychiatric care, had there been a need. Indeed, it appears that generally speaking, that is how Florida Hospital operates: by shifting beds to other uses within its licensed authority according to demand. See T. 1322-26. Thus, all 105 of Florida Hospital's licensed beds would have been available and would have been used for adult short term psychiatric patients if the demand existed. Counting Patient Days - Are Eating Disorder Patient Days Psychiatric Patient Days? Florida Hospital reported in discovery that it had 2,982 patient days in its eating disorder unit, and that the unit operated with 13 beds. C.M. Ex. 18, P. 3, lines 8 and 26. The eating disorder unit reports to the administrative director of the Florida Hospital Center for Psychiatry. T. 977. The administrative director could not explain why the unit reported to the Center for Psychiatry. T. 977. The unit has co-directors, one a psychiatrist, and the other a specialist in internal medicine. Id. The administrative director of the Center for Psychiatry characterizes the 13 eating disorders beds as medical-surgical beds, and classifies patients in those beds as primarily having a medical problem, T. 976, but the psychiatrist co-director of the program hedged, and would not say whether the primary diagnosis is medical or psychiatric. T. 1315. The patients typically are, however, very ill from a medical point of view. T. 1314. Florida Hospital's characterization of the nature of the care given in its eating disorders unit, as summarized in the preceding paragraph, in view of the manner in which the witnesses were unclear as to how to characterize the eating disorder unit, is not evidence that the care given in that unit is not psychiatric care in view of Florida Hospital's interest in these cases in opposition to the applications. Charter's expert concluded from C.M. Ex. 18 that Florida Hospital was serving short term psychiatric patients in its eating disorders unit at Altamonte Springs. T. 287. He characterized this as a short term psychiatric service in medical-surgical beds. T. 289. But he also characterized the 13 beds as psychiatric beds. T. 287-88. HRS has issued a certificate of need to a short term psychiatric hospital limiting that certificate of need to treatment of eating disorders, thereby recognizing treatment of eating disorders in that case as a form of psychiatric treatment. T. 1191. From testimony at the hearing, it would appear that HRS's expert would view the eating disorder unit at Altamonte Springs as a short term psychiatric program. T. 1191-1192, 1194. It is concluded that the preponderance of the evidence shows that the care rendered to patients in the eating disorders unit was psychiatric care. The unit is administratively a part of the hospital's Center for Psychiatry. While the patients are very ill, medically speaking, they also have substantial mental health problems. Finally, and most persuasive, HRS has previously characterized such care as short term psychiatric care. If these 2,982 eating disorder patient days are counted as psychiatric patient days in 1986 for District VII, and if the number of beds at Florida Hospital remains as it was in the SAAR calculation (105 licensed beds), then the total patient days for the District changes from 63,976 to 66,958. The result is that the occupancy rate for District VII for 1986 for adult and mixed short term psychiatric beds changes from 73.72 percent to 77.16 percent. C.M. Ex. 17, p. 13. This calculation is the result of a weighted average discussed above. Psychiatric Patient Days Reported to the Hospital Cost Containment Board Orlando Regional Medical Center and Florida Hospital report patient days by Medicare major diagnostic categories (MDC). MDC 19 is the category for psychiatric care. T. 512; O.G. Ex. 7. The data collected in this record was for calendar year 1986. T. 603-604. Relying upon MDC 19 statistics for calendar year 1986, Florida Hospital (Orlando and Altamonte Springs combined) had 28,372 MDC 19 patient days, and Orlando Regional Medical Center had 7,328 MDC 19 patient days. The Florida Hospital MDC 19 patient days shown in table 6, O.G. Ex. 7, are very close to the number of patient days shown on C.M. Ex. 18, the operating statistics from the "Center for Psychiatry" obtained from Florida Hospital in discovery. The MDC 19 patient days, 28,372, exceed the "Center for Psychiatry" reported data by only 452. The Orlando Regional Medical Center's MDO 19 patient days, 7,328, is 618 patient days greater than the patient days reported by Orlando Regional Medical Center to the local health council. If these MDC 19 patient days are assumed to be short term adult psychiatric patient days, following the same mathematical calculation used by HRS both in the SAAR and in testimony during the hearing (with the same weighted averages), the occupancy rate for adult and mixed short term psychiatric care in District VII, using licensed beds, was 78.39 percent in calendar year 1986. O.G. Ex. 7, table 6. This calculation uses the same weighted average (86,779 patient days at 100 percent occupancy) as used by all the other parties. C.M. Ex. 17, p. 11, fn. 9. There is no evidence in the record that the foregoing MDC 19 patient days are limited to short term psychiatric days, or the extent to which the data considers long term patient days as well. Of course, there is also no evidence available to separate the MDC 19 patient days into adult patient days and patient days attributable to children and adolescents. Westlake Hospital Data as to Short Term Psychiatric Patient Days in 1986 The Intervenor, Florida Hospital, has renewed its effort to have F.H. Ex. 3, and testimony based upon that exhibit admitted, into evidence. The exhibit and testimony involves data as to short term psychiatric patient days for 1986 at Westlake Hospital, located in Seminole County. Florida Hospital argues that the ruling excluding F.H. Ex. 3 from evidence, as well as testimony related to that exhibit, is inconsistent with the ruling that allowed Charter Medical to introduce C.M. Ex. 19. It is argued that the only difference is that in the case of Charter Medical, the witness first testified as to the contents of the exhibit, whereas in Florida Hospital's case, the exhibit was admitted, the witness testified, and then the exhibit was excluded. Florida Hospital argues that as a result of this sequence of events, its witness was not afforded an opportunity to present the same evidence from memory without the exhibit. From a review of the sequence of events, it is apparent that there is a substantial difference between the two exhibits, as well as a substantial difference in the procedures used by counsel, and that difference necessitates the two rulings. C.M. Ex. 19 is nearly identical to C.M. Ex. 17, with three exceptions. In C.M. Ex. 19 the patient days at the Florida Hospital eating disorder unit were moved from the Orlando facility to the Altamonte Springs facility. C.M. Ex. 19 also excluded adolescent patient days from the Florida Hospital count changed the number of "existing" beds at Orlando Regional Medical Center to 25 instead of 32. T. 295. C.M. Ex. 19 made no other changes to C.M. Ex. 17 with respect to patient days or number of beds. Two objections were made by Florida Hospital to the admission of C.M. Ex. 19, that C.M. Ex. 19 had not been provided to opposing counsel at the exchange of exhibits, in violation of the prehearing order, and that C.M. Ex. 19 was an impermissible amendment to Charter Medical's application for certificate of need. T. 295-296. Only the first objection is the subject of Florida Hospital's renewed argument. The Hearing Officer at the time overruled the first objection because it was determined that C.M. Ex. 19 merely summarized the testimony of Dr. Luke as to changes he would make to C.M. Ex. 17. That ruling was correct, and should not be changed at this time. All of the underlying data for the expert analysis in C.M. Ex. 19 came into evidence without objection that it had not been exchanged among the parties. C.M. Ex. 18 contained the data as to adolescent patient days and eating disorder patient days at Florida Hospital in 196. That data came into evidence without objection that it had not been exchanged. T. 316. Dr. Luke's testimony that Orlando Regional Medical Center had only 25 beds operational in 1986 came into evidence without objection. T. 292. Dr. Luke's testimony concerning the location of the eating disorders unit at Altamonte Springs came into evidence without objection. T. 287, 291. Both of these latter evidentiary matters were of a type that easily could have been known to Dr. Luke without reference to a document to refresh his memory. Additionally, the parties were well aware of the argument that Orlando Regional Medical Center had only 25 operational beds in 1986, and that Florida Hospital had only 48 adult beds in operation in 1986, since that evidence and argument was a fundamental part of Orlando General Hospital's basic bed need exhibit, O.G. Ex. 7, and the testimony of Ms. Horowitz. Moreover, the type of analysis of the data contained in C.M. Ex. 19 is the same as that of Ms. Horowitz in O.G. Ex. 7. Thus, Florida Hospital was not caught by surprise by C.M. Ex. 19. The exhibit did not contain new data or new modes of analysis. Florida Hospital's attempt to introduce data as to the actual number of short term psychiatric patient days at Westlake Hospital in 1986 was quite different. The data as to patient days at Westlake had not been produced during the deposition of Florida Hospital's witness, although similar data for 1987 and 1988 was produced. T. 867. Had it been made available in discovery, the failure to exchange the data as an exhibit as required by the prehearing order would have been less serious. But the exhibit had not been given by Florida Hospital to opposing parties, in violation of the prehearing order. T. 869. F.H. Ex. 3 did not reorganize data that otherwise was exchanged between the parties. It attempted to introduce new raw statistical data that had not been furnished opposing counsel as required by the prehearing order. The Hearing Officer initially ruled that F.H. Ex. 3 should be admitted into evidence and allowed the witness to testify concerning the data contained in the document. T. 870-871. That initial ruling was in error. The data contained in F.H. Ex. 3 is not at all simple. The document consists of four pages of numbers representing monthly statistics in 1986 at Westlake Hospital for each of its units. It is highly unlikely that a witness could have remembered all of that data presented the data in testimony without reliance upon the exhibit. Indeed, the witness testified that all of his testimony was based upon F.H. Ex. 3. T. 907. The witness had apparently given a different impression as to Westlake's occupancy rate in 1986 during his deposition, and did so without the benefit of F.H. Ex. 3. T. 910. Florida Hospital could have asked the witness if he could have presented his testimony without reference to F.H. Ex. 3, but it did not ask the witness that critical question. In sum, the witness could not have presented his analysis from memory. He had to have F.H. Ex. 3 in front of him as he testified. On December 2, 1987, an order was entered setting this case for formal administrative hearing beginning on July 11, 1988. That order established prehearing procedures. Paragraph 3 of that order requires counsel to meet no later than 10 days before the hearing to, among other things, "examine and number all exhibits and documents proposed to be introduced into evidence at the hearing." Later in the same paragraph is the requirement that the parties file a prehearing stipulation containing a list of all exhibits to be offered at the hearing. Paragraph 3D of the prehearing order states in part that failure to comply with the requirements of the order "may result in the exclusion of testimony or exhibits." The first time that opposing counsel were given the opportunity to see the data in F.H. Ex. 3 was in the middle of the formal administrative hearing. The exhibit contained detailed raw statistical data. C.M. Ex. 19 did not try to present new raw statistical data. For these reasons, F.H. Ex. 3 and all testimony related to that exhibit by Mr. Menard was excluded from evidence. Later in the hearing, Florida Hospital sought to introduce the same data through the testimony of Wendy Thomas, the planning director and data manager for the local health council. T. 1050. Counsel for Florida Hospital first attempted to show the witness the document that had been excluded from evidence, and counsel for the other parties objected. T. 1047-1049. The Hearing Officer suggested to counsel that counsel should first ask the witness whether she had made a computation and then ask what was the basis of the computation, rather than show the witness the document. T. 1049. Counsel then attempted to do that. But when counsel asked the witness for her computation, it was still unclear whether the witness based her calculation upon data in the excluded document. T. 1053. After a number of other questions, it still was unclear whether the data in the excluded document was the basis for the calculation. T. 1053-1055. The Hearing Officer then asked the witness if she could identify F.H. Ex. 3. The witness said that F.H. Ex. 3 contained the exact type of information that she had in her own files, and that her document looked like F.H. Ex. 3, except it was photocopied smaller. T. 1056. During all of this exchange, the witness was never asked by counsel for Florida Hospital if she ever had an independent memory of the details of the underlying data, or whether, if that memory now had faded, looking at F.H. Ex. 3 would refresh her memory. Since it was apparent that the basis for the witness's calculation was the same raw statistical data as contained in F.H. Ex. 3, the Hearing Officer granted the motion to exclude the testimony. Later, in cross examination of the proffered testimony, the witness testified that the basis for her calculation was the use of a document containing the same data as F.H. Ex. 3. T. 1087-1088, 1091. Thus, counsel for Florida Hospital did not lay a proper predicate for attempting to use F.H. Ex. 3 to refresh the memory of either witness. As discussed above, had it done so, it is unlikely that either witness could have testified from memory as to the statistics because the data contained in F.H. Ex. 3 was too detailed to have ever been in the memory of either witness. Florida Hospital argued that Ms. Thomas's calculation should be admitted because the raw data had been in her possession for over a year. That argument is unpersuasive. The raw data was in the possession of Westlake Hospital as well. The issue is not whether opposing parties might have discovered the data on their own, but compliance with the prehearing order requiring exchange of important exhibits. For these reasons, the Hearing Officer's rulings as to exclusion of the foregoing evidence will remain unchanged. The Local Health Plan Applicability No part of the District VII local health plan was adopted by HRS as a rule when these applications were and reviewed. T. 1214. Several years ago, with respect to applications for certificates of need for short term psychiatric beds, HRS considered need and occupancy rates only on a district-wide basis. T. 1184. See e.g. C.M. Ex. 20, where HRS did not refer to the local health plan as to these issues in District VII. HRS has now changed that policy, however, and considers need and occupancy at the district level and by portions of the District if those issues are effectively required by the local health plan. T. 1184. For purposes of planning for short term psychiatric services, the local health plan divides District VII into county "planning areas." Orange County is thus a local health plan planning area. The local health plan does not use planning areas for substance abuse planning, and it does not explain why there is a difference in planning. Orlando General and Charter both propose to locate their proposed short term adult psychiatric beds in Orange County if granted certificates of need. Counties are convenient units for health planning purposes because population data exists by county. T. 1180. Census tracts and zip code areas are also convenient geographical units for health planning. T. 1180-81. If a proposed facility is to be located very close to the county line, it would make no difference which side of the line it was on with respect to the ability of the facility to serve patients originating in either county. T. 1181. Allocation of Net Need to Orange County The local health plan, policy 3, provides that if the application of rule 10-5.011(1)(o) indicates a need (at the District level), the need is to be allocated among the counties in the district using the state numeric need method by county. T. 1027-29; C.M. Ex. 5. Applying all of the age calculations for the projected populations and bed inventory of Orange County only, the local health plan allocates 55 new short term psychiatric beds to Orange County by 1992. However, applying the allocation ratios of the rule, there is an excess of 18 short term psychiatric beds in general hospitals, and thus none of the 55 beds would be mainly allocable to a general hospital. There is, nonetheless, a potential allocation of need of 73 beds in either a specialty or a general hospital, and the net need of 55 beds could be allocated to either a specialty hospital or a general hospital. The Orange County Mixed Occupancy Rate The local health plan, policy 4, applies the 75 percent occupancy standard to the county level. The policy explicitly calls for an average annual occupancy rate for all existing facilities in the planning area with respect to adult short term psychiatric beds. C.M. Ex. 5. Relying upon the calculation in the SAAR, but deleting Laurel Oaks, the mixed occupancy rate for Grange County in 1986 was less than 58.4 percent. This calculation only includes the beds at Florida Hospital (Orlando) and Orlando Regional Medical Center. The calculation is based upon 18,696 patient days at Florida Hospital (Orlando) in 85 beds, and 6,242 patient days in Orlando Regional Medical Center in 32 beds. There were 4,969 MDC 19 patient days occurring at Orlando General Hospital in 1986. There were 7,328 MDC 19 patient days occurring at Orlando Regional Medical Center in 1986. The eating disorder patient days occurred in Seminole County (Altamonte springs) and should not be counted in an Orlando occupancy rate. The only data as to patient days at Florida Hospital, Orlando only, is that found in C.M. Ex. 18, which is the same as the SAAR, which reports 18,696 patient days. (The MDC 19 data mixes the two units.) The number of licensed short term psychiatric beds in Orange County in 1986 was 117. All of these beds were licensed the entire year, and thus there was no need to do a weighted average of potential patient days for these beds. See C.M. Ex. 17, p. 11; O.G. Ex. 7, table 6. Using all of the foregoing patient days, the number of patient days was 30,993, the number of licensed short term psychiatric beds was 117, and the mixed occupancy rate for Orange County for 1986 was 72.6 percent. If it is not appropriate to count the 4,969 patient days at Orlando General Hospital in the Orange County occupancy rate, the 1986 Orange County occupancy rate was only 60.09 percent. Conversion of Existing Beds and Service to Indigent Patients Policy 5 of the local health plan states that excess bed capacity in, among other types of beds, medical/surgical beds, should be eliminated by reallocation of beds among the services, including psychiatric services. Policy 6 of the local health plan states that primary consideration should be given for project approval to applicants who satisfy to the greatest extent the following priorities: The first priority is to applicants who commit to serving "underserved client groups," including Medicaid, Baker Act, and medically indigent patients. The second priority is to applicants who convert underutilized existing beds. As will be discussed in the conclusions of law, Orlando General's application satisfies these priorities, and Charter Medical's application does not. Other Evidence as to Future Need Historically, health care providers have been reimbursed on a fee- for-service basis. The more services provided, the greater the payment. These insurance arrangements had little incentive to decrease the level of services. T. 720. In the last three or four years, the health insurance industry has changed its methods of providing insurance. A very large percentage of insured patient care is now managed by use of flat rates based upon a per person count (capitation). The rates do not increase related to utilization. Managed health care reimbursement uses a system whereby the health care provider is paid a flat rate annually for each insured person, and agrees to provide for the health care needs of all such persons generally without considering the degree of utilization during the year. T. 722-723. Under the capitation system, the provider has the incentive to provide only such care that, in intensity or duration, is the minimum that is clinically acceptable. T. 724. Psychiatric services have been included in the movement of the industry toward managed health care reimbursement rather than fee-for-service reimbursement. T. 722. The health care industry now offers competitive managed health care plans in central Florida, and the trend is for an increase in the availability of such methods of reimbursement in central Florida. T. 726-727. It is now 40 percent of the insurance market, and in the early 1990's, the percentage of managed health care may be twice that percentage. T. 727. The effect of the new reimbursement system is to substantially lower the length of stay, and to lower the rate of admission as well, at short term psychiatric hospitals. T. 724-725, 881-882, 1319-1320. Orlando General Hospital projected that its average length of stay would be 30 days in 1992. It has discovered from current experience that its average length of stay is about 15 days. T. 433, 464. District VII has recently experienced an increase in the availability of community based mental health facilities. These facilities provide a variety of mental health services, including brief inpatient care. The facilities do not require a certificate of need. T. 1046-1047, 1319. The Nature of the Proposed Programs Orlando General Hospital General Orlando General is a 197 bed acute care general osteopathic hospital located in Orlando, Florida, in Orange County. Orlando General proposes to convert a 35 bed medical-surgical unit to 24 short term psychiatric beds at a capital cost of $689,272. It would relocate 11 of its medical-surgical beds, and convert the remainder to short term psychiatric beds. Orlando General Hospital is located in the southeast portion of Orange County. T. 1107. It is the most eastward facility in Orange County with the exception of a long term psychiatric hospital now under construction. T. 1107. The primary service area of Orlando General by location of physicians offices is the southern half of Seminole County and the northern portion of Orange County. In particular, the hospital serves northeastern Orange County through the location of its physicians' offices. T. 412; O.G. Ex. 2, p. 27. The program of treatment described in Orlando General's application is no longer an accurate description of Orlando General's current program or of the intended program. T. 453. The treatment programs planned for the new short term psychiatric unit are comparable to the programs planned by Charter Medical-Orange County, Inc., and are adequate and appropriate programs for short term psychiatric care. Psychiatric Care for the Elderly Orlando General Hospital would provide adequate and appropriate specialized short term psychiatric care for elderly patients, but would not provide such care in a unit physically separated from other patients. There currently is a split of professional opinion as to whether or not geriatric patients should be treated in a psychiatric unit separated (physically as well as programmatically) from other patients. There are benefits from both approaches. T. 1315-1317, 68, 74-76, 43-45, 770. Various Charter Medical hospitals do it both ways. T. 70. Osteopathic Medicine at Orlando General Hospital Osteopathic medicine differs from allopathic medicine in its emphasis upon viewing the interaction of all parts of the body, rather than a single part, and the use of muscular and skeletal manipulation. T. 1349, 753-754. Orlando General Hospital is an osteopathic hospital and has been osteopathic in nature since the 1960's. It was founded by osteopathic physicians, and the hospital abides by osteopathic philosophies. The Board of Trustees at the hospital are all osteopathic physicians. Although it has medical doctors on staff, the majority are osteopathic physicians Orlando General Hospital is accredited by the American Osteopathic Association to train osteopathic physicians, and has such training programs, primarily in family medicine. T. 412-414, 755. There are about 80 osteopathic physicians in Orange County, and the vast majority are on the staff at Orlando General Hospital. T. 760. Patients who prefer osteopathy, and osteopathic physicians, prefer an osteopathic hospital. Osteopathic physicians believe that they deliver better care to their patients in an osteopathic facility rather than an allopathic facility. About 30 percent of the psychiatric patients treated by Dr. Greene at Orlando General Hospital receive manipulation as a therapy. T. 1351. There is a shortage of osteopathic psychiatrists. T. 756. Other than Randall Greene, D.O., there are no osteopathic psychiatrists in the Orange County area. Id. There is a shortage of places for psychiatric resident training. There is no osteopathic psychiatric residency in Florida, and only a few in the country. T. 764, 1349. Consequently, osteopaths seeking to become psychiatrists often have to go to allopathic hospitals for residencies. T. 1349 Residency in an allopathic hospital is often not approved by the American College of osteopathic psychiatrists. Thus the osteopath who has had his or her residency in an allopathic hospital and lacks such approval will not be readily accepted as an osteopathic psychiatrist on the staff of an osteopathic hospital. T. 1350. Orlando General Intends to have a residency program in osteopathic psychiatric for at least two positions if it is granted a certificate of need. T. 762, 415. The Evolution of Osteo-Psychiatric Care at Orlando General Hospital Dr. Randall Greene came to Orlando in 1982. He is an osteopathic physician and psychiatrist. He initially was on the staff at four hospitals but soon discovered that other osteopathic physicians were referring patients needing psychiatric care to Orlando General Hospital because it was an osteopathic hospital. These physicians frequently asked Dr. Greene to provide psychiatric care at Orlando General. T. 754. Osteopathic physicians who referred their patients to Dr. Greene and to Orlando General Hospital continued to treat the physical ailments of those patients at Orlando General Hospital. T. 760. Dr. Greene now limits his psychiatric practice to Orlando General Hospital because of the large number of psychiatric patients being treated at the hospital. T. 756. Thirty to forty percent of the psychiatric patients come to Orlando General via the emergency room. T. 421, 445. Additionally, patients admitted to the new substance abuse program often need psychiatric care. T. 407. Orlando General has difficulty transferring its psychiatric patients to other hospitals. A number of the patients have no insurance or have only Medicaid coverage. T. 420. Orlando General Hospital is located in a lower economic area, and thus attracts patients of this type. Id. Patients who prefer osteopathic treatment also prefer not to be transferred to an allopathic hospital. T. 759. The increase in numbers of psychiatric patients served at Orlando General Hospital in medical-surgical beds helped to offset the hospital's loss of medical-surgical patient days during the same period. T. 452 Due to the large number of psychiatric patients, and the decline in need for medical-surgical beds, Orlando General hospital decided to apply for the instant certificate of need. Due to the osteopathic nature of the hospital, physicians, patients and the hospital prefer to keep these patients at Orlando General Hospital rather than refer them to an allopathic hospital. It is HRS's position that if a hospital does not advertise itself as having a distinct psychiatric unit and does not organize within itself a distinct psychiatric unit, the admission and treatment of psychiatric patients to medical-surgical beds on an "random" and unplanned basis is proper even the hospital does not have licensed psychiatric beds. T. 1191. Orlando General hospital does not hold itself out to the public through advertising as having a separate psychiatric unit. T. 468. Patient Mix & Commitment to Charity Care Orlando General Hospital currently provides a large portion of charity care for Orange County. T. 1100. In its 26 bed chemical dependency unit, Orlando General reserves 2 beds for indigents. T. 785. The unit also sets aside, as needed, one bed for any Florida nurse whose license is in jeopardy due to chemical dependence and who has no financial means to pay for treatment. Id. Orlando General Hospital typically has a larger amount of bad debt and charity care (for people who do not pay) than other hospitals in the area. T. 423. In 1987, Orlando General Hospital reported to the Hospital Cost Containment Board that it had $141,404 in charity care, and that it had $3,244,530 in bad debt. T. 657, 660. Bad debt constituted 9.7 percent of gross revenue. T. 660. Since it is very difficult to determine at admission whether the patient realistically can pay for services, a lot of this bad debt is, in a functional sense, charity care. T. 659-660. It is concluded from the foregoing that Orlando General Hospital has a genuine commitment to providing health care to persons who cannot pay. T. 422, 662. Orlando General Hospital projects that it will in its proposed 24 bed short term psychiatric unit 5 percent indigent patients, 8 percent Medicaid patients, 20 percent Medicare patients, 50 percent insured patients, and 17 percent private pay patients. These projections are reasonable and are consistent with Orlando General Hospital's current experience. T. 662-664; O.G. Ex. 2, p. 16. Charter Medical-Orange County, Inc. General Charter Medical proposes to construct a 50 bed free standing short term psychiatric hospital in Orange County, Florida. The capital cost of the proposed project would $5,85,000. C.M. Ex. 1. Charter Medical would offer adult and geriatric short term psychiatric services in the proposed short term beds. As a free standing specialty hospital devoted entirely to short term psychiatric care, Charter Medical's proposal should be able to provide more space and additional therapies than would typically be found at a general hospital with a short term psychiatric unit. T. 47-50, 890-91. Charter Medical would provide adequate geriatric short term psychiatric care in a separate unit with separate programs consisting of the latest techniques for caring for the mentally ill elderly patient. Charter Medical's proposed facility would not be able to treat short term psychiatric patients who also have serious medical problems, which undoubtedly will include elderly patients. Charter Medical would have adequate transfer arrangements with a general hospital to serve the medical needs of its patients, and would have adequate staffing and equipment within the free standing specialty hospital to meet the routine and emergency medical needs of its patients. Staffing Orlando General and Charter Medical would be able to recruit, train, and retain adequate staff to operate its proposed short term psychiatric unit. T. 635-648, 849-852, T. 137-143. Lone Term Financial Feasibility Orlando General Hospital Charges When these applications were filed, HRS did not have standards for the contents of a pro forma of income and expenses. Orlando General Hospital initially projected a charge rate of $350 in 1987 and $375 in 1988. This charge rate was based upon the charge rate for Orlando General's substance abuse unit at that time, compared with a survey of five other hospitals having short term psychiatric beds. T. 425; O.G. Ex. 2, p. 24, 49. As of the summer of 1988, the Medicaid program reimbursed Orlando General Hospital for its MDC 19 (psychiatric) patients at the rate of $418 per day. T. 585. Charter Medical proposes to charge $475 per day during 1988. Florida Hospital currently charges between $425 and $445 per short term psychiatric patient day, and these charges do not include ancillary charges. T. 992. Westlake Hospital currently charges about $550 per short term psychiatric patient day. T. 888. Winter Park Pavilion is a freestanding psychiatric hospital with 39 adult psychiatric beds. The record does not indicate whether it is licensed for short or long term care. The facility charges about $500 per patient day, which does not include ancillary costs. T. 913, 918. Crossroads University Behavioral Center is a freestanding 100 bed long term psychiatric hospital that is under construction. T. 808. Crossroads has considered charges in the range of $500 to $600 per day, but has not definitely settled on the rate. T. 832-833. The charges proposed by Orlando General Hospital in its application are very reasonable, if not very conservative. Projected Utilization Orlando General Hospital's MDC 19 patient days (psychiatric patient days) have increased steadily from 1986. In 1986, the hospital had 4,969 MDC 19 patient days; in 1987, it had 7,779 MDC 19 patient days; and extrapolating (multiplying by 4) from the data for the first three months of 196, Orlando General could reasonably expect 11,804 MDC 19 patient days in 1988. O.G. Ex. 2, p. 11; T. 516. Since a 24 bed unit at 100 percent occupancy would only generate 8,760 patient days, it is unreasonable to use 11,804 as the estimate of patient days in 1988. However, it is concluded that Orlando General Hospital would have no difficulty at all in very quickly filling its proposed 24 bed unit to capacity. Expenses Orlando General Hospital's application estimated that direct expenses of the proposed 24 bed short term psychiatric unit would be $801,505 in 1987, $839,080. In 1988, and $887,030 in 1989. O.G. Ex. 2. These are reasonable projections of direct expenses. The pro forma filed by Orlando General Hospital in its application did not include an estimate of allocated expenses. The allocated expenses would typically have been 60 percent of total expenses, and the direct expenses only 40 percent of total expenses. T. 698. The projected direct expenses for 1988 in Orlando General Hospital's application were $839,080. Since that is only 40 percent of the total expense, the total projected expense (including 60 percent for indirect allocated expense) would be $2,097,700. Long Term Financial Feasibility If Orlando General Hospital charged $375 per patient day in 1988, and had 8,760 patient days, as is reasonable to expect, given its actual experience, Orlando General would have $3,285,000 in gross revenue for 1988. Assuming that net revenue, after additions and after accounting for contractuals and bad debt, will be the same percentage of gross revenue as shown in Orlando General's application, which was 76.74 percent, this would generate a net revenue of $2,520,909. This net revenue would entirely cover not only the direct expenses but also the allocated expenses, and would leave profit of $423,209. All of the remaining issues raised by the parties as to the accuracy of Orlando General's estimates of nursing expense or bad debt are irrelevant given the large amount of leeway Orlando General would have, if necessary, to raise its charges from $375 to something closer to the charges of other area hospitals. In summary, Orlando General Hospital's proposal is financially feasible in the long term. Charter Medical-Orange County, Inc. Charter Medical's proposed charges include charges for physicians who admit patients, perform histories and physicals, and make daily medical rounds. The proposed charges are reasonable. If there were need, Charter Medical's proposal would be financially feasible in the long term. The need for Charter Medical's proposed facility has not been proven by a preponderance of the evidence, however. See the Conclusions of Law herein. While the numerical need rule as applied to Orange County shows a need for 55 beds, in actual practice that need is a need for osteopathic psychiatric care. The thirty or so patients currently treated on a daily basis at Orlando General Hospital ended up at that hospital, rather than Orlando Regional Medical Center or Florida Hospital, primarily because the patients preferred osteopathic care and were admitted to Orlando General Hospital by osteopathic physicians. Absent action by HRS to stop Orlando General Hospital from treating these patients, the patients would not be available to Charter Medical in its proposed facility. This would leave Charter Medical in a situation of opening a new 50 bed facility when the county occupancy rate in 1986 was 60 percent in the only two licensed facilities in the area. It would also leave Charter Medical in a situation of opening a new facility in the face of the trend to managed health care and the certainty that the average length of stay for short term psychiatric care by 1992 will decrease from current levels. For these reasons, Charter Medical has not proven financially feasibility in the long term by a preponderance of the evidence. Quality of Care Orlando General Hospital Orlando General Hospital would provide care of good quality comparable to care that would be provided by Charter Medical. Charter Medical-Orange County, Inc. Charter Medical Corporation is a large corporation that has experience in the operation of a large number of psychiatric hospitals. That expertise would be available to insure that the care provided in Orange County would be of good quality. Charter Medical-Orange County, Inc., would provide care of good quality comparable to care that would be provided by Orlando General. Comparative Review as to Important Differences The Orlando General Hospital Application Orlando General Hospital intends to convert 24 underutilized medical and surgical beds to 24 short term psychiatric beds. T. 517. Since the project calls for conversion of existing facilities, the capital cost is $700,000, and does not include the construction of new buildings. T. 517. Since the capital cost is relatively low, the project will not drain away a large amount of reimbursement from reimbursement funding sources, thus making those funds available to other health care facilities. T. 1223. As a licensed general hospital, Orlando General Hospital's patients including the patients that would be served by the proposed short term psychiatric unit, would be eligible for Medicaid reimbursement T. 1224. Orlando General Hospital has a good record in Orange County of serving indigent patients, and currently is providing care to a large portion of the indigents cared for by Orange County. T. 1099-1100. As discussed in the section concerning osteopathic care, Orlando General Hospital's proposal for a short term psychiatric unit would have a number of benefits to the practice of osteopathic medicine in the region, and the availability of osteopathic care to patients desiring that form of care. Patients in the short term psychiatric unit at Orlando General Hospital could be transferred to a medical bed when a medical need arises without having to be transported by an ambulance. The Charter Medical Application Charter Medical-Orange County, Inc., is a wholly owned subsidiary of Charter Medical Corporation. Charter Medical Corporation has been in existence for 20 years and has 81 hospitals. Of these, 68 are psychiatric or substance abuse facilities. Charter Medical thus has extensive resources and experience to provide very good psychiatric care at the proposed facility. As a free standing hospital dedicated solely to short term psychiatric care, it is reasonable to expect that Charter Medical's facility will tend to provide more space, more varied programs, and more intensive patient care than a general hospital. This would occur because in a general hospital, the psychiatric unit must compete with medical units for allocation of resources, and in some hospitals, the psychiatric unit is given a lower priority due to the tendency of such hospitals to emphasize the medical aspect of their services. T. 47-49. Charter Medical's facility would not treat Medicaid patients, and it proposes to serve a very small percentage of indigent patients. Charter proposes in future years after the second year to provide 1.5 percent of gross revenue as charity care, and 5 percent as bad debt. T. 377-79, 197. Charter Medical's facility would serve primarily private pay and insured patients, thus draining away these paying patients from other hospitals, to the detriment of other hospitals. T. 971. The Substantial Interest of Florida Hospital If a certificate of need were granted to Charter Medical, Florida Hospital would suffer an adverse impact by loss of patients and additional competition for staff. T. 971-972, 1318-1321, 1327.
Recommendation For these reasons, it is recommended in case number 87-4748 that a final order be entered denying the application of Charter Medical-Orange County, Inc., to construct and operate a new 50 bed short term psychiatric hospital, and in case number 87-4753 that a final order be entered granting the application of Orlando General Hospital to convert 24 medical-surgical beds to short term psychiatric beds. DONE and ENTERED this 28th day of November, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, 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 28th day of November, 1988. APPENDIX 1 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact in this appendix or proposed findings of fact adopted by reference in this appendix are additional findings of fact. Findings of fact proposed by Charter Medical: 3-5. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The need is for beds in either a specialty or a general hospital. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The operational use of the beds is not relevant to the occupancy rate. Had the beds been restricted as a matter of licensure to children, like Palm Bay or Laurel Oaks, the beds would not have been potentially available for adults. Only in that case would exclusion of these beds have been proper. The operational use of the beds is not relevant to the occupancy rate. The testimony regarding the use of the word "existing" in the health planning field has been rejected as not persuasive. The context of such use was not explained, and thus a finding cannot be made that the use of the word is properly applicable to the way HRS intends the word to be used in its occupancy rule. The equation of "existing" with "operational" confuses capacity and need as discussed elsewhere in this recommended order. The HRS interpretation is the most reasonable construction of the word, and leads to a meaning far more consistent with the purposes of the certificate of need regulatory law than does the equation of "existing" with merely being operational. The certificate of need law is aimed at determining need five years into the future. How a hospital may temporarily operate its licensed beds during that period to respond to fluctuations in demand and operational idiosyncrasies at the particular hospital is irrelevant to the question of whether HRS should grant certificates of need and additional licensed capacity within the District. Dr. Luke's calculation was conservative and correct, but a better calculation is the one by Orlando General's expert (78 percent) that uses MDC 19 patient days. The only relevant count is 105 licensed beds at the two facilities. The last sentence is rejected for lack of credible evidence from which to draw that inference, as explained elsewhere in this recommended order. 20-21. The only relevant count is licensed beds. 22. Orlando General's average daily census was 13.6 based upon 4,969 MDC 19 patient days in 1986. 23-24. The only relevant count is licensed beds. 28. These are matters of law, and thus not appropriate as proposed findings of fact. 30. It is true that the health care needs of the metropolitan Orlando impact counties adjacent to Orange County due to the sprawl of that urban area across several county lines. But there is sufficient expert evidence in this record to conclude that generally speaking, the local health council has not acted arbitrarily and capriciously in its choices of counties as health planning areas for purposes of allocation of bed need and for purposes of applying occupancy rates. Nonetheless, the that the urban extent of the metropolitan Orlando area is important has been accepted in this recommended order with respect to the conclusion that the factor that the Orange County occupancy rate is only slightly below 75 percent is entitled to less weight in this case. 32, 33, 35, 37-63. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 64 (first sentence). It is realistically expected that Charter Medical will devote 1.5 percent of its gross patient revenue to barity care. T. 377- 379. 65-70. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 71-72. Financial feasibility has not been shown due to lack of need. Lack of need will result in insufficient occupancy and revenue. 73-74. The extrapolation from the actual trend of increase in patient days in District VII for the years 1983-1987 to create a projection of patient days in 1988 through 1992 would have been a valid and important way to show need, and would have been accepted had the projection accounted for the trend in the industry toward shorter lengths of stay due to changes in methods of payments for mental health care. The extrapolation simply assumes that the past will continue. In this case, there is substantial reason to believe that the past will not continue, that the base data, 1983-1987, is not valid for predicting patient days in 1992 because the patient days in 1992 will largely be paid for under a new system, a system that discourages inpatient stays beyond that which is absolutely necessary from a clinical point of view. Charter Medical projects that it will rely upon insurance for payment 67 percent of the time, so the changes in insurance payments will substantially affect patient days in 1992 at its proposed facility. 75-85. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 89. While osteopathic psychiatric care is essentially the same as allopathic psychiatric care, there are two critical differences. Osteopathic medicine in general emphasizes consideration of the functioning of the body as a whole; allopathic medicine does not. Secondly, osteopathic medicine utilizes muscular and skeletal manipulation in treatment, including psychiatric treatment, and allopathic medicine does not. These two differences are sufficiently marked for patients to have a preference for one or the other approach. 91-92. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 93-94. These proposed findings are true and are adopted by reference, but the findings do not prove that the quality of care at Orlando General Hospital would not be adequate in 1992. It was apparent that Dr. Greene's heavy caseload was not an optimum circumstance. However, at the time of the , Orlando General had four staff psychiatrists. T. 1355. Dr. Greene testified that the care was "basically" the same, but his testimony clearly reflected his opinion that the "deeper" differences were significant. T. 756, 1350-1354. The record cited does not support a finding that the majority of the patients transferred were indigent. That question was not asked. This proposed finding places the cart before the horse. Osteopathic physicians gravitate to Orlando General Hospital to practice osteopathy. In the practice of osteopathy, they achieve many job satisfactions, including care of patients and making money. 98-99. These proposed findings of fact are irrelevant because based upon the past, not upon a future having more staff psychiatrists. Moreover, it is clinically acceptable for other professionals to provide therapy and counseling. These proposed findings of fact are irrelevant. The program description in the application was superseded by evidence during the formal administrative hearing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Orlando General Hospital is an existing hospital that already has these functions. It may need some augmentation of staff in these areas, but if it does, it would be an unreasonable conclusion to make that it would fail to add such 103-106. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The only exception is the last sentence in proposed finding 106. The number 18 is not supported by the record cited. This method has not been shown to be unreasonable. It is true that it was the method used. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. There was an accounting for bad debt. O.G. Ex. 2, p. 48. The point is essentially irrelevant. A 10 percent increase based upon 1987 salaries would be only about 20,000. Moreover, Charter Medical stipulated in the prehearing stipulation that the salaries of all personnel are reasonable. The proposed finding of fact is true but irrelevant. A pro forma does not have to comport with generally accepted accounting principles. Even with the addition of these charges, the resultant charge is comparable to charges of other area hospitals, including. Charter Medical's proposed charge of $475, which with inflation would increase rapidly to $500. 113-122, 124. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 125-127. Proof that an existing health care program is in sound financial condition is essentially irrelevant to the question of whether that program has a substantial interest sufficient to permit intervention into a section 120.57(1), Fla. Stat., formal proceeding. Proof of competition for the same patients in the same service area is sufficient to show that the existing program will be "substantially affected" to entitle it to intervene. Section 381.709(5)(b), Fla. Stat. (1987). Florida Hospital has proven its substantial interest by showing that the addition of new short term psychiatric beds, particularily a new facility like proposed by Charter Medical, will increase competition in Orange County for patients and staff. T. 881, 883, 649, 855-856. 128-129. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference 130. Mr. Holton's testimony was not only based upon consideration of the data mentioned in this proposed finding of fact, but also his experience in general with managed health care plans and the effect such plans have had upon the market place. The proposed finding that his testimony was not credible is rejected. 131 (first two sentences), 132-133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of Fact proposed by Orlando General Hospital: 7-12, 17, 19, 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The statement is true only from the perspective of the osteopathic psychiatrist and with respect to osteopathic care. Allopathic physicians disagree. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 34. The second sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 38-49, 51-60. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposition that separate geriatric units offer no benefits to geriatric patients is contrary to the preponderance of the evidence. The proposition that there is no problem in mixing the elderly with younger patients, or that an elderly patient does much better in a mixed population, is contrary to the preponderance of the evidence. The second and third sentences are contrary to the preponderance of the evidence. 67-71, 73-80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 86-87. While these proposed findings of fact are true, they are only marginally relevant since the ratio is measured as of 1992, not 1988. These are matters of law, and thus not appropriate as proposed findings of fact. It is unclear when Dr. Greene meant when he testified that his census was 35 to 40 patients. For the first 90 days of 1988, the hospital had 2,951 MDC 19 patient days, or 32.8 patients per day. The analysis with respect to "existing" beds and the county analysis have been rejected as explained in this recommended order. The last sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 97-102. The legal argument that beds temporarily not in operation are not "existing" has been rejected as explained in this recommended order. Thus, these findings are not relevant. 105, 107 (last sentence). These are matters of law, and thus not appropriate as proposed findings of fact. 109. The second sentence is rejected as a finding of fact because the health planning context was not adequately explained. 110-111. These are matters of law, and thus not appropriate as proposed findings of fact. 114-115. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 117. These are matters of law, and thus not appropriate as proposed findings of fact. 118-120. These proposed findings of fact are irrelevant. 122. These are matters of law, and thus not appropriate as proposed findings of fact. 123, 124, 126, 127, 129-131, 133. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The proposed finding of fact is true, but has not been shown to impact the financial feasibility of the Charter Medical proposal. The indirect costs within a single hospital are more relevant to long term financial feasibility of the proposed project than the indirect costs to a single hospital from a parent corporation that has over 60 such hospitals. 136, 147, 151, 152. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The patient body count for the first three months of 1988 was 32.8. O.G. Ex. 2, p. 11. The "consciousness" of a corporation is difficult . Orlando General Hospital was well aware that its medical-surgical census was decreasing and its psychiatric population was increasing. It is true that the increase of its psychiatric population was largely due to causes outside the control of the hospital, however, and not due to marketing efforts by the hospital. 161 (last sentence), 162. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. These are matters of law, and thus not appropriate as proposed findings of fact. This proposed finding of fact is only marginally relevant because the result could be an average caused a minority of states who do things differently. Moreover, there Is no evidence that Florida is like this. The third sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 167. The statement is true only if HRS allows Orlando General Hospital to continue to serve this large number of psychiatric patients without having a certificate of need. If the practice were discontinued, some of the patients would be served by other hospitals in the District, including Florida Hospital. These are matters of law, and thus not appropriate as proposed findings of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 174, 176. These are matters of law, and thus not appropriate as proposed findings of fact. 177. The current state of access to short term psychiatric services in eastern Orange County was not credibly proven. 179. These are matters of law, and thus not appropriate as proposed findings of fact. Findings of fact proposed by HRS: 1, 2, 3, 4. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 5, 6. These are matters of law, and thus not appropriate as proposed findings of fact. 13. The number should be 64, not 63. 22. The occupancy rate is a mathematical attempt to measure the degree to which the District VII capacity to serve adult short term psychiatric patients has been used up. The theory implicit in the rule is that, with respect to adult capacity, the decision to add new capacity should be delayed until the old capacity is at least 75 percent or more used up. The rate has a numerator (patient days) and a denominator (the real capacity). Any argument that tries to ignore real patient days occurring in the District, or real capacity to serve those patients, is unreasonable. Findings of fact proposed by Florida Hospital: The second sentence is true, but the issue is not she license of the beds is, but what type of patient day is generated by that service. The preponderance of the evidence is that those were short term psychiatric patient days. The first sentence is rejected for the reasons stated above. 19-21. These are matters of law, and thus not appropriate as proposed findings of fact. 20-27. F.H. Ex. 3 was excluded from evidence, and the testimony related to that exhibit was also excluded from evidence for the reasons stated elsewhere in this recommended order. 28. This proposed finding fails to consider the MDC 19 evidence of patient days at Florida Hospital and Orlando Regional Medical Center. 29-30. These proposed findings of fact are true, and the reasoning therein is part of the reason why the denominator of the fraction that is the occupancy rate must be licensed beds. 31. A correction to the number of patient days at Westlake Hospital is legally appropriate, but the evidence for such a correction has been excluded from the record for reasons having nothing to do with the legal propriety of such a correction. 33. These are matters of law, and thus not appropriate as proposed findings of fact. 34-39. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The fact that existing facilities may have beds available to treat future patients is not inconsistent with a decision to grant a certificate of need for additional licensed beds. The occupancy rate threshold in the rule is 75 percent occupancy, not 100 percent occupancy. It is to be expected that the District will have 25 percent or less of its beds unoccupied when new beds are approved. 41, 43-44, 46-47. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. This proposed finding of fact is contrary to the credible evidence. These proposed findings of fact are irrelevant. See section 381.705(1)(g) and (h), Fla. Stat. (1987). This proposed finding of fact is contrary to the credible evidence. This proposed finding of fact is contrary to the credible evidence. To the contrary, where need exists, these are grounds for determining which of the competing applicants should be approved. 60. A conclusion that the occupancy rates are "stable" cannot be made from data based only upon calendar year 1986, which was two years ago, and six years from 1992, the time when need is projected. 61-69. These findings of fact are true. Even where there is need, the opening of the new facility normally lures some patients away from existing facilities. But if need exists sufficient to grant a certificate of need, this short term harm to existing providers is irrelevant. Finally, health care costs would not increase if there is need. While it is true that the Charter Medical utilization projections were initially prepared without a close analysis of District VII, the projections are nonetheless reasonable as discussed elsewhere in this recommenced order. Inflation of expenses without projection of inflation in revenues is an incomplete and unreasonable mode of projection. T. 229-230. Given the size of the Charter Medical Corporation and the number of hospitals it owns and operates, the condition of one more hospital will not Increase home office expenses. Those expenses will exist whether this project exists or not. The financial feasibility of the project in Orlando, therefor, need not consider home office expenses. T. 242-244. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The quantitative relevancy of this proposed finding of fact has not been shown. The proposed finding of fact is otherwise true. Orlando General Hospital's current patient census is a sufficient basis for a finding that its projected occupancy rate is reasonable. Charges proposed in an application for a certificate of need are not promises binding upon the applicant. In future years, the applicant is reasonably expected to make substantial changes in its charge structure based upon market conditions. Proposed charges, as well as proposed changes to charges to meet altered contingencies beyond the control of the applicant, is entirely appropriate for analysis in a certificate of need case. The only relevant question is whether the altered charge compares favorably with competing applicants. 81-83. Florida Hospital proved that the market for staff is competitive and that hiring staff is difficult at the moment. But it did not prove that the applicants would fail to hire adequate staff to operate their proposed facilities. T. 1327. 92-102. These proposed findings of fact summarize proposed findings of fact which have previously been addressed. APPENDIX 2 TO RECOMMENDED ORDER, CASE NOS. 87-4748 and 87-4753 Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn $ha the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. It would be unreasonable to require the applicants to prove applications that have become erroneous due to the passage of time. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborouh, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987) ; Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988). These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. 1081: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: ... HRS has authority by statute to issue a CON for an identifiable portion of . Section 381.4C4(8), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 1628: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS... [ limited the denovo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the' effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have "known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. COPIES FURNISHED: For Agency HRS Theodore D. Mack. Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Building Tallahassee, Florida 32308 (904) 488-8673 Charter Medical-Orange County, Inc. Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Roberts, Baggett, LaFace & Richard 101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32301 (904) 222-6891 William D. Hoffman, Jr., Esquire Deborah J. Winegard, Esquire King & Spalding 2500 Trust Company Tower Atlanta, GA 30303 (404) 572-4600 Orlando Regional Medical Center, Inc. Steven R. Bechtel, Esquire Mateer, Harbert & Bates, P. A. 100 East Robinson Street Post Office Box 2854 Orlando, Florida 32802 (305) 425-9044 Orlando General Hospital, Inc. Eric J. Haugdahl, Esquire 1363 East Lafayette Street Suite C Tallahassee, Florida 32301 (904) 878-0215 Florida Hospital Stephen K. Boone, Esquire Robert P. Mudge, Esquire Boone, Boone, Klingbeil & Boone, P. A. 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 (813) 488-6716 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
