The Issue Whether the Agency for Health Care Administration has a policy regarding the determination of the need for long term care beds which constitutes a rule and, if so, whether rulemaking is feasible and practicable.
Findings Of Fact Vencor Hospitals South, Inc. (Vencor), applied for a certificate of need (CON No. 8614) to establish a 60-bed long term care hospital in Agency for Health Care Administration (AHCA) District 8, for Fort Myers, Lee County, Florida. AHCA is the state agency authorized to administer the CON program for health care services and facilities in Florida. AHCA reviewed and preliminarily denied Vencor's application for CON No. 8614. The reasons for AHCA's actions on this or any other CON application are memorialized in documents called State Agency Action Reports (SAARs). Vencor alleges that the following statement generally describes AHCA's policy in regard to the review of CON applications for long term care hospitals: Long term care is not a separate category of health service, but is instead merely an allowable form of reimbursement pursuant to Medicare regulations. The care provided in acute care hospitals, hospital based skilled nursing beds, "subacute" care in nursing homes, and care at rehabilitation facilities, are all equivalent to the care provided at long term care hospitals. Therefore, in evaluating the need for long term care hospital beds, AHCA will assess the availability of other categories of beds and services to meet the need for the services proposed by the applicant for long term care hospital beds. Need for long term care beds is determined on a regional basis. Prior to 1994, long term care hospitals were not regulated separately and were considered comparable to general acute care hospitals. In 1994, AHCA amended the CON rules to establish long term care beds and hospitals as separate categories of health care providers. In 1994, AHCA defined and continues to the present to define long term care hospital as follows: "Long term care hospital" means a hospital licensed under Chapter 395, Part I, F.S., which meets the requirements of Part 412, subpart B, paragraph 412.23(e), [C]ode of Federal Regulations (1994), and seeks exclusion from the Medicare prospective payment system for inpatient hospital services. Rule 59C-1.002(29), Florida Administrative Code. In the federal regulations referenced by the AHCA rule, long term care hospital is more specifically defined as a hospital with an independent governing structure, an average length of stay greater than 25 days, referral of at least 75 percent of total patients from separate hospitals, and which meets the requirements for Medicare participation. 42 CFR Ch. IV, Subch. B, Pt. 412, Subpt. B, s. 412.23. AHCA also distinguishes long term care in its rules governing the conversions from one type of health care provider to another. The applicable conversion rules provide: "Conversion from one type of health care facility to another" means the reclassification of one licensed facility type to another licensed facility type, including reclassification from a general acute care hospital to a long term care hospital or specialty hospital or from a long term care hospital or specialty hospital to a general acute care hospital. Rule 59C-1.002(14), Florida Administrative Code (emphasis added); and "Conversion of beds" means the reclassification of licensed beds from one category to another including, for facilities licensed under Chapter 395, F.S., conversion to or from acute care beds, neonatal intensive care beds, hospital inpatient psychiatric beds, comprehensive medical rehabilitation beds, hospital inpatient substance abuse beds, distinct part skilled nursing facility beds, or beds in a long term care hospital; and, for facilities licensed under Chapter 400, Part I, F.S., conversion to or from skilled beds and intermediate care beds in a facility that is not certified for both skilled and intermediate nursing care if such conversion effects a change in the level of care of 10 beds or 10 percent of the total bed capacity of the facility within a 2-year period, or conversion to or from sheltered beds and community beds. Rule 59C-1.002 (15), Florida Administrative Code (emphasis added). AHCA also defined "substantial change in health services" to include: The conversion of a general acute care or specialty hospital licensed under Chapter 395, Part I, F.S., to a long term care hospital. Rule 59C-1.002(41)(c), Florida Administrative Code. Taken together AHCA's rules recognize long term care hospitals or beds as a separate and distinct category. Elfie Stamm was responsible for the development of the rules and is currently the chief of the CON and Budget Review Office at AHCA. Ms. Stamm testified in a 1994 rule challenge case, when AHCA was drafting a rule with a numeric need methodology for long term care beds, that: long term care hospitals serve patients who cannot be cost effectively treated in an acute care hospital, who do not have the same needs for the same types of service; it would not be fair for an applicant for the new construction of a long term care hospital to be compared to an acute care hospital; comprehensive medical rehabilitation (CMR) services are different than services in a long term care hospital; a long term care hospital with an average length of stay of 25 days or more is different from an acute care hospital that generally has a length of stay of 5 to 6 days but provides a full range of services; the patient populations in long term care hospitals are different from those in an acute care hospital in terms of overall patient characteristics, including older than average age, higher percentage of patients with particular diagnoses, such as ventilator dependency, higher overall mortality rates than acute care hospitals, and a much higher percentage of admissions by referrals from acute care hospitals. [T. 262-283]. See also Tarpon Springs Hospital Foundation, etc. v. AHCA, et al., DOAH Case No. 94-0958RU (R.O. 8/2/94). On behalf of AHCA, Ms. Stamm testified in this proceeding that: AHCA has changed its mind on whether or not it is appropriate to leave a patient in an acute care setting rather than transfer to long term care, specifically with regard to cost-effectiveness. [T. 373]. AHCA has not changed its mind and still says acute care hospitals and long term care hospitals should be reviewed separately, because if they would be reviewed comparatively, . . . there would be no chance for any [long term] beds ever because we don't show any need for acute care beds anywhere in the state. [T. 376]. But in evaluating Vencor's application for long term care hospitals in District 8 that would be located in Lee County, the Agency viewed hospital-based skilled nursing units, community nursing home subacute beds and comprehensive medical rehab beds throughout the entire district as existing and like potential alternatives to the proposed project. [T. 389]. AHCA does not necessarily agree that CMR services are different from long term care hospital services. [T. 265]. AHCA does not have a clearly identified population group for whom long term care would be more cost-effective, or to determine a numeric need methodology. [TR. 324]. Although there is a population that does need services that exceed 25 days or prolonged ventilator service, AHCA is not sure what is the most appropriate setting for their care because of inadequate data on comparative costs and outcomes. [TR. 327-8]. AHCA attributes its change in position to the publication titled Subacute Care: Policy Synthesis And Market Area Analysis, submitted to the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, on November 1, 1995, by Lewin-VHI, Inc. The document is commonly referred to as the Lewin Report. The Lewin Report concludes that long term care hospitals serve patients who are also served in other subacute settings, including CMR beds and hospitals, acute care hospital skilled nursing units, and skilled nursing units in freestanding nursing homes. As a result of the conclusions in the Lewin Report, AHCA maintains that it is unable to develop a numeric need methodology without an identifiable patient population. AHCA has not, however, repealed the rules establishing long term care as a separate type of health care service. Rather, the agency intends to wait for additional studies, including one being conducted for Vencor. The Medicare prospective payment system (PPS) for acute care hospitals created the market for subacute and long term care. Under the PPS, acute care hospitals receive a fixed payment based on the patient's diagnosis or diagnostic related group (DRG). Upon discharge to a subacute or long term setting, the patient's care is no longer reimbursed on a fixed basis, but at actual, reasonable costs. AHCA maintains that financial pressures created the current system, but without cost/benefit or outcomes analyses to demonstrate the appropriateness of using long term care hospitals. Therefore, AHCA considered the occupancy levels of acute care hospitals and available nursing home beds in determining the need for Vencor's project. AHCA has no rule defining subacute care, no inventory of subacute care units in nursing homes, and no reporting requirements from which it can determine the level of care or services provided in hospital based skilled nursing units. AHCA has no reports on specific levels or types of services provided in CMR beds. AHCA, nevertheless, presumed that the services are like those provided in long term care beds based on the Lewin Report. In rejecting Vencor's attempts to distinguish itself from other types of health care providers, AHCA relied, in part, on its finding that 1995 District 8 acute care hospital occupancy averaged 47.69 percent and peaked at 60.26 percent. By not adopting rules for determining the numeric need for long term care, AHCA also failed to establish the appropriate service area for determining need. AHCA considers the need for long term care services on a regional basis. In support of AHCA's decision to deny a long term care hospital application in District 9, Ms. Stamm's predecessor, Elizabeth Dudek, testified that long term care is a regional service. As further evidence of AHCA's position, the SAARs issued by AHCA on long term care hospital applications, have examined available services beyond the limits of the district. AHCA contends that long term care is regional, but determines its need by comparison to available hospital based skilled nursing units and subacute beds in community nursing homes, which are evaluated on a subdistrict basis, and CMR services which are tertiary but evaluated on a district-wide basis. See Finding of Fact 22. Since November 1995, AHCA has preliminarily denied all CON applications for long term care hospitals. Its policy of comparing the need for long term care to available beds in nursing homes and other types of hospitals is consistently repeated in the portions of the SAARs which address need. In analyzing the need for long term care hospitals in AHCA District 1, the SAAR dated January 10, 1997, includes the following statements: Vencor Hospitals South, Inc. defines its patient population as those currently being treated in ICUs and belonging to roughly 10 DRGs (which account for approximately 83% of Vencor patients. . . .) However these DRGs could also [be] appropriate for acute care, hospital based freestanding skilled nursing care, skilled nursing facility care and comprehensive medical rehabilitation care and the applicant does not demonstrate that these services are not available to residents of District 1. and The applicant [Baptist Health Affiliates Inc.] also discusses the differences between its proposed patient population and that of an acute care hospital, nursing home and those treated at home. However, there is no documentation provided which demonstrates the applicant's potential patients could not receive appropriate care in the District's existing rehabilitation facility, hospital based or nursing home skilled subacute nursing units. . . . Vencor Exhibit 12, pages 3-4 and 8. AHCA reviewed a CON application filed by Columbia of Pinellas County, Inc., to convert acute care beds to a long term care hospital in District 5, and concluded: The patient population represented by the DRGs listed above (by the applicant) are typical of freestanding nursing home with subacute units and hospital based SNUs in the state. There appear to be strong similarities between the subacute patient population of nursing homes/units and those of a long term care hospital. Vencor Exhibit 13, page 8. The SAAR issued on the Columbia of Pinellas County CON application continued with an extensive discussion of the Lewin Report. The SAAR reported AHCA's finding that CMR hospitals are alternatives since they admit patients who do not fit federal guidelines for CMR admissions (being able to tolerate three hours of therapy a day), and who might otherwise be in long term care hospitals. In the SAAR issued after the review of long term care applications for District 7, the same statement appears: The patient population represented by the DRGs listed above [by Orlando Regional Hospital] are typical of freestanding nursing home with subacute units and hospital based SNUs in the state. There appear to be strong similarities between the subacute patient population of nursing homes/units and those of a long term care hospital. Vencor Exhibit 14, page 11. Finally, in reviewing applications from Palm Beach County in District 9, AHCA concluded again: The applicant states that generally speaking the long term care hospital patients have respiratory complications, . . . tracheostomies, . . . chronic diseases, an infectious process requiring antibiotic therapy, . . . skin complications . . . need a combination of rehabilitation and complex medical treatment or are technology dependent individuals requiring high levels of nursing care. However, these patients could also [be] appropriate for acute care, hospital based skilled nursing care, skilled nursing facility care and comprehensive medical rehabilitation care and the applicant does not demonstrate that these services are not available to the residents of District IX. Vencor Exhibit 15, page 4. AHCA relies on the statutory review criteria in Subsection 408.035(1)(b), Florida Statutes, as authority for its consideration of all beds and facilities which may serve the same patients. That provision requires consideration of: (b) The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care facilities and health services in the service district of the applicant. The expert witness for AHCA, however, distinguished between "like and existing" services for purposes of determining numeric need and the statutory criteria. She noted that once numeric need is established and published for nursing beds or CMR beds, for example, that same category of beds outside the appropriate health service planning subdistrict or district is not considered "like and existing." Similarly, within the district or subdistrict, there is a factual issue in each case but no presumption that beds of a different category are "like and existing." AHCA contends that it has no policy related to long term care and any comparable services. Since 1995, long term care CON applicants, according to AHCA, have failed to meet the requirements of Rule 59C-1.008(e), which provides in pertinent part: If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. (Emphasis added). AHCA's argument ignores the fact that its expert witness provided competent, substantial evidence that it has redefined and expanded the meaning of "like services" for purposes of demonstrating need through a needs assessment methodology. It also ignores the fact that AHCA has expanded the comparison of need beyond the geographical limits of the district. AHCA's argument that it is waiting for additional data before adopting a need methodology, including data from a Vencor study, is to no avail since AHCA has already changed its policy. After reviewing a total of eighteen CON applications for long term care hospitals, AHCA has issued two CONs, one as part of a settlement agreement and the other approving an application filed by St. Petersburg Health Care Management, Inc. (St. Petersburg), for CON 8213. The St. Petersburg application demonstrated need using an identical methodology prepared by the same health planner as Vencor in this case. Referring to CON 8213, AHCA's expert witness candidly admitted . . . "I want to make clear that particular application was actually submitted and approved prior to the Lewin study." (T. 393). Subsequent to the Lewin study, AHCA has consistently denied applications for long term care beds or hospitals.
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.
Findings Of Fact The Agency is statutorily responsible for administering the Certificate of Need (CON) program and the promulgation of rules pertaining to tertiary health services. Promise Healthcare, Inc., is located at 999 Yamato Road, Third Floor, Boca Raton, Florida. Promise's wholly-owned subsidiary, Promise Healthcare of Florida III, Inc., has received approval to construct and operate an LTCH in AHCA Health Service Planning District (District) 3. See Promise Healthcare of Florida III, Inc. v. State of Florida, Agency for Health Care Administration, Case No. 06-0568CON (DOAH April 10, 2008; AHCA May 16, 2008). Select owns and operates an LTCH in Orlando, Florida, within District 7. Petitioners related corporations are currently and have been applicants in proceedings before the Division of Administrative Hearings (DOAH) seeking to establish LTCHs in the State of Florida. Id. See also Select Specialty Hospital - Marion, Inc. v. State of Florida, Agency for Health Care Administration, Case No. 04-3150CON (DOAH July 11, 2006; AHCA Sept. 23, 2006); Select Specialty Hospital - Broward, Inc. v. Agency for Health Care Administration, Case No. 07-0597CON and Promise Healthcare of Florida X, Inc. v. Agency for Health Care Administration, Case No. 07-0598CON (Consolidated). The Proposed Rule In December 2005 and September 2006, the Agency published separate notices of proposed rule development proposing to include long-term care hospitals within the rule definition of tertiary health service. On June 8, 2007, the Agency published a copy of the proposed rule at issue in this proceeding in the Florida Administrative Weekly. The proposed rule is one of several proposed changes to Florida Administrative Code Rule 59C-1.002, providing definitions. The stated purpose and effect of the entire proposed rule changes to Rule 59C-1.002 is "to amend the rule that defines terms in Chapter 59C-1, F.A.C. due to recent statutory changes " On July 13, 2007, a public hearing was held. Proposed rule 59C-1.002(41)(i) provides: "'Tertiary health service' means a health service. . . . .The types of tertiary services to be regulated under the Certificate of Need Program in addition to those listed in Florida Statutes include: . . . (i) Long-term care hospitals. The Agency relies on Sections 408.034(6) and 408.15(8), Florida Statutes, as the specific authority for all of the changes to Rule 59C-1.002, including subsection(41)(i). All of the proposed rule changes implement Sections 408.033(1)(a), 408.036(1)-(3), 408.037(1), 408.039(1) and (2), and 651.118, Florida Statutes. See also endnote 3. ("'Law implemented' means the language of the enabling statute being carried out or interpreted by an agency through rulemaking." Ch. 2008-104, § 2, Laws of Fla.) Section 408.034(6) authorizes the Agency to adopt rules necessary to implement Sections 408.031-408.045, known as the "Health Facility and Services Development Act." See also § 408.15(8), Fla. Stat., providing similar authority. Section 408.033(1)(a) pertains to Local Health Councils. Section 408.036(1)-(3) include projects that are subject to CON review, including expedited review, and projects that are exempt from CON review. (The new construction or establishment of additional health care facilities, which includes long-term care hospitals by definition, see Section 408.032(8), Florida Statutes, are subject to CON review.) Section 408.037(1) pertains to CON application content. Section 408.039(1) and (2) pertains to CON review cycles and letters of intent, respectively. Section 651.118 pertains generally to the Agency's authority regarding nursing home beds and sheltered nursing home beds. Statutory Definitions "'Health services' means inpatient diagnostic, curative, or comprehensive medical rehabilitative services and includes mental health services. Obstetric services are not health services for purposes of ss. 408.031-408.045." § 408.032(9), Fla. Stat. In 2004, the Legislature amended the definition of "health services" as follows: "'Health services' means inpatient diagnostic, curative, or comprehensive medical rehabilitative services and includes mental health services. Obstetrical services are not health services for purposes of ss. 408.031- 408.045." Ch. 2004-383, § 2, Laws of Fla. (emphasis in original). "'Health care facility' means a hospital, long-term care hospital. . . ." § 408.032(8), Fla. Stat. "'Hospital' means a health care facility licensed under chapter 395." § 408.032(11), Fla. Stat. "Hospital" is defined in Section 395.002(12), Florida Statutes. "'Hospital' means any establishment that" offers "services more intensive than those required for room, board, personal services, and general nursing care, and offers facilities and beds for use beyond 24 hours by individuals requiring diagnosis, treatment, or care for illness, injury, deformity, infirmity, abnormality, disease, or pregnancy. " § 395.002(12)(a)-(b), Fla. Stat. The parties stipulated that the Agency licenses LTCH facilities as Class 1 general hospitals. Generally, a Class 1 general hospital is a "basic multipurpose hospital." Like Class 1 general hospitals, LTCHs are subject to CON review and approval prior to offering those services. Unlike a Class 1 general hospital, a Class I LTCH seeks exclusion from the acute care Medicare prospective payment system for inpatient services. "'General hospital' means any facility which meets the provisions of subsection (12) and which regularly makes its facilities and service available to the general population." § 395.002(10), Fla. Stat. See also § 395.002(28), Fla. Stat. for a definition of "specialty hospital." For example, a freestanding children's hospital is classified as a Class 3 specialty hospital because it provides services to a specialized population related to gender or age. Comprehensive rehabilitation hospitals are classified as Class 2 specialty hospitals. Gregg deposition at 35-39. If a Class 1 general hospital desires to add a tertiary health service, such as pediatric cardiac catheterization, the hospital would need to obtain a CON. Aside from LTCHs and perhaps some referral hospitals, the Agency believes a comprehensive inpatient rehabilitation facility is an example of a facility providing services that are high in intensity, complexity, or a specialized or limited application at a high cost associated with the Medicare program. Gregg deposition at 36-37. The new construction or establishment of additional health care facilities, including an LTCH, is subject to CON review. § 408.036(1)(b), Fla. Stat.1 Conversions from one type of health care facility to another, including the conversion from a general hospital, a specialty hospital, or a long-term care hospital are also subject to CON review. § 408.036(1)(c), Fla. Stat. See endnote 5. Also, unless exempt, all health care-related projects requesting "[t]he establishment of tertiary health services, including inpatient comprehensive rehabilitation services" are subject to CON review. § 408.036(1)(f), Fla. Stat. An LTCH desiring to offer a tertiary health service is required to obtain a CON in order to provide the service. LTCHs, like other general hospitals, can add additional beds without CON review by filing an appropriate notice with the Agency. "'Long-term care hospital' means a hospital licensed under chapter 395 which meets the requirements of 42 C.F.R. s. 412.23(e)[2] and seeks exclusion from the acute care Medicare prospective payment system for inpatient hospital services." § 408.032(13), Fla. Stat. See also Fla. Admin. Code R. 59C- 1.002(28), as amended, which mirrors the statutory definition. In 2004, the Legislature amended the definition of long-term care hospital in Section 408.032(13), adding the terms "acute care" before "Medicare." Ch. 2004-383, § 2, Laws of Fla.3 "'Tertiary health service' means a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service. Examples of such service include, but are not limited to, pediatric cardiac catheterization, pediatric open- heart surgery, organ transplantation, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. The agency shall establish by rule a list of all tertiary health services. § 408.032(17), Fla. Stat.(emphasis added).4 In 2004, the Legislature added "pediatric cardiac catheterization" and "pediatric open-heart surgery" to the statutory list of tertiary health services and deleted "specialty burn units". Ch. 2004-383, § 2, Laws of Fla.(emphasis in original).5 By its terms, the statutory list of tertiary health services is not exhaustive. The Agency reviews this list periodically. To accomplish the legislative purpose stated in the statutory definition of tertiary health service, the Agency includes a list of tertiary health services in Florida Administrative Code Rule 59C-1.002(41)(a)-(j). Like its statutory counterpart, Section 408.032(17), Florida Statutes, all of the items listed in Rule 59C- 1.002(41(a)-(j) are health services, which, by definition, "should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service." Fla. Admin. Code R. 59C- 1.002(41). Over time, the Agency has added several tertiary health services, such as heart, kidney, liver, bone marrow, lung, pancreas, islet cells, and heart/lung transplantation, and adult open heart surgery. The Agency proposes to delete neonatal and pediatric cardiac and vascular surgery, and pediatric oncology and hematology, from the list and add pediatric cardiac catheterization and pediatric open-heart surgery to the list, the latter reflecting the 2004 statutory amendments. See proposed rule 59C-1.002(41)(a)-(j). The Agency's Rationale for the Proposed Rule According to the Agency, Section 408.032(17) provides a broad definition of tertiary health services and the Agency has the authority to decide if certain services, due to their complexity and cost, should be added to or deleted from the list of tertiary health services. Notwithstanding the stated purpose and effect of the proposed rule, see Finding of Fact 6, "[t]he Agency has proposed to include long term care hospital (LTCH) services as a tertiary service in the [CON] program because the services are intense, complex, specialized and costly." See AHCA's Motion for Summary Final Order, "Rationale for Proposing Long Term Care Hospital Services as a Tertiary Service in the CON Program" at 1. In attachments to its Motion for Final Summary Order, the Agency provided information that the Agency believes demonstrates that LTCH services are tertiary health services. The Agency contends that "[t]he undisputed evidence shows that a long term care hospital is a tertiary health service" and further asserts "[t]here are no genuine issues of material fact present in this case." AHCA's Motion at 2, ¶¶ 2 and 3. For the Agency, "[t]here is really no such thing as a tertiary hospital. Tertiary has to do with the services that are provided." Within the Agency's framework, tertiary health services are "a combination of specialized, complicated, complex services that are a high cost." Further, "[t]hey are somewhat unique. They are high-end services that are the most complex, the most technologically advanced, the most difficult to provide, the most resource intensive, and inherently limited as a result." According to the Agency, LTCHs are health services that provide a high level of intensity, treat complex patients, and have a high cost associated with the services provided. Gregg deposition at 30-33, 48-53. By the proposed rule, the Agency proposes to make services that are provided in an LTCH a tertiary health service. But, if those same services are provided in some other type of facility, they are not LTCH services. Gregg deposition at 48- 49.6 The Agency's approach is based in part on several reports published by, for example, MedPAC, which characterize the role of the LTCH to provide post-acute care to a small number of medically complex patients at a high cost and for relatively extended periods. Id. at 21-29, 67-68. (The MedPAC reports relied on by the Agency do not define tertiary services. Id. at 58.) The Agency's approach is also based on the experience of the Agency in reviewing LTCH CON applications and developing an understanding of the complex patient population treated at LTCHs. Id. at 29, 68. See also AHCA's Motion at Gregg affidavit and supporting information. The Agency's rationale for the proposed rule is informative and thoughtful, but not material to the disposition of this rule challenge in light of the facial challenge to the proposed rule as written. See endnotes 7 and 13. If the case was resolved on the current record, none of the parties would be entitled to entry of a final order as a matter of law if the issue was whether LTCH services within an LTCH are tertiary health services because whether LTCH services provided within an LTCH are tertiary health services requires the resolution of genuine issues of material fact. Compare, e.g., Petitioners' Motion for Summary Final Order, Exhibit 9 (Kornblatt affidavit) with AHCA's Motion for Summary Final Order, Gregg affidavit and supporting information. Rather, the challenge is resolved based on an evaluation of the proposed rule in light of the plain meaning of several statutory provisions.
Conclusions For Petitioner Promise Healthcare, Inc.: F. Philip Blank, Esquire Blank & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 For Petitioner/Intervenor Select Specialty Hospital- Orlando, Inc.: Mark A. Emanuele, Esquire Panza, Maurer & Maynard, P.A. Bank of America Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 For Respondent Agency for Health Care Administration: Bart O. Moore, Esquire Shaddrick A. Haston, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate district where the party resides. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.
The Issue The issues are whether Petitioner is entitled to recover Medicaid funds paid to Respondent pursuant to section 409.913(1), Florida Statutes, for hospice services Respondent provided during the audit period between September 1, 2009, and December 31, 2012; and the amount of sanctions, if any, that should be imposed pursuant to section 409.913(15), (17).
Findings Of Fact Based upon the stipulations of the parties and the evidence presented at hearing, the following relevant Findings of Fact are made. Parties Petitioner, AHCA, is the state agency responsible for administering the Florida Medicaid Program. § 409.902, Fla. Stat. (2016). Medicaid is a joint federal and state partnership to provide health care and related services to certain qualified individuals. Respondent, Halifax, is a provider of hospice and end- of-life services in Volusia and Flagler counties. During the audit period of September 1, 2009, through December 31, 2012, Halifax was enrolled as a Medicaid provider and had a valid Medicaid provider agreement with AHCA. Hospice Services Hospice is a form of palliative care. However, hospice care is focused upon patients at the end-of-life-stage while palliative care is for any patient with an advanced illness. Both hospice and palliative care patients are amongst the sickest patients, generally. Hospice is focused upon serving the patient and family to provide symptom management, supportive care, and emotional and spiritual support during this difficult period when the patient is approaching their end-of-life. Hospice care, as with Halifax, uses an inter-disciplinary team (IDT) to provide comfort, symptom management, and support to allow patients and their families to come to terms with the patient’s terminal condition, i.e., that the patient is expected to die. Each patient is reviewed in a meeting of the IDT no less than every two weeks. For hospice, a terminally-ill patient must choose to elect hospice and to give up seeking curative care and aggressive treatments. At all times relevant to this proceeding, Petitioner was authorized to provide hospice services to Medicaid recipients. AHCA Audit A Medicaid provider is a person or entity that has voluntarily chosen to provide and be reimbursed for goods or services provided to Medicaid recipients. As an enrolled Medicaid provider, Halifax was subject to federal and state statutes, regulations, rules, policy guidelines, and Medicaid handbooks incorporated by reference into rule, which were in effect during the audit period. AHCA is required to oversee the integrity of the Medicaid program. Among other duties, AHCA is required to conduct (or cause to be conducted) audits to determine possible fraud, abuse, overpayments, or recipient neglect in the Medicaid program. § 409.913(2), Fla. Stat. Under Florida law, “overpayment” is defined as “any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake.” § 409.913(1)(e), Fla. Stat. The federal Department of Health & Human Services, Centers for Medicare and Medicaid (“CMS”), contracted with Health Integrity, LLC (“HI”), a private vendor, to perform an audit of Halifax on behalf of AHCA. HI, in turn, retained a company called Advanced Medical Reviews (“AMR”) to provide physician reviews of claims during the audit process to determine whether an audited claim was eligible for payment. The audit in this matter was conducted to determine whether Medicaid recipients met eligibility for hospice services. To establish the scope of the audit, HI identified patients that had greater than six months of service, and then, excluded recipients with cancer diagnoses and patients who were dual eligible for Medicaid and Medicare. All the claims at issue, along with patient medical records, were first reviewed by a claims analyst, who is a nurse consultant, to determine whether the claims met the criteria for hospice services. The patient records and the nurse consultant's summary for each patient were then forwarded to a peer reviewer, a physician who used his or her medical expertise to determine the medical necessity of the hospice services provided. In this case, AHCA employed the services of two peer reviewers: Dr. Alan Heldman was the peer reviewer who specializes in internal medicine and cardiology, and Dr. Todd Eisner, who specializes in gastroenterology. The peer reviewers prepared reports that offered their opinion as to whether a patient was qualified for hospice services. A draft audit report (“DAR”) was prepared by HI, which initially identified overpayment of Medicaid claims totaling $694,250.75, relating to 12 patients. Halifax provided a response to the DAR, and contested the overpayments for each of the 12 patients. Halifax’s response was provided to the peer review physicians, who, after reviewing the response, maintained their original conclusions. HI then prepared the FAR, upholding the overpayments identified in the DAR, and submitted it to CMS. CMS provided the FAR to AHCA with instructions that AHCA was responsible for initiating the state recovery process and furnishing the FAR to the provider. The FAR contains the determinations of the peer review physicians, specifically, whether each of the 12 patients at issue had a terminal diagnosis with a life expectancy of six or less months if their disease progressed at its normal course. After the FAR had been issued, upon further review, of certain patient files at issue, AHCA determined that four of the original 12 patients were eligible for Medicaid hospice services, and revised the amount of overpayment it seeks to $529,906.88, with a reduction in the fine it seeks to $105,981.38. Halifax is challenging the eligibility determination, i.e., the medical necessity of services provided, regarding the following patients1/: Patient D; Patient H; Patient P; Patient Q; Patient S; Patient U; Patient V; and Patient O. The Florida Medicaid Hospice Services Coverage and Limitations Handbook, the January 2007 edition (“Handbook”), governs whether a service is medically necessary and meets certification criteria for hospice services. MPI instructs each peer reviewer to review the criteria set forth in the Handbook to determine whether services provided to a patient are eligible for Medicaid coverage. To qualify for the Medicaid hospice program, all recipients must: Be eligible for Medicaid hospice; Be certified by a physician as terminally ill with a life expectancy of six months or less if the disease runs its normal course; Voluntarily elect hospice care for the terminal illness; Sign and date a statement electing hospice care; Disenroll as a participant in a Medicaid or Medicare health maintenance organization (HMO), MediPass, Provider Service Network (PSN), Medicaid Exclusive Provider Organization, MediPass Pilot Programs or the Children’s Medical Services Network; Disenroll as a participant in Project AIDS Care; and Disenroll as a participant in the Nursing Home Diversion Waiver. The Handbook also provides certification of terminal illness requirements as follows: For each period of hospice coverage, the hospice must obtain written certification from a physician indicating that the recipient is terminally ill and has a life expectancy of six months or less if the terminal illness progresses at its normal course. The initial certification must be signed by the medical director of the hospice or a physician member of the hospice team and the recipient’s attending physician (if the recipient has an attending physician). For the second and subsequent election periods, the certification is required to be signed by either the hospice medical director or the physician member of the hospice team. Certification documentation requirements used by the peer review physicians are as follows: Documentation to support the terminal prognosis must accompany the initial certification of terminal illness. This documentation must be on file in the recipient’s hospice record. The documentation must include, where applicable, the following: Terminal diagnosis with life expectancy of six months or less if the terminal illness progresses at its normal course; Serial physician assessments, laboratory, radiological, or other studies; Clinical progression of the terminal disease; Recent impaired nutritional status related to the terminal process; Recent decline in functional status; and Specific documentation that indicates that the recipient has entered an end- stage of a chronic disease. The Medicaid hospice provider must provide written certification of eligibility for hospice services for each patient. The certification is also required for each election period. A patient may elect to receive hospice services for one or more of the election periods. The election periods include: an initial 90-day period; a subsequent 90-day period; and subsequent 60-day time periods. The Handbook further provides guidance regarding the election periods as follows: The first 90 days of hospice care is considered the initial hospice election period. For the initial period, the hospice must obtain written certification statements from a hospice physician and the recipient’s attending physician, if the recipient has an attending physician, no later than two calendar days after the period begins. An exception is if the hospice is unable to obtain written certification, the hospice must obtain verbal certification within two days following initiation of hospice care, with a written certification obtained before billing for hospice care. If these requirements are not met, Medicaid will not reimburse for the days prior to the certification. Instead, reimbursement will begin with the date verbal certification is obtained . . . . For the subsequent election periods, written certification from the hospice medical director or physician member of the interdisciplinary group is required. If written certification is not obtained before the new election period begins, the hospice must obtain a verbal certification statement no later than two calendar days after the first day of each period from the hospice medical director or physician member of the hospice’s interdisciplinary group. A written certification must be on file in the recipient’s record prior to billing hospice services. Supporting medical documentation must be maintained by the hospice in the recipient’s medical record. Peer Review Physicians The two peer reviewers assigned to review claims in this matter were Florida-licensed physicians, who were matched by specialty or subspecialty to the claims they were reviewing. Each physician testified as to his medical education, background, and training. Petitioner offered each physician as an expert, and the undersigned accepted each expert as such. Dr. Heldman has been licensed to practice medicine in the state of Florida for 10 years. While in Florida, he worked as a professor and practitioner within the University of Miami Medical School and Health System until 2015. Since 2015 he has maintained an independent private practice. Before practicing in Florida, Dr. Heldman practiced at Johns Hopkins Hospital in Baltimore, Maryland, for 19 years. Dr. Heldman received his training at Johns Hopkins in cardiology and interventional cardiology. He has been board-certified in cardiovascular disease since 1995, and board-certified in interventional cardiology since 1999. Both cardiology specialties are subspecialties of the board of internal medicine. Dr. Heldman was previously board-certified in internal medicine in 1992 but was not certified in that area when he reviewed the claims in this matter.2/ Dr. Heldman has referred patients to hospice. Dr. Eisner, who is board-certified in gastroenterology, has seen numerous patients with liver disease throughout his career and, based upon his experience, Dr. Eisner understands what factors are properly considered when estimating a patient’s life expectancy. He also refers patients to hospice on a regular basis, which routinely requires him to make the type of prognosis determination such as those at issue in this matter. Although Dr. Eisner has some experience dealing with patients who have Chronic Obstructive Pulmonary Disease (“COPD”), he does not have board-certification in pulmonary disease. Also, Dr. Eisner has never provided expert testimony regarding pulmonology conditions. Halifax Hospice Providers Dr. Zimmerman, Halifax’s medical director, authored the provider response to the eight patients at issue and testified at the final hearing in that regard. Although he is board-certified in hospice and palliative medicine, he is not and has never been certified in internal medicine, gastroenterology, or cardiology. Halifax did not elicit testimony from Dr. Zimmerman that he had any experience in examining and treating patients with liver disease, COPD, dementia, or end-stage lung disease. Likewise, none of the other Halifax physicians testified at hearing and there was no evidence of their respective experience in examining and treating patients with the illnesses involved in this case. Additionally, although Dr. Zimmerman initially certified the patients selected for the audit for hospice services, and attempted to support the other Halifax hospice physicians when they repeatedly recertified the patients as eligible, Dr. Zimmerman admitted he never examined any of these patients himself and was unable to attest that any of his in- house physicians ever personally examined any of the patients. In addition to Dr. Zimmerman, the hospice physicians involved in the certification of the eight patients at issue in this audit were as follows: Dr. Richard C. Weiss: board-certified in internal medicine, oncology, and hospice & palliative medicine Dr. John Bunnell: board-certified in family medicine and hospice & palliative medicine Dr. Arlen Stauffer: board-certified in family medicine and hospice & palliative medicine Dr. Susan Howard: board-certified in family medicine and hospice & palliative medicine Dr. Lyle E. Wadsworth: board-certified in internal medicine, geriatrics, and hospice & palliative medicine Dr. Gregory Favis: board-certified in internal medicine, with subspecialty certification in hematology and oncology; and Dr. Justin Chan: board-certified in family medicine Specific Patient Review At the time of the hearing, the hospice service claims related to eight patients remained at issue. The findings of fact regarding eligibility of each patient for hospice services are set forth below in the following order: D, H, P, Q, S, U, V, and O. Patient D Patient D, a 53-year-old male, was first admitted to Halifax Hospice on February 25, 2011, with a terminal diagnosis of hepatocellular cancer and cirrhosis secondary to hepatitis C. He was discharged on May 29, 2012, and then readmitted on June 13, 2012, through December 31, 2012 (audit period). He had previously been in various hospices for six to seven years. Dr. Eisner noted there was no recent decline in functional status. In June 2011, a nurse noted the patient was ambulating well and went fishing, but he experienced frequent falls. He continued to experience falls (from his couch and bicycle) and also had mild to moderate arm and hand tremors. His weight decreased from 176 to 162 over seven months. Thus, the patient records reflected some indication of functional decline. However, as Dr. Eisner credibly testified, even considering the alleged terminal diagnosis, the patient showed no evidence of having refractory ascites, hepatic encephalopathy nor gastrointestinal bleeding. Further, he indicated there was no documentation of variceal bleeding, hepatorenal syndrome, or spontaneous bacterial peritonitis, which he would expect to see if the patient truly had six or less months to live. The medical records support Dr. Eisner’s conclusion that the patient did not meet the standard of six or less months to live. Throughout the period of the hospice stay, nursing notes indicate that the patient was stable, ambulating well, felt good, and was observed by an ER doctor after a fall off his bike, as “well-nourished, well-developed patient, [and] in no apparent distress.” Even Dr. Weiss, the hospice physician who worked with Patient D, noted in recertification that “It is a difficult case as he clearly has a terminal illness and at the same time is manipulative with no overt progression of disease.” Dr. Eisner credibly testified that the patient was not eligible for hospice services and, thus, the services provided were not eligible for Medicaid reimbursement. The greater weight of the evidence proves that Patient D was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $98,776.63 Patient H Patient H was admitted to Halifax on December 31, 2010, with a terminal diagnosis of end-stage liver disease secondary to chronic hepatitis C. Dr. Eisner determined that Patient H did not have a life expectancy of less than six months. Dr. Eisner opined that there was no clinical progression of the patient’s terminal disease. The patient did not have impaired nutritional or functional status related to the terminal illness. The patient had weight loss but experienced increased abdominal girth. The treating hospice physician was Dr. Wadsworth, who is board-certified in internal medicine. He noted that the patient had cirrhosis and variceal bleeding and hepatic encephalopathy. However, as correctly noted by Dr. Eisner, those conditions were the natural progression of the disease, but would not result in a life expectance of less than six months. Dr. Eisner also testified that patients with chronic liver disease can live up to 10 years and patients with hepatic encephalopathy can live up to 15 years. Patient H was ultimately discharged for drug diversion, and although her discharge note states: “Suspected drug diversion became evident over last 2 months when controlled medication was not available for nurses to check during visit,” the patient records reflect that Halifax was aware of this problem throughout her stay, but did not discharge her for an additional 12 months. The inconsistency of the medical records and Dr. Eisner’s opinions indicate that this patient did not have a terminal diagnosis with a life expectancy of six months or less if her terminal disease progressed at its normal course at initial certification or at any recertification throughout her stay with Halifax. The medical records contained in this patient’s file do not support a finding that the Medicaid hospice eligibility standard was met. Based upon the greater weight of the evidence in this case, it is determined that Patient H was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $50,142.74. Patient P Patient P, a 48-year-old male, was admitted to Halifax on August 25, 2011, with a terminal diagnosis of end-stage liver disease. The first 11 months of his stay were denied, however, the last month was approved. Dr. Eisner testified that although the patient had ascites requiring frequent paracentesis, he did not see documentation indicating there was a progression of the terminal disease until July 2012. Dr. Eisner also determined there was no documentation in the patient records of impaired nutritional status related to the disease or a decline in functional status. However, when the patient did show a decline in functional status, Dr. Eisner agreed the patient was eligible. Further, because, during the denied period, there was no evidence of variceal bleeding, hepatorenal syndrome or recurrent spontaneous bacterial peritonitis, Dr. Eisner opined that the life expectancy of the patient would typically be one to two years, not six or less months. There is also a discrepancy in the medical records for this patient. In the narrative for the recertification for November 24, 2011, Dr. Wadsworth indicates this is a “48 yo ES Dementia, and multiple comorbidities. Has had [hallucinations] has improved.” Certainly this is in error and cannot be the basis for a valid recertification–-this patient did not have dementia nor were there reported hallucinations. This patient did not have a terminal diagnosis with a life expectancy of six months or less if his terminal disease progressed at its normal course at initial certification or at any recertification throughout the first 11 months of his stay with Halifax. The medical records contained in this patient’s file do not support a finding that the Medicaid hospice eligibility standard was met. Based upon the greater weight of the evidence in this case, it is determined that Patient P was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $60,872.04. Patient Q Patient Q was a 56-year-old male admitted with end- stage lung disease. Per the FAR overpayment recalculations, he was deemed ineligible for the first three months of his hospice admission beginning on December 13, 2011, and was thereafter approved through the end of the audit period. As Dr. Eisner reasoned, the medical records did not support hospice eligibility for the first three months that were billed. The patient was stable, using a walker, and had reasonable palliative performance scale scores, and showed no decline in functional status and Transient Ischemic Attacks (“TIA), if any, were stable. However, as Dr. Eisner noted, after three months, the records did contain evidence supporting a progressive deterioration of the patient’s condition and functional status. Much of the issue with this patient appears to be whether the patient actually had ongoing TIA episodes prior to and during the initial certification period. The patient’s medical record from a hospital visit six months prior to hospice admission, where he was seen for chest pains, made no mention of TIAs. Further, Dr. Zimmerman admitted that none of his doctors or nurses had witnessed the patient having a TIA, and the records do not support that the patient had mini-strokes prior to the approved period. While Dr. Zimmerman also attempted to justify his concerns with TIAs based upon one episode during the denied period where the patient reported being dizzy and short of breath, he admitted that these could have been caused by the extensive amount of opiates and other drugs the patient had been given. For the denied period, the patient did not have a terminal diagnosis with a life expectancy of six months or less if his terminal disease progressed at its normal course at initial certification. The medical records do not support a finding that the Medicaid hospice eligibility standard was met. Based upon the greater weight of the evidence, it is determined that Patient P was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $12,716.10. Patient S Patient S, a 51-year-old patient, was admitted to Halifax with a terminal diagnosis of end-stage liver disease. Dr. Eisner determined that hospice services were not appropriate for Patient S. Specifically, he determined that the patient’s disease, while terminal, did not result in a life expectancy of six months or less. In refuting Dr. Zimmerman’s response, Dr. Eisner stated, “In the absence of recurrent, untreated, variceal bleeding, hepatorenal syndrome or recurrent spontaneous bacterial peritonitis, the life expectancy of patients with cirrhosis, ascites, and hepatic encephalopathy is typically 1 to 2 years.” There was no clinical progression of the disease. The Halifax treating physician, Dr. Weiss, noted that the patient’s condition included cirrhosis and hepatic encephalopathy. However, as noted by Dr. Eisner, the condition was the natural progression of the disease. The greater weight of the evidence supports that Patient S was not eligible for hospice services for the period September 1, 2009, through December 1, 2010, and that Petitioner is entitled to recover an overpayment of $63,235.91. Patient U Patient U, a 61-year-old female, was admitted with a terminal diagnosis of dementia. She was first admitted to Halifax hospice in October 2010, however, the claims audit period for this patient did not begin until January 1, 2011. Dr. Heldman indicated that she was not eligible through the end of her initial stay in hospice on January 31, 2012. Dr. Heldman approved her second stay in hospice beginning on May 19, 2012. Dr. Heldman, who indicated he had dealt with dementia patients many times, testified that there were discrepancies throughout her medical records and that the file did not contain documentation showing serial physician assessments, clinical progression of the terminal disease, a decline in functional status, nor of the end stage of a terminal disease. Dr. Zimmerman, in his provider response after the DAR, focused on what he claimed was a significant weight loss with this patient over the period she remained in hospice care. As Dr. Zimmerman stated in the provider response: “when certifying physicians saw consistent weight gain/stabilization they became comfortable that the improvement was not a brief ‘honeymoon’ in her failing nutritional status and they no longer believed that her ‘normal course’ would result in a life expectancy of six months or less and they appropriately discharged her.” It is clear Dr. Zimmerman relied on the patient’s alleged dramatic weight loss to justify continued provision of hospice services to the patient. However, at the final hearing, Dr. Zimmerman conceded that the dramatic weight loss upon which he relied (and his physician who was recertifying the patient relied on) in evaluating this patient, was a mistake. The factor upon which Dr. Zimmerman relied upon to support the patient’s stay in hospice, including his initial certification and at least two recertifications, did not actually exist. Dr. Heldman likewise provided credible testimony regarding the inconsistencies in Halifax’s records for Patient U’s file and that the records did not contain sufficient documentation to support the initial certification and recertifications. The preponderance of the evidence proves that Patient U was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $47,159.40. Patient V Patient V, a 56-year-old male, was initially admitted to Halifax on May 22, 2012, with a terminal diagnosis of end- stage liver disease. Dr. Eisner testified that although this patient did have ascites, they are part of the normal progression of the disease and the condition was appropriately treated with paracentesis. Further, he indicated that throughout the course of the patient’s stay, there was no documentation to show a clinical progression of the terminal disease. Dr. Eisner also noted there was no evidence of impaired nutritional status related to the terminal disease or any decline in functional status. More importantly, Dr. Eisner opined that there was no evidence that the patient had entered the end stage of a chronic disease. Finally, he saw no evidence that the patient had variceal bleeding, hepatorenal syndrome, or recurrent spontaneous bacterial peritonitis, which would have indicated six months or less to live. Dr. Zimmerman testified that his team was extremely worried about the patient’s prior episode of ventricular tachycardia and the chance of another episode that would be fatal, and that this chance supported keeping him in hospice. Dr. Zimmerman highlighted this grave concern repeatedly through his written response to the DAR. However, on cross-examination, he admitted that the patient did not have a history of the tachycardia but rather had one episode that lasted 20 beats or less and that Halifax did not send the patient to be further evaluated by a cardiologist. He also admitted that the opiates Halifax treatment providers were giving Patient V could have caused the dizziness that prompted their concern and allegedly supported the prognostication of limited life expectancy. Patient V did not have a terminal diagnosis with a life expectancy of six months or less if his terminal disease progressed at its normal course at initial certification or at any recertification throughout his stay with Halifax during the audit period. The medical records contained in this patient’s file do not support a finding that the Medicaid hospice eligibility standard was met. Based upon the greater weight of the evidence in this case, it is determined that Patient V was not eligible for Medicaid hospice services and that Petitioner is entitled to recover an overpayment of $38,769.20. Patient O Patient O, a 57-year-old female, was first admitted to Halifax on October 16, 2009, with a terminal diagnosis of COPD, a common breathing disorder. She was discharged November 9, 2012, because Halifax determined she did not meet the criteria for hospice. Although Patient O had COPD, Halifax never presented her for a FEV1 test which would have been a good indicator of the degree of COPD and would have assisted in properly obtaining a prognosis of life expectancy. Patient O was recertified for hospice 16 times, with little or no narrative from the recertifying Halifax physician present in the medical records. Patient O also regularly showed oxygen saturation levels within the normal range for a COPD patient. In May 2010, seven months into her hospice stay, there was no evidence of impaired nutritional status, no signs or symptoms of respiratory distress, no change in chest pain, residual weakness, fair appetite, no swallowing difficulties and her pain was well controlled. Additionally, in September 2010, there were notes that the patient’s lungs were clear, she had been removed from oxygen for activities, and had showered without difficulty. Between December 2010 through September 2012, the nurse’s notes reflect that patient O stated that she was doing better and had not experienced shortness of breath. It appears from the medical records that while the patient may have had COPD, it was not progressing. Dr. Eisner testified that other than intermittent upper respiratory infections, the patient’s pulmonary status remained stable and showed no progression over the course of time. Further, he saw no proof that her coronary heart disease or diabetes deteriorated over the three years and that, although she had some weight loss, there was no documentation of a decline in her functional status. However, Dr. Eisner provided an opinion regarding this patient outside his expertise. That a COPD terminal diagnosis was beyond his experience was made clear when Dr. Eisner could not identify the specific indicators for when a COPD patient was decompensating. Although Dr. Eisner may have treated patients with COPD, his primary practice treating patients was related to gastroenterological conditions. He was not board-certified in pulmonology and was not trained in the specialty. Therefore, AHCA has not met its burden by the greater weight of the evidence that Patient O was not eligible for Medicaid hospice services, and Petitioner is not entitled to recover an overpayment of $158,234.66. Fine Calculation When calculating the appropriate fine to impose against a provider, MPI uses a formula based on the number of claims that are in violation of rule 59G-9.070(7)(e). Specifically, the formula involves multiplying the number of claims in violation of the rule by $1,000 to calculate the total fine.3/ The final total may not exceed 20 percent of the total overpayment, which resulted in a fine of $64,981.38. Summary of Findings of Fact At the time of the hearing, AHCA sought from Respondent overpayments in the amount of $529,906.88 for eight patients who received hospice services at Halifax during the audit period. The findings of fact above upheld AHCA's denial of hospice services for patients: D, H, P, Q, S, U, and V. The Respondent rebutted the evidence regarding eligibility of Patient O. Therefore, AHCA is entitled to recover overpayment of $371,672.22. Each expert credibly testified as to when each patient was admitted and the certification for each patient. The experts provided the requisite support to both the DAR and FAR for the patients where there was a finding of ineligibility for hospice services.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that that the Agency for Health Care Administration enter a final order directing Halifax to pay $371,672.22 for the claims found to be overpayments and a fine of $67,981.38. The undersigned reserves jurisdiction to award costs to the prevailing party. DONE AND ENTERED this 30th day of June, 2017, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN 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 June, 2017.
The Issue Whether Certificate of Need Application No. 8614, filed by Vencor Hospitals South, Inc., meets, on balance, the applicable statutory and rule criteria. Whether the Agency for Health Care Administration relied upon an unpromulgated and invalid rule in preliminarily denying CON Application No. 8614.
Findings Of Fact Vencor Hospital South, Inc. (Vencor), is the applicant for certificate of need (CON) No. 8614 to establish a 60-bed long term care hospital in Fort Myers, Lee County, Florida. The Agency for Health Care Administration (AHCA), the state agency authorized to administer the CON program in Florida, preliminarily denied Vencor's CON application. On January 10, 1997, AHCA issued its decision in the form of a State Agency Action Report (SAAR) indicating, as it also did in its Proposed Recommended Order, that the Vencor application was denied primarily due to a lack of need for a long term care hospital in District 8, which includes Lee County. Vencor is a wholly-owned subsidiary of Vencor, Inc., a publicly traded corporation, founded in 1985 by a respiratory/physical therapist to provide care to catastrophically ill, ventilator-dependent patients. Initially, the corporation served patients in acute care hospitals, but subsequently purchased and converted free-standing facilities. In 1995, Vencor merged with Hillhaven, which operated 311 nursing homes. Currently, Vencor, its parent, and related corporations operate 60 long term care hospitals, 311 nursing homes, and 40 assisted living facilities in approximately 46 states. In Florida, Vencor operates five long term care hospitals, located in Tampa, St. Petersburg, North Florida (Green Cove Springs), Coral Gables, and Fort Lauderdale. Pursuant to the Joint Prehearing Stipulation, filed on October 2, 1997, the parties agreed that: On August 26, 1996, Vencor submitted to AHCA a letter of intent to file a Certificate of Need Application seeking approval for the construction of a 60-bed long term care hospital to be located in Fort Myers, AHCA Health Planning District 8; Vencor's letter of intent and board resolution meet requirements of Sections 408.037(4) and 408.039(2)(c), Florida Statutes, and Rule 59C-1.008(1), Florida Administrative Code, and were timely filed with both AHCA and the local health council, and notice was properly published; Vencor submitted to AHCA its initial Certificate of Need Application (CON Action No. 8614) for the proposed project on September 25, 1996, and submitted its Omissions Response on November 11, 1996; Vencor's Certificate of Need Application contains all of the minimum content items required in Section 408.037, Florida Statutes; Both Vencor's initial CON Application and its Omissions Response were timely filed with AHCA and the local health council. During the hearing, the parties also stipulated that Vencor's Schedule 2 is complete and accurate. In 1994, AHCA adopted rules defining long term care and long term care hospitals. Rule 59C-1.002(29), Florida Administrative Code, provides that: "Long term care hospital" means a hospital licensed under Chapter 395, Part 1, F.S., which meets the requirements of Part 412, Subpart B, paragraph 412.23(e), [C]ode of Federal Regulations (1994), and seeks exclusion from the Medicare prospective payment system for inpatient hospital services. Other rules distinguishing long term care include those related to conversions of beds and facilities from one type of health care to another. AHCA, the parties stipulated, has no rule establishing a uniform numeric need methodology for long term care beds and, therefore, no fixed need pool applicable to the review of Vencor's CON application. Numeric Need In the absence of any AHCA methodology or need publication, Vencor is required to devise its own methodology to demonstrate need. Rule 59C-1.008(e) provides in pertinent part: If no agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict, or both; Medical treatment trends; and Market conditions. Vencor used a numeric need analysis which is identical to that prepared by the same health planner, in 1995, for St. Petersburg Health Care Management, Inc. (St. Petersburg). The St. Petersburg project proposed that Vencor would manage the facility. Unlike the current proposal for new construction, St. Petersburg was a conversion of an existing but closed facility. AHCA accepted that analysis and issued CON 8213 to St. Petersburg. The methodology constitutes a use rate analysis, which calculates the use rate of a health service among the general population and applies that to the projected future population of the district. The use rate analysis is the methodology adopted in most of AHCA's numeric need rules. W. Eugene Nelson, the consultant health planner for Vencor, derived a historic utilization rate from the four districts in Florida in which Vencor operates long term care hospitals. That rate, 19.7 patient days per 1000 population, when applied to the projected population of District 8 in the year 2000, yields an average daily census of 64 patients. Mr. Nelson also compared the demographics of the seven counties of District 8 to the rest of the state, noting in particular the sizable, coastal population centers and the significant concentration of elderly, the population group which is disproportionately served in long term care hospitals. The proposed service area is all of District 8. By demonstrating the numeric need for 64 beds and the absence of any existing long term care beds in District 8, Vencor established the numeric need for its proposed 60-bed long term care hospital. See Final Order in DOAH Case No. 97-4419RU. Statutory Review Criteria Additional criteria for evaluating CON applications are listed in Subsections 408.035(1) and (2), Florida Statutes, and the rules which implement that statute. (1)(a) need in relation to state and district health plans. The 1993 State Health Plan, which predates the establishment of long term care rules, contains no specific preferences for evaluating CON applications for long term care hospitals. The applicable local plan is the District 8 1996-1997 Certificate of Need Allocation Factors Report, approved on September 9, 1996. The District 8 plan, like the State Health Plan, contains no mention of long term care hospitals. In the SAAR, AHCA applied the District 8 and state health plan criteria for acute care hospital beds to the review of Vencor's application for long term care beds, although agency rules define the two as different. The acute care hospital criteria are inapplicable to the review of this application for CON 8614 and, therefore, there are no applicable state or district health plan criteria for long term care. (1)(b) availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the district; and (1)(d) availability and adequacy of alternative health care facilities in the district. Currently, there are no long term care hospitals in District 8. The closest long term care hospitals are in Tampa, St. Petersburg, and Fort Lauderdale, all over 100 miles from Fort Myers. In the SAAR, approving the St. Petersburg facility, two long term care hospitals in Tampa were discussed as alternatives. By contract, the SAAR preliminarily denying Vencor's application lists as alternatives CMR facilities, nursing homes which accept Medicare patients, and hospital based skilled nursing units. AHCA examined the quantity of beds available in other health care categories in reliance on certain findings in the publication titled Subacute Care: Policy Synthesis And Market Area Analysis, a report submitted to the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, on November 1, 1995, by Levin-VHI, Inc. ("the Lewin Report"). The Lewin Report notes the similarities between the type of care provided in long term care, CMR and acute care hospitals, and in hospital-based subacute care units, and subacute care beds in community nursing homes. The Lewin Report also acknowledges that "subacute care" is not well-defined. AHCA has not adopted the Lewin Report by rule, nor has it repealed its rules defining long term care as a separate and district health care category. For the reasons set forth in the Final Order issued simultaneously with this Recommended Order, AHCA may not rely on the Lewin Report to create a presumption that other categories are "like and existing" alternatives to long term care, or to consider services outside District 8 as available alternatives. Additionally, Vencor presented substantial evidence to distinguish its patients from those served in other types of beds. The narrow range of diagnostic related groups or DRGs served at Vencor includes patients with more medically complex multiple system failures than those in CMR beds. With an average length of stay of 60 beds, Vencor's patients are typically too sick to withstand three hours of therapy a day, which AHCA acknowledged as the federal criteria for CMR admissions. Vencor also distinguished its patients, who require 7 1/2 to 8 hours of nursing care a day, as compared to 2 1/2 to 3 hours a day in nursing homes. Similarly, the average length of stay in nursing home subacute units is less than 41 days. The DRG classifications which account for 80 percent of Vencor's admissions represent only 7 percent of admissions to hospital based skilled nursing units, and 10 to 11 percent of admissions to nursing home subacute care units. Vencor also presented the uncontroverted testimony of Katherine Nixon, a clinical case manager whose duties include discharge planning for open heart surgery for patients at Columbia-Southwest Regional Medical Center (Columbia-Southwest), an acute care hospital in Fort Myers. Ms. Nixon's experience is that 80 percent of open heart surgery patients are discharged home, while 20 percent require additional inpatient care. Although Columbia-Southwest has a twenty-bed skilled nursing unit with two beds for ventilator-dependent patients, those beds are limited to patients expected to be weaned within a week. Finally, Vencor presented results which are preliminary and subject to peer review from its APACHE (Acute Physiology, Age, and Chronic Health Evaluation) Study. Ultimately, Vencor expects the study to more clearly distinguish its patient population. In summary, Vencor demonstrated that a substantial majority of patients it proposes to serve are not served in alternative facilities, including CMR hospitals, hospital-based skilled nursing units, or subacute units in community nursing homes. Expert medical testimony established the inappropriateness of keeping patients who require long term care in intensive or other acute care beds, although that occurs in District 8 when patients refuse to agree to admissions too distant from their homes. (1)(c) ability and record of providing quality of care. The parties stipulated that Vencor's application complies with the requirement of Subsection 408.035(1)(c). (1)(e) probable economics of joint or shared resources; (1)(g) need for research and educational facilities; and (1)(j) needs of health maintenance organizations. The parties stipulated that the review criteria in Subsection 408.035(1)(e), (g) and (j) are not at issue. (f) need in the district for special equipment and services not reasonably and economically accessible in adjoining areas. Based on the experiences of Katherine Nixon, it is not reasonable for long term care patients to access services outside District 8. Ms. Nixon also testified that patients are financially at a disadvantage if placed in a hospital skilled nursing unit rather than a long term care hospital. If a patient is not weaned as quickly as expected, Medicare reimbursement after twenty days decreases to 80 percent. In addition, the days in the hospital skilled nursing unit are included in the 100 day Medicare limit for post-acute hospitalization rehabilitation. By contrast, long term care hospitalization preserves the patient's ability under Medicare to have further rehabilitation services if needed after a subsequent transfer to a nursing home. (h) resources and funds, including personnel to accomplish project. Prior to the hearing, the parties stipulated that Vencor has sufficient funds to accomplish the project, and properly documented its source of funds in Schedule 3 of the CON application. Vencor has a commitment for $10 million to fund this project of approximately $8.5 million. At the hearing, AHCA also agreed with Vencor that the staffing and salary schedule, Schedule 6, is reasonable. (i) immediate and long term financial feasibility of the proposal. Vencor has the resources to establish the project and to fund short term operating losses. Vencor also reasonably projected that revenues will exceed expenses in the second year of operation. Therefore, Vencor demonstrated the short and long term financial feasibility of its proposal. needs of entities serving residents outside the district. Vencor is not proposing that any substantial portion of it services will benefit anyone outside District 8. probable impact on costs of providing health services; effects of competition. There is no evidence of an adverse impact on health care costs. There is preliminary data from the APACHE study which tends to indicate the long term care costs are lower than acute care costs. No adverse effects of competition are shown and AHCA did not dispute the fact that Vencor's proposal is supported by acute care hospitals in District 8. costs and methods of proposed construction; and (2)((a)-(c) less costly alternatives to proposed capital expenditure. The prehearing stipulation includes agreement that the design is reasonable, and that proposed construction costs are below the median in that area. past and proposed service to Medicaid patients and the medically indigent. Vencor has a history of providing Medicaid and indigent care in the absence of any legal requirements to do so. The conditions proposed of 3 percent of total patient days Medicaid and 2 percent for indigent/charity patients proposed by Vencor are identical to those AHCA accepted in issuing CON 8213 to St. Petersburg Health Care Management, Inc. Vencor's proposed commitment is reasonable and appropriate, considering AHCA's past acceptance and the fact that the vast majority of long term care patients are older and covered by Medicare. services which promote a continuum of care in a multilevel health care system. While Vencor's services are needed due to a gap in the continuum of care which exists in the district, it has not shown that it will be a part of a multilevel system in District 8. (2)(d) that patients will experience serious problems obtaining the inpatient care proposed. Patients experience and will continue to experience serious problems in obtaining long term care in District 8 in the absence of the project proposed by Vencor. Based on the overwhelming evidence of need, and the ability of the applicant to establish and operate a high quality program with no adverse impacts on other health care providers, Vencor meets the criteria for issuance of CON 8614.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration issue CON 8614 to Vencor Hospitals South, Inc., to construct a 60-bed long term care hospital in Fort Myers, Lee County, District 8. DONE AND ENTERED this 3rd day of March, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Kim A. Kellum, Esquire Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301
