The Issue The issue is whether the Agency should approve the Certificate of Need applications filed by Select-Marion and/or Kindred, each of which proposes to establish a new long-term care hospital in Marion County.
Findings Of Fact Based upon the testimony and evidence received at the hearing and the parties' stipulations, the following findings are made: Parties Select-Marion is a recently-created subsidiary of Select Medical Corporation (Select). Select has its corporate headquarters in Pennsylvania. Select operates 79 LTCHs in 24 states, including two in Florida. Select’s Florida LTCHs are located in Jacksonville and Miami. Another Select LTCH has been approved in Orlando, but that facility has not yet opened. Kindred is a subsidiary of Kindred Healthcare, Inc., which has its corporate headquarters in Kentucky. Kindred Healthcare operates 72 LTCHs in 26 states, including seven in Florida. Kindred operates 17 of those LTCHs, including six of the seven Florida LTCHs. Kindred’s Florida LTCHs are located in Green Cove Springs, St. Petersburg, Hollywood, Ft. Lauderdale, Miami, and Tampa. Another subsidiary of Kindred Healthcare operates a second LTCH in Tampa. Select and Kindred Healthcare have each been in the business of operating LTCHs since the 1980’s. The Agency is the state agency responsible for administering the CON program and licensing LTCHs and other health care facilities. Relevant Demographics of Marion County The LTCHs proposed by Select-Marion and Kindred are to be located in Ocala, which is in Marion County. Marion County is in District 3 for health planning purposes. District 3 is a geographically large district. It includes 16 counties: Marion, Hamilton, Suwannee, Columbia, Lafayette, Dixie, Gilchrist, Union, Bradford, Alachua, Putnam, Levy, Citrus, Sumter, Lake, and Hernando. Marion County is the most populous county in District The 2003 population of Marion County was approximately 275,000, which represented approximately 20 percent of the total population of District 3. Approximately 25 percent of Marion County’s 2003 population was in the 65 and older (65+) age cohort, and approximately 23 percent of the population of the respective primary service areas defined by Select-Marion and Kindred (see Part D(3) below) was in that age cohort. Those percentages are higher than the statewide average of 17.5 percent in the 65+ age cohort. The population of Marion County is projected to increase approximately 8.9 percent by January 2007, and during that same period, the population of the 65+ age cohort in the county is projected to increase approximately 11.3 percent. Similar relative growth rates are projected in the primary service area defined by Kindred through July 2005, which was to be the beginning of the facility's second year of operation.4 Marion County has a higher percentage of persons in the 65+ age cohort than do any of the counties that currently have an LTCH except for Sarasota County, which has 31.2 percent of its population in the 65+ age cohort. There are 40 approved but not yet operational LTCH beds in Sarasota County. Hospitals in Marion County and the Surrounding Areas There are three acute care hospitals in Marion County: Munroe Regional Medical Center (Munroe), Ocala Regional Medical Center (Ocala Regional), and West Marion Community Hospital (West Marion). Each of those hospitals is in Ocala. Munroe is a not-for-profit hospital. It is the oldest and largest acute care hospital in Marion County. Munroe currently has 323 beds, and it is in the midst of a $78 million expansion that will increase its capacity to 421 beds. Ocala Regional and West Marion are for-profit hospitals owned by HCA, Inc. Ocala Regional, which has more than 200 beds, is located directly across the street from Munroe. West Marion, which opened in 2002 and has approximately 70 beds, is a satellite facility of Ocala Regional. There is very little in-migration to the Marion County hospitals. For fiscal year 2002, approximately 83 percent of Munroe’s discharges were residents of Marion County. A similar percentage of the discharges from Ocala Regional were Marion County residents. In addition to the three hospitals in Marion County, there are nine more acute care hospitals in District 3 within a 40-mile radius of the parties’ proposed Ocala LTCHs. Those facilities include Shands Hospital (Shands) at the University of Florida in Gainesville, Leesburg Regional Medical Center (Leesburg Regional), and The Villages Regional Hospital (Villages Regional). Shands is located to the north of Marion County in Alachua County. Leesburg Regional and Villages Regional are located to the south of Marion County in Lake County and Sumter County, respectively. The record does not reflect how many total acute care beds are in the hospitals outside of Marion County within the 40-mile radius, nor does it reflect whether any of those hospitals (other than Shands) are trauma centers or have other specialty programs that might impact, either positively or negatively, the potential patient pool for the parties’ proposed LTCHs. The record does not reflect the number, type, quality of care, or utilization at the nursing homes and other traditional post-acute care facilities in Marion County or District 3. The Parties’ Proposed LTCHs Select-Marion and Kindred each submitted timely letters of intent and CON applications for their proposed LTCHs in the first “hospital beds and facilities” batching cycle of 2003. Kindred Kindred’s proposed LTCH is a 31-bed “hospital-within- a-hospital” (HIH). Kindred's proposed LTCH will be located on a wing of the fifth floor of Munroe’s existing hospital. The wing includes 11,606 square feet of contiguous space that Kindred is leasing from Munroe. Kindred is renovating the leased space to include 15 semi-private (i.e., double-occupancy) rooms and one “isolation room.” The total project cost of Kindred’s proposed LTCH is approximately $1.4 million, or approximately $45,300 per bed. That cost will be funded by Kindred Healthcare’s “cash on hand.” The lease agreement between Kindred and Monroe has been executed. The terms of the executed lease are slightly different than the terms of the draft lease included in Kindred’s CON application. The lease is for an initial term of seven years with two five-year renewal periods upon the agreement of the parties. The draft lease included in the CON application contained a 10- year initial term with the two five-year renewals at Kindred’s option. Because renewal of the lease will require the mutual agreement of Kindred and Munroe, there is no guarantee that the lease will be renewed at the end of the seven-year initial term. However, Kindred’s expert in LTCH business development testified that HIH leases typically are renewed. There is also no guarantee that space will be made available within Munroe for future expansions of Kindred’s LTCH. However, Munroe’s Chief Operating Officer testified that Munroe would “entertain whatever discussions that would facilitate the expansion.” Kindred's application states that its proposed LTCH will include the same types of services that are provided at Kindred’s other Florida LTCHs, including respiratory/life support, wound care, and neurological. Kindred’s proposed LTCH will not include an intensive care unit (ICU) or a pediatric program. Kindred will contract with Munroe for services such as laboratory, radiology, surgery/operating room, physical and speech therapy, and cardiology. An “ancillary services agreement” for these services has been executed by Kindred and Munroe. A patient transfer agreement between Munroe and Kindred has been negotiated. The agreement cannot be formally executed until Kindred’s LTCH is approved. Kindred projected that its proposed LTCH would begin operating in June 2004, which is one year after the “initial decision deadline date” for the applicable batching cycle. The need projections in Kindred’s application were based upon July 2005 population figures, and the utilization and financial projections in Kindred’s application were for the first two years of operation ending May 31, 2005 and 2006. Select-Marion Select-Marion’s proposed LTCH is a 60-bed freestanding facility to be located in Ocala. The precise site of the facility has not yet been determined by Select-Marion. The application identifies a “top priority location” east of Interstate 75 on State Road 200 in the general vicinity of Central Florida Community College. Select-Marion’s proposed LTCH will consist of 44,434 square feet of new construction. The bed complement at the facility will be 47 private (i.e., single-occupancy) rooms, five semi-private rooms, and three “isolation rooms.” The total project cost of Select-Marion’s proposed LTCH is approximately $12.2 million, or approximately $204,100 per bed. That cost will be funded by Select from its cash flow from operations and/or through borrowings from Select’s line of credit with its bank. The services at Select-Marion's proposed LTCH will include the same "core" services found at other Select LTCHs. Those services include the treatment of pulmonary and ventilator patients, neuro-trauma and stroke patients, medically complex patients, and wound care. Select-Marion’s proposed LTCH will include a “step down” unit where ICU-level care will be provided. The facility will not include a pediatric program. Select-Marion has not negotiated patient transfer agreements with any of the area hospitals. Select-Marion’s application includes a letter from West Marion’s Administrator, which states that West Marion “anticipates implementing a transfer agreement with [Select- Marion’s] facility” in the event that the LTCH “achieves appropriate licensure and certification.” No weight is given to that letter because, as discussed below, West Marion did not have any potential LTCH patients and it is a satellite facility of Ocala Regional, which provided a letter of support to Kindred. Select-Marion projected that its proposed LTCH would begin operating in June 2005, which is one year later than Kindred's proposed LTCH was projected to open. The delay is a result of Select-Marion's proposed LTCH being a new freestanding facility, which has a longer construction period than does the renovation of the existing hospital space for Kindred's HIH LTCH. The need projections in Select-Marion’s application were focused on the facility’s third year of operation, which is the 12-month period ending June 2008. The utilization and financial projections in Select-Marion’s application were for the first two years of operation ending May 31, 2006 and 2007. Proposed Service Areas Kindred’s application defines the primary service area (PSA) for its proposed LTCH as Marion, Alachua, Levy, Citrus, Sumter, and Lake Counties. The secondary service area is defined as the remaining 10 counties in District 3. Select-Marion’s application defines the PSA for its proposed LTCH as Marion County and a 40-mile radius around the proposed facility. A secondary service area is not specifically defined, but the application states that Select-Marion’s proposed LTCH will serve the entire district “to the degree possible.” The geographic scope of the PSA proposed by Select- Marion is similar to the geographic scope of the PSA proposed by Kindred; the 40-mile radius defined by Select-Marion includes all of Marion County and substantial portions of the remaining five counties included in Kindred’s PSA. It is not reasonable to expect that a material number of the admissions to either of the proposed LTCHs would come from outside of the PSAs defined in the applications. On this issue, the undersigned accepts the expert testimony of Select- Marion’s health planner that a realistic PSA for an LTCH in Ocala would be Marion County, and based upon the limited in-migration to Marion County hospitals and the testimony of Kindred's expert health planner that patients generally prefer to receive their long-term care close to their homes, the undersigned draws the inference and finds that realistic secondary service area for an LTCH in Ocala would be the remainder of the PSAs defined by the parties. It is also not reasonable to expect that either of the proposed LTCHs will serve District 3 in its entirety despite the parties’ expressed intentions and desire to do so. Indeed, Kindred’s application states that it expects that residents of District 3 who are geographically closer to the existing LTCHs in Green Cove Springs and Tampa -– which would include a number of the counties in Kindred’s proposed secondary service area -- will continue to leave the district for LTCH services. Similar statements are included in Select-Marion’s application as part of its explanation of the proposed 40-mile PSA. Letters of Support Select-Marion’s application included only one letter of support, which was from West Marion. Although the letter represented that “[m]any of our long-stay acute patients are candidates for care in [an LTCH,]” the evidence establishes that West Marion did not have any long-stay patients that would be potential LTCH patients. Moreover, West Marion is a satellite facility of Ocala Regional, which is located across the street from Munroe and provided a letter of support for Kindred’s proposed LTCH. Kindred’s application included 13 letters of support, including letters from five hospitals in District 3 (i.e., Munroe, Ocala Regional, Leesburg Regional, Villages Regional, and Citrus Memorial Hospital), a nursing home in Ocala, a home health care organization affiliated with Munroe, a local physician, and several local and state politicians. The support expressed in the letters included in Kindred’s application was general in nature. Indeed, many of the letters, including the letters from Ocala Regional and several of the other hospitals, appeared to be form letters. Other than the letter from Monroe’s director of case management, the letters included in Kindred’s application did not attempt to quantify the number of LTCH patients that would likely be generated for Kindred’s proposed LTCH. Nor did the letters detail access or other problems for potential LTCH patients that would help to demonstrate need for an LTCH in Marion County. General letters of support typically carry little weight with the Agency in its evaluation of need for a new health care facility. Indeed, the Bureau Chief of the Agency’s CON program, Jeffrey Gregg, testified that general letters of support are only significant to the Agency where one applicant has received a number of such letters and the other applicant has not received any letters of support.5 Because of their general nature, the letters of support included in Kindred’s application do not in and of themselves demonstrate need for a proposed LTCH in Marion County, nor do they validate the numeric bed need projected in either of the applications. However, the volume of the letters included in Kindred’s application from hospitals and health care providers as compared to the single letter included in Select- Marion’s application demonstrates that there is greater support from the relevant community for Kindred’s proposed LTCH than there is for Select-Marion’s proposed LTCH. Application Review and Preliminary Agency Action The applications filed by Select-Marion (CON 9647) and Kindred (CON 9648) complied with all of the application content and submittal requirements in the governing statutes and the Agency’s rules. The required filing fees were paid, and the local health council submittal requirements were met. The applications were comparatively reviewed by the Agency in accordance with the Agency’s rules and standard procedures. On June 11, 2003, the Agency issued its State Agency Action Report (SAAR) based upon its comparative review of the applications. The SAAR recommended denial of both applications based primarily on the Agency’s determination that neither applicant had adequately demonstrated need for its proposed LTCH. The Agency’s decision to deny the applications was published in the Florida Administrative Weekly as required by statute and Agency rule, and Select-Marion and Kindred each timely requested a hearing on the Agency’s decision. This consolidated proceeding followed. In March 2004, the Agency changed its position with respect to Kindred’s application and provided timely notice of that change in position to the parties. The Agency now supports approval of Kindred’s application, even though it continued to maintain at the hearing that need has not been adequately demonstrated by either applicant. LTCHs Generally LTCHs are health care facilities that provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions. To qualify as an LTCH, the facility must serve a patient population whose average length of stay (ALOS) exceeds 25 days. LTCHs fit into the continuum of care between traditional, “short-term” acute care hospitals and traditional post-acute care facilities such as nursing homes, skilled nursing facilities (SNFs), skilled nursing units (SNUs), or comprehensive medical rehabilitation (CMR) facilities. LTCHs are designed to serve patients that would otherwise have to be maintained in a traditional acute care hospital where the reimbursement rates may be insufficient to cover the costs associated with a lengthy stay, or be moved to a traditional post-acute care facility where the patient may not receive the level of curative care needed. LTCH services are most highly utilized by persons in the 65+ age cohort because those persons are more likely to have complex and/or co-morbid medical conditions that require long- term acute care. The typical LTCH patient is still in need of considerable acute care, but a traditional acute care hospital may no longer be the most appropriate or lowest cost setting for that care. Most LTCH admissions are patients transferred directly from a traditional acute care hospital. It is not uncommon for an LTCH patient to be transferred on life support from a critical care unit or ICU after the patient has been diagnosed and stabilized. Nursing homes, SNFs, SNUs, CMR facilities, and home health care are not appropriate for the typical LTCH patient because the patient's acuity level and medical/therapeutic needs are higher than those generally treated in those settings. Indeed, unlike traditional post-acute care settings, which typically do not admit patients who still require acute care, the core patient-group served by LTCHs are patients who require considerable acute care through daily physician visits and intensive nursing care in excess of eight hours of direct patient care per day. LTCH patients are often discharged to a traditional post-acute care facility such as a nursing home, SNF, SNU, CMR facility, or home health care. Thus, those facilities cannot be considered as "substitutes" for LTCHs, even though there is some overlap between the services provided to lower acuity LTCH patients and higher acuity patients in those traditional post- acute care facilities. The family of a patient in an LTCH is generally encouraged to be more involved in the patient’s care than it would be if the patient was in the ICU of a traditional acute care hospital. For example, the visiting hours at LTCHs are typically more liberal than the visiting hours at a traditional acute care hospital for the ICU and, in some cases, the general medical/surgery floor. Medicare reimbursements are the primary source of revenue for LTCHs because on average 75 to 85 percent of LTCH patients are covered by Medicare. In this case, Kindred projected that approximately 91 percent of the patient days and 86 percent of the net patient revenues for its proposed LTCH would be generated by Medicare patients, and Select-Marion projected that approximately 76 percent of its patient days and approximately 71 percent of its net patient revenue at its proposed LTCH would be generated by Medicare patients. In 2002, CMS adopted a Medicare prospective payment system (PPS) specifically for LTCHs. That system recognizes the LTCH patient population as being distinct from the patient populations treated by traditional acute care hospitals and post-acute care facilities such as nursing homes, SNFs, SNUs, and CMR facilities, even though there may be some overlap between the patient populations served by LTCHs and those other types of facilities. Under the LTCH PPS, services are reimbursed by Medicare at a predetermined rate that is weighted based upon the patient's diagnosis and acuity, regardless of the cost of care. This reimbursement system is similar to, but uses Diagnosis Related Groups (DRGs) that are different than the DRGs used in the PPS for traditional acute care hospitals. The Medicare reimbursement rates for services to long- stay patients in an LTCH are generally higher than the reimbursement rates for the same services to long-stay patients at a traditional acute care hospital. As a result, there is a financial incentive for hospitals to transfer their long-stay patients to an LTCH. It takes approximately six months for a new LTCH to receive its Medicare certification from CMS. During that period, the LTCH is reimbursed by Medicare at the lower rates applicable to traditional acute care hospitals, and, there is a financial incentive for the LTCH to keep its patient census as low as possible while still meeting the 25-day minimum ALOS. Accordingly, the first year of operation of an LTCH is not necessarily representative of the facility’s utilization, patient mix, or payor-source mix over time. The Agency has concerns about the long-term viability of the LTCH industry because it is largely dependent upon CMS's continuing the LTCH PPS with its higher Medicare reimbursement rates. The Agency’s concerns have caused it to take a very conservative approach in evaluating CON applications for new LTCHs so as not to allow the LTCH market to over-develop in the same way that freestanding psychiatric hospitals were over- developed at a time when the reimbursement rate for those facilities was favorable, which is no longer the case. HIH Verses Freestanding LTCHs There are two distinct types of LTCHs: HIHs and freestanding facilities. Both types are accepted in the industry, and both types are found nationwide. Almost all of Select’s LTCHs (i.e., 76 out of 79) are HIHs. Approximately 80 percent of Kindred Healthcare’s LTCHs, including all of its Florida LTCHs, are freestanding facilities. Initially, all of the LTCHs approved in Florida were freestanding facilities because of the Agency’s concern that the applicable building codes precluded HIHs and/or because the Agency’s interpretation of the building codes made the development of HIH LTCHs cost-prohibitive. The Agency no longer has concerns about the building code issue and, as reflected by its change in position in this case, it is willing to approve HIH LTCHs. Indeed, the two recently-approved Orlando LTCHs are HIHs. The Agency does not have a formal preference for HIHs over freestanding LTCHs, or vice versa. There are no material operational differences between HIH LTCHs and freestanding LTCHs, except that HIHs typically contract with the “host hospital” (i.e., the hospital in which the LTCH is located) for ancillary services such as laboratory, radiology, and operating room. The acuity level and mix of patients is materially the same at HIHs and freestanding LTCHs. The ALOS at HIH LTCHs is slightly less than the ALOS at freestanding LTCHs, but the difference is not material. HIH LTCHs draw the largest percentage of their admissions from the host hospital. That percentage is typically at least 25 percent, and it is not uncommon for the percentage to range from 50 to 90 percent. Typically, HIH LTCHs are less expensive to operate than freestanding LTCHs because of lower overhead and the ability to obtain ancillary services from the host hospital; however, both types of LTCHs can be financially viable. Currently, the Medicare reimbursement rates under the LTCH PPS are the same at HIH LTCHs and freestanding LTCHs. LTCHs in Florida At the time Select-Marion’s and Kindred’s applications were filed, there were only nine LTCHs operating in Florida with a total of 683 licensed beds. Those facilities were concentrated in six counties – Dade, Broward, Hillsborough, Pinellas, Duval, and Clay – and five of the State’s 11 heath planning districts – Districts 4, 5, 6, 10 and 11. There were an additional 182 LTCH beds that had been approved by the Agency but which were not operational at the time that Kindred’s and Select-Marion’s applications were filed, including new facilities in Panama City (District 2), Orlando (District 7), and Sarasota (District 8). Those 182 beds do not include Select’s recently-approved 40-bed LTCH in Orlando. There are no licensed or approved LTCHs in District 3. The closest operational LTCH to Ocala is Kindred’s 60-bed facility in Green Cove Springs, which is 50 to 75 miles away. The approved but not yet operational Orlando LTCHs will be approximately 75 miles from Ocala. The Florida LTCHs are generally well utilized; the occupancy rates at the facilities range from 54.6 percent to 99.2 percent. Four of the nine facilities, including Kindred’s LTCH in Green Cove Springs, have occupancy rates higher than 80 percent, and the average occupancy rate for all of the Florida LTCHs is 76.6 percent. Data reported to the Agency reflects that counties and districts where LTCHs are located have considerably more LTCH admissions (both in number and as a percentage of total patients whose length of stay was greater than 25 days) than do counties and districts where there is no LTCH. See Exhibit S-4, at 5-6, 8-9. This data indicates that patients generally remain closer to home for their long-term care, which is consistent with the expert testimony of the health planners in this case. During calendar year 2002, a total of 202 District 3 residents were admitted to a Florida LTCH. Over half of those admissions were residents of the District 3 counties that are closer to an existing LTCH, which indicates that residents of those counties have better access to LTCH services than do residents of the other counties in the district.6 By contrast, only 20 Marion County residents were admitted to a Florida LTCH in calendar year 2002. The admission experience at Kindred’s Green Cove Springs LTCH is consistent with that data. Between 20 and 25 percent of the admissions at that facility are District 3 residents, most of whom come from Putnam, Bradford, and other northern counties in District 3. The ALOS for all patients discharged from Florida LTCHs between July 2001 and June 2002 was 42.2 days. The 65+ age cohort accounted for approximately 77 percent of the LTCH discharges in Florida for that period. The ALOS for Florida LTCHs is considerably higher than the ALOS experienced nationwide by either Select or Kindred Healthcare. The ALOS at Select’s LTCHs is between 25 and 30 days; the ALOS at Kindred Healthcare’s LTCHs is in the low 30's. The higher ALOS at the Florida LTCHs is due, at least in part, to the limited number of LTCHs in Florida and their tendency to treat only the “sickest of the sick,” which are the patients that generally have longest lengths of stay. The ALOS at the Florida LTCHs is expected to become lower as the number of LTCHs in Florida increases and as medical technology improves such that the more complex cases can be better managed. Determination of Need for LTCH Beds in District 3 and Marion County Generally Select-Marion and Kindred have the burden to demonstrate need for their proposed LTCHs. The Agency does not publish a fixed-need pool for LTCHs, nor is there an Agency rule which provides a specific formula or methodology for determining numeric need for LTCH beds.7 Indeed, it was clear from Mr. Gregg’s testimony at the hearing and in his deposition that the Agency’s policy toward LTCHs and, more specifically, need projections for LTCHs is still evolving. The criteria that must be addressed by the applicant to demonstrate need are set forth in Florida Administrative Code Rule 59C-1.008(2)(e)2.a. through d. The criteria are population demographics and dynamics; availability, utilization and quality of "like services" in the district; medical treatment trends; and market conditions. In addition to or as part of the demonstration of need based upon the rule criteria, the applicant must demonstrate that there is numeric need for at least the number of beds that it is proposing. Kindred and Select-Marion stipulated that there is a numeric need for at least 31 LTCH beds in District 3. The Agency did not join that stipulation, and even though Mr. Gregg testified at the hearing and in his deposition that the Agency “presumes” that there is some level of need for LTCH beds in District 3, the Agency continued to take the position that neither applicant demonstrated need for its proposed LTCH.8 Methodologies Used by Kindred and Select-Marion to Project Numeric Need Kindred and Select-Marion each used a “use rate” methodology and a “length of stay” methodology to project numeric need for their proposed LTCHs. “Use Rate” Methodologies Use rate methodologies are commonly used by health planners to project need for acute care hospital beds and other types of services. However, use rate methodologies do not produce reliable projections of bed need in the LTCH context because the existing LTCHs are not evenly distributed statewide and the utilization rates for the existing LTCHs vary significantly.9 The use rate methodologies used by Kindred and Select-Marion each projected the number of LTCH patient days that will likely be generated for their proposed LTCHs based upon the utilization rates at the existing LTCHs in Florida. Those patient days were then converted into an average daily census (ADC) and, in the case of Select-Marion, a bed need based upon a presumed occupancy rate. The use rate methodology used by Kindred calculated the average utilization rate of the existing Florida LTCHs for both the population as a whole and for the 65+ age cohort. Those use rates were then applied to the respective 2005 populations of the primary and secondary service areas for Kindred’s proposed LTCH. Kindred’s use rate methodology projected an ADC of 79 applying the use rate for the total population and an ADC of 109 applying the use rate for the 65+ age cohort. The ADCs projected for the PSA, which as noted above is a more reasonable geographic scope from which Kindred’s proposed LTCH will likely draw its patients, were 56 applying the use rate for the total population and 80 applying the use rate for the 65+ age cohort. Select-Marion’s use rate methodology calculated separate “statewide” utilization rates for the 0-44, 45-64, 65- 74, 75-84, and 85+ age cohorts. Those rates were then applied to the projected 2008 population of Marion County in the respective age cohorts in order to calculate a projected number of patient days that will be generated by Marion County residents in the third year of operation at Select-Marion’s proposed LTCH. Those patient days were then "grossed up” by an occupancy standard of 80 percent and then "grossed up" by an additional 44.5 percent to account for patients coming to the facility from outside of Marion County. Select-Marion’s use rate methodology projected that Marion County residents would generate an ADC of 55 in 2008, which resulted in a projected need for 123 LTCH beds when the ADC was “grossed up” to account for the 44.5 percent of out-of- county patients and to reflect the 80 percent occupancy standard. The use of age cohort-specific utilization rates is generally more reliable than the use of a utilization rate for the total population or only the 65+ age cohort. Kindred’s failure to use age cohort-specific utilization rates causes the bed need projections based upon its use rate methodology to be unreliable. The age cohort-specific utilization rates used by Select-Marion in this case are unreliable because the LTCHs in Miami-Dade and Pinellas Counties were excluded from the calculations because their utilization rates were, according to Select-Marion’s application, “misleadingly conservative.” The effect of excluding those counties is that the utilization rates applied by Select-Marion were inflated. The 44.5 percent out-of-county rate was purportedly derived from the experience of the other LTCHs operating in Florida, but there is no evidence in the record to corroborate that rate. Moreover, Select-Marion’s own health planning expert testified that the 44.5 percent rate was too high; she testified that a more appropriate out-of-county rate would have been 20 to 25 percent, which is more consistent with the in-migration rate experienced by existing hospitals in Marion County. Based upon the general unreliability of use rate methodologies in the LTCH context and the specific flaws in the use rate methodologies applied by Kindred and Select-Marion, the ADC and bed need projected under those methodologies are not reliable or reasonable. “Length of Stay” Methodologies The length of stay methodologies used by Kindred and Select-Marion each attempted to quantify the need for LTCH beds in their respective service areas by analyzing discharges from the hospitals in those areas. The methodologies each focused on “long-stay patients” discharged from those hospitals with “LTCH- appropriate DRGs” as the potential patient population for the proposed LTCHs. This general approach is reasonable from a health planning perspective. The lists of LTCH-appropriate DRGs used by Kindred and Select-Marion in their respective methodologies were generally consistent. Although Select-Marion’s list included a greater number of DRGs than did Kindred’s, both lists are reasonable. The parties’ respective methodologies each used the geometric mean length of stay (GMLOS) as the starting point for defining long-stay patients, which is reasonable and appropriate.10 The GMLOS is calculated by CMS. It is a statistically-adjusted value for all cases within a DRG that takes into account certain types of cases that could skew an arithmetic average length of stay. Patients who have lengths of stay substantially longer than the GMLOS due to co-morbidities, complex medical conditions, or frailties due to age are typically appropriate LTCH patients, particularly if the patient would otherwise remain in the ICU of a traditional acute care hospital. In such circumstances, an LTCH would likely be the more appropriate setting for the patient from both a financial and patient-care standpoint. Kindred defined long-stay patients as adult patients who were residents of District 3 and whose length of stay was at least 17 days longer than the GMLOS. Select-Marion’s definition of long-stay patients included adult patients whose length of stay was at least 15 days longer than the GMLOS, and was not limited to District 3 residents. Kindred’s definition of long-stay patients produced a more conservative (and more reasonable) estimate of potential LTCH patient days than did Select-Marion’s definition, primarily because Kindred’s definition included only District 3 residents. In this regard, Kindred’s methodology appropriately recognizes and takes into account the fact that patients discharged from District 3 hospitals who are not residents of the district are less likely to stay in the district for long-term acute care. Kindred’s methodology was also more conservative (and more reasonable) in the manner that it calculated the number of potential LTCH patient days generated by the identified long- stay patients. Kindred calculated the potential LTCH patient days starting seven days after the GMLOS, whereas Select-Marion calculated the potential LTCH patient days starting at the GMLOS. In this regard, Kindred’s methodology appropriately recognizes and takes into account the fact that hospitals typically do not consider the transfer of patients to an LTCH until after the GMLOS and that it typically takes several days for the transfer to be coordinated once the patient has been identified as a potential LTCH patient. Both parties’ methodologies assumed a 100 percent capture rate of the potential LTCH patients identified through their respective definitions of long-stay patients with LTCH- appropriate discharges. The assumed 100 percent capture rate is not realistic, particularly when applied to the potential LTCH patients outside of the PSAs defined by the parties in the northernmost and southernmost counties in District 3. The evidence establishes that those patients will likely continue to leave the district for LTCH services, and as a result, a considerably lower capture rate would be expected from those counties. The assumed 100 percent capture rate within the PSAs is more reasonable for Kindred’s methodology than it is for Select-Marion’s methodology because Kindred’s methodology includes only District 3 residents in the pool of potential LTCH patients whereas Select-Marion’s methodology also includes non- District 3 residents. The result of Kindred’s length of stay methodology was an estimate of 14,269 potential LTCH patient days generated by residents of its PSA and 4,762 potential LTCH patient days generated by residents of its secondary service area. Those patient days translated into an ADC of 39 from the PSA and an ADC of 13 from the secondary service area. The result of Select-Marion’s length of stay methodology was an estimate of 51,221 potential LTCH patient days generated by discharges from hospitals within the 40-mile radius around Ocala. Those patient days translated into an ADC of 140 and a bed need of 175 based upon an 80 percent occupancy standard. Kindred’s length of stay methodology is, on balance, more reasonable than Select-Marion’s, and as a result, its projection of need is more reliable than the projection based upon Select-Marion’s methodology. Specifically, the preponderance of the evidence establishes that Select-Marion’s methodology overstates need by including patient days generated by non-residents of District 3 (who would not be as likely to use an LTCH in Marion County, and would certainly not use the facility at the assumed 100 percent capture rate) and by calculating the potential LTCH patient days starting at the GMLOS, rather than the seven days after the GMLOS which reasonably reflects the period of time necessary to identify, assess, and discharge a patient to the LTCH. Ultimate Findings Related to Numeric Need There was no credible evidence that there is a need for more than 91 LTCH beds so as to allow for the approval of both applications. As discussed above, the parties' use rate methodologies and Select-Marion’s length-of-stay methodology, which all projected need for more than 91 LTCH beds, were not reliable. The most reliable projection of need for a proposed LTCH in Marion County is the ADC of 39 projected by Kindred’s length of stay methodology for its PSA.11 The assumptions underlying that methodology are more reasonable than the assumptions underlying the length-of-stay methodology used by Select-Marion, and Kindred’s PSA, which is essentially the same as Select-Marion’s proposed 40-mile service area, is the most reasonable projection of the area from which an LTCH in Ocala could expect to draw virtually all of its patients. See Part of D(3) above. An 80 percent occupancy standard is reasonable and appropriate because it is conservative figure and better reflects the lower bed turn-over by LTCH patients than does the 75 percent occupancy standard typically applied to traditional, “short-term” acute care hospitals. Applying the 80 percent occupancy standard to an ADC of 39 results in a numeric need for 49 LTCH beds in the service area from which an LTCH in Ocala could reasonably be expected to draw its patients. Ultimate Findings Related to Need Based Upon the Criteria in Florida Administrative Code Rule 59C-1.008(2)(e)2. The population demographics and dynamics of Marion County and the PSAs support the establishment of an LTCH in Ocala. The 65+ age cohort, which is the group that most highly utilizes LTCH services, represents approximately 25 percent of Marion County’s population and approximately 23 percent of the population of the parties' proposed PSAs. That age cohort is projected to grow at a higher rate than the overall population of the county and the PSAs over the planning horizons of the proposed LTCHs. There are no LTCHs in District 3, and there are no LTCHs reasonably accessible to the residents of Marion County. The closest LTCH is more than 50 miles away in Green Cove Springs, and the occupancy/utilization rate at that facility is higher than 80 percent. The absence of an LTCH in District 3 does not mean that there are no “like services” available at the existing hospitals in District 3 and, potentially, at some of the traditional post-acute care facilities in the district. The availability of an LTCH in District 3 would, however, provide an alternative and, in some cases, more appropriate and cost- effective setting for those services to be provided. There is a general trend towards the increased utilization of LTCHs due to higher reimbursement rates available under the relatively new LTCH PPS, but the evidence failed to establish that the trend will, in fact, impact the delivery of health care services in Marion County or District 3. Instead, the evidence establishes that the utilization of a LTCH in Ocala will depend in large part on how well the local physicians are “educated” about the availability of LTCH services and whether the physicians have positive experiences with their patients at the facility. Market conditions in Marion County support the establishment of an LTCH. The favorable market conditions include the size and projected growth of the 65+ age cohort and the letters of support provided by the two largest hospitals in Marion County as well as several of the hospitals in the surrounding counties. The letters demonstrate a general level of support in the community for the establishment of an LTCH in Marion County, even though they do not specifically quantify the number of LTCH patients that would be generated from those hospitals. Given the stage in the process at which the letters were obtained, the level of specificity in the letters is reasonable, at least for purposes of demonstrating market support for the proposed LTCHs. These factors, on balance, demonstrate the need for an LTCH in District 3 and Marion County, and they also support the projection of numeric need set forth above. Comparative Analysis of the CON Applications Based Upon the Criteria in Section 408.035, Florida Statutes (2003)12 Assuming the Agency accepts the foregoing findings that there is a demonstrated need for only 49 LTCH beds, it is not necessary to comparatively evaluate Kindred’s application against Select-Marion’s application, which proposes a 60-bed LTCH; it is only necessary to evaluate Kindred’s application against the applicable statutory criteria. However, in an abundance of caution, a comparative evaluation of the applications is set forth below in the event that the Agency (or an appellate court) determines that the evidence demonstrates a need for more than 60, but less than 91 LTCH beds. Criteria Upon Which All of the Parties Agree The parties stipulated that Kindred’s and Select- Marion’s applications each satisfied the criteria in Subsections 408.035(3), (5), (6), (10), and (12), Florida Statutes, or that the criteria in those subsections are not applicable. See Joint Pre-hearing Statement, at 7. Notably, the parties stipulated that both Kindred and Select have a history of providing high quality of care to their patients. The evidence fails to establish that either of the proposed LTCHs would provide a materially higher quality of care to its patients than would the other facility.13 Criteria That Are in Dispute Section 408.035(1), Florida Statutes (Need in Relation to District Health Plan) There are no preferences related to the development of LTCHs in the District 3 health plan; the plan does not even address LTCH services. Accordingly, this criterion is not implicated in this case. Section 408.035(2), Florida Statutes (Availability, Quality of Care, etc. of Existing Services) There are no existing LTCHs in District 3. As a result, either of the proposed LTCHs will enhance the availability and accessibility of LTCH services in the district to some degree. That impact will be most significant in Marion County and the adjacent counties because the evidence establishes that residents of the northernmost and southernmost counties in District 3, which are closer to the existing LTCHs in the adjacent districts, already have access to LTCH services. Kindred’s proposed HIH LTCH will primarily serve its host hospital, Munroe. The most persuasive evidence on this issue was that Kindred's LTCH will likely receive 80 to 90 percent of its admissions from Munroe and Ocala Regional, which is across the street from Munroe. That will leave only 10 to 20 percent of its admissions coming from the remainder of District 3, which equates to 3 to 6 of the facility’s beds being available to serve residents of District 3 outside of Marion County. Because Select-Marion’s proposed LTCH is nearly twice the size of Kindred’s proposed LTCH, it would have more beds available to serve residents of District 3 outside of Marion County. However, because it is unreasonable to expect that there will be significant in-migration to Marion County for LTCH services, the evidence does not support the inference that Select-Marion’s larger facility will, in fact, better enhance access to LTCH services for residents of District 3 than will Kindred’s facility. Accordingly, each application satisfies the criterion in Section 408.035(2), Florida Statutes, and that criterion does not materially weigh in favor of the approval of one application over the other. Section 408.035(4), Florida Statutes (Special Health Care Services) The phrase “special health care services” in Section 408.035(4), Florida Statutes, is not defined in statute or Agency rule. Kindred and Select-Marion contend that LTCH services are “special health care services”; the Agency contends that they are not. See Joint Pre-hearing Statement, at 10. The health care services that will be provided in the proposed LTCHs are services that are currently being provided in District 3, either at a traditional acute care hospital (with respect to acute-level care) or at a post-acute care facility (with respect to rehabilitative care). The approval of the CON applications at issue in this proceeding would simply provide an alternative, and potentially more cost-effective setting in which those services could be provided. Accordingly, LTCH services are not “special health care services” for purposes of Section 408.035(4), Florida Statutes, and the criterion in that subsection is not implicated in this case. Section 408.035(7), Florida Statutes (Enhancing Access) The approval of an LTCH in Ocala will enhance access to LTCH services in Marion County and the immediate surrounding areas; however, access to such services will not be significantly enhanced for residents of District 3 who are closer to and currently have reasonable access to LTCH services in an adjacent district. Moreover, as discussed above in relation to Section 408.035(2), Florida Statutes, there is no credible evidence that access would be improved to a greater extent by the approval of Select-Marion’s proposed LTCH over Kindred’s, or vice versa. Accordingly, each application satisfies the criterion in Section 408.035(7), Florida Statutes, and that criterion does not materially weigh in favor of the approval of one application over the other. Section 408.035(8), Florida Statutes (Financial Feasibility) Issues Upon Which All of the Parties Agree The parties stipulated that both of the proposed LTCHs are financially feasible in the short-term. The parties also stipulated that Select-Marion’s proposed LTCH, which is projected to generate a net profit of approximately $939,000 in its second year of operation is financially feasible in the long-term. Disputed Issues Related to the Long-term Financial Feasibility of Kindred's Proposed LTCH The Agency concluded in the SAAR that Kindred’s proposed LTCH is financially feasible in the long-term, and that position was reaffirmed through Mr. Gregg’s testimony at the hearing. However, Select-Marion disputes the long-term financial feasibility of Kindred’s proposed LTCH. The general rule for assessing the long-term financial feasibility of a CON project is if the project will at least break even by the end of the second year of operation, then the project is financially feasible in the long-term; if, however, the project continues to show a loss in the second year of operations and it is not demonstrated that the project will reach a break-even point within a reasonable period of time, then the project is not financially feasible in the long-term. Schedule 8A in Kindred’s application projects a net profit from operations of $263,134 for Kindred’s proposed LTCH in its second year of the operation. Omission of Public Medical Assistance Trust Fund Assessment Kindred concedes that the net profit from operations is overstated by $117,734 because Schedule 8A did not include a deduction for the Public Medical Assistance Trust Fund assessment in that amount. That assessment is imposed on all hospitals at a rate of 1.5 percent of the facility’s gross revenues. Understatement of Property Taxes The preponderance of the evidence establishes that the net profit from operations is overstated by an additional $92,918 because the taxes shown on Schedule 8A are understated by that amount. The $92,918 represents the difference between the amount of taxes shown on Schedule 8A and the total estimated property taxes on the proposed facility, which according to John Grant, the Kindred witness responsible for calculating the taxes for Schedule 8A, were based upon the average property taxes paid on Kindred’s other Florida LTCHs. There is no competent evidence, such as expert testimony from a property appraiser, to support Kindred’s position that the $32,136 of taxes shown on Schedule 8A is a reasonable estimate of the taxes for its proposed LTCH.14 Alleged Understatements in the Nursing Costs Projected for the Second Year of Operation Select-Marion also contends that Kindred’s net profit from operations is overstated by an additional $191,856, as a result of various understatements in the nursing costs on Schedule 8A, which are based upon the staffing projections on Schedule 6 of Kindred’s application. Specifically, Select- Marion contends that the nursing costs are understated because of an alleged error in the calculation of the nursing salary expense for the second year of the facility’s operation based upon the number of nursing full-time equivalents (FTEs) identified for that period; because of the additional nursing staff (and related costs) that would be necessary to achieve the nursing-hours-per-patient-day figure and the licensed-to- unlicensed-nurse ratio that were referenced in the text of Kindred’s CON application; and because a benefit rate of 17 percent was used instead of 20 percent. Number of FTEs Used in Projecting Staffing Costs Kindred’s CON application does not include staffing projections on Schedule 6 for the second year of operation; however, Mr. Grant, the Kindred employee who developed the assumptions underlying the financial schedules in Kindred’s application testified in his deposition that at the end of the second year of operation, Kindred’s facility would have 41.7 nursing FTEs and 11.8 ancillary FTEs. Those projections were not disputed, and are reasonable. Mr. Grant and other Kindred witnesses testified that the staffing projections shown on Schedule 6 were the number of FTEs at the end of the year, rather than the average number of FTEs during the year. Those witnesses further testified that the nursing costs shown on Schedule 8A are based upon the average number of FTEs during the year, not the year-end FTEs. That testimony is found to be credible. The opinion of Select-Marion’s expert financial witness, Patricia Greenberg, that there is an error in the calculation of the nursing costs shown on Schedule 8A was based upon the incorrect assumption that the nursing costs on Schedule 8A and the staffing projections on Schedule 6 were both based upon the year-end figures. Accordingly, Ms. Greenberg’s opinion on that issue is rejected. Nursing-Hours-Per-Patient-Day Kindred’s application states that Kindred Healthcare's LTCHs currently provide an “average [of] 10.5 nursing hours per patient day.” The financial projections in Kindred’s application used the 10.5-hour figure for the proposed Ocala LTCHs' first year of operation only. The figure used for the second year of operation was approximately 9.6 nursing hours per patient day. Kindred’s application did not represent that 10.5 hours of nursing care per day would actually be provided at the proposed Ocala LTCH. There are no regulations that require that amount (or any amount) of nursing care per day at LTCHs. Kindred’s application refers to the 10.5 hours as an “average.” Kindred’s medical director testified in his deposition that 10.5 hours is “a little on the high side” based upon his experience and another Kindred witness testified that the nursing hours would only be “around that number.” Select- Marion did not offer any credible evidence to the contrary. Accordingly, the net profit from operations for Kindred’s proposed LTCH is not overstated in any amount because of the failure to project nursing costs for the second year of operation based upon the 10.5 hours of nursing care per day, and Ms. Greenberg’s opinion on that issue is rejected. Licensed-to-Unlicensed-Nurse Ratio Kindred’s application states that the ratio of licensed to unlicensed nursing personnel in Kindred Healthcare's LTCHs “averages 3.5 to 1.” The ratio actually used in the financial projections for Kindred’s proposed Ocala LTCH was approximately 2.46-to-one, which can be calculated by dividing the 23.2 FTEs shown on Schedule 6 for “R.N.’s” and “L.P.N.’s” by the 9.4 FTEs shown on that schedule for “Nurses Aides.” Kindred’s application did not represent that the 3.5- to-one ratio would actually be provided at the proposed Ocala LTCH. There are no regulations that require that ratio (or any ratio) of licensed-to-unlicensed nursing personnel at LTCHs. Accordingly, the net profit for Kindred’s proposed facility is not overstated in any amount because of the failure to project nursing costs for the second year of operation based upon the 3.5-to-one ratio, and Ms. Greenberg’s opinion on that issue is rejected. Benefit Rate The preponderance of the evidence establishes that Kindred’s benefit rate is 17 percent (not 20 percent), and that the 17 percent rate was used for the salary projections included in Kindred’s application.15 Accordingly, the net profit from operations projected for Kindred’s proposed LTCH is not understated in any amount based upon its use of a 17 percent benefit rate, and Ms. Greenberg’s opinion on that issue is rejected. Summary In sum, the evidence establishes the net profit from operations of Kindred’s proposed LTCH in the second year of operation is overstated by a total of $210,652. Even after that amount is deducted from the net profit from operations shown on Schedule 8A, Kindred’s facility will still have a net profit from operations in the amount of $52,482. Therefore, Kindred’s proposed LTCH is financially feasible in the long-term. Kindred and Select-Marion are both for-profit entities whose parent corporations are headquartered in other states, and there is no credible evidence that the local community would directly benefit from the profitability of either facility. As a result, the fact that Select-Marion’s proposed facility is projected to be “more financially feasible" in the long-term than Kindred’s proposed facility is immaterial to the outcome of this case. Moreover, on the latter point, the net profit projected for Select-Marion’s facility is likely overstated to some degree because it is based on the patient revenues generated by a 60-bed LTCH operating at an average utilization rate of 68 percent in the second year of operation, which translates into an ADC of approximately 41. That ADC is higher than the ADC projected through the need methodology that was found to be the most reasonable and reliable. See Part G(3) above. Section 408.035(9), Florida Statutes (Fostering Competition that Promotes Cost-effectiveness) Competition for LTCH services in District 3 will not be fostered by the approval of only one of the applications, and need has not been established for two LTCHs. The approved applicant would be the sole provider of such services in District 3, and there would likely not be any significant overlap in and competition for the patients served by the LTCH in Ocala and the existing LTCHs in Green Cove Springs, Jacksonville, and Tampa. Accordingly, the criterion in Section 408.035(9), Florida Statutes, does not materially weigh in favor of the approval of either application. Section 408.035(11), Florida Statutes (Medicaid and Indigent Care) Kindred and Select-Marion stipulated that their applications were conditioned on the provision of Medicaid and charity care at levels consistent with the statewide average. However, the Agency took the position in the SAAR and in the Joint Pre-hearing Statement that the conditions offered by each applicant were lower than the statewide average. Kindred conditioned its application on a combined two percent of its total patient days being provided to Medicaid and charity patients. Schedule 7A of Kindred’s application reflects only 0.4 percent of the patient days being Medicaid patients and 0.3 percent of the patient days being charity patients for the first year of operation. In the second year of operation, Schedule 7A reflects 1.6 percent of the patient days being Medicaid patients and 1.2 percent of the patient days being charity patients, for a total of 2.8 percent. Select-Marion conditioned its application on a combined 2.8 percent of its patient days being provided to Medicaid and charity patients. Schedule 7A of Select-Marion’s application projects two percent of its patient days being charity patients and 0.8 percent of the patient days being Medicaid patients in each of the first two years of operation. The SAAR states that the statewide averages for Medicaid and charity patient days are two percent and 1.7 percent, respectively, for a total of 3.7 percent. There is no credible evidence in the record to corroborate those figures. Even if those percentages were assumed to accurately reflect the data reported to the Agency, the evidence establishes that the Medicaid percentage is skewed based upon the pediatric program in Kindred’s St. Petersburg LTCH, which attracts an inordinately high level of Medicaid patients. The St. Petersburg facility is the only LTCH in Florida that has such a program. Neither of the proposed LTCHs at issue in this proceeding will have a pediatric program. As a result, it is not reasonable to compare the skewed statewide average to the Medicaid and charity care commitments proposed by the applicants in this case. If the Medicaid patient days from the St. Petersburg LTCH are removed from the calculation of the statewide average, the “adjusted” statewide average for Medicaid patient days would between 1.2 and 1.5 percent. That range is comparable to the levels projected by the applicants in this case by the second year of operation of their respective LTCHs. Select-Marion projects that it will provide a higher percentage of patient days for Medicaid and charity care in the first year of operation than does Kindred; however, by the second year of operation, the total percentage of patient days for Medicaid and charity care projected for each facility is the same. The Agency recognizes that an LTCH may not meet its Medicaid and charity care conditions in the first year of the facility’s operation because the facility must control its admissions during a portion of that year in order to ensure that its ALOS is long enough to obtain certification from CMS. In sum, Select-Marion and Kindred both satisfy the criterion in Section 408.035(11), Florida Statutes, when their projected Medicaid and charity care commitments are compared to the statewide average that is adjusted to exclude pediatric patient days; and, because the Medicaid and charity care commitments by the Select-Marion and Kindred are materially the same by the second year of the facilities’ operation, this criterion does not favor either applicant over the other. Ultimate Findings Based upon Comparative Analysis On balance, Kindred’s application satisfies the applicable criteria in Section 408.035, Florida Statutes. On balance, Select-Marion’s application satisfies the applicable criteria in Section 408.035, Florida Statutes. Neither application is materially superior to the other in relation to the statutory criteria. Faced with two comparatively equal applications, it is not unreasonable for the Agency to view the more conservative application more favorably. In this case, the more conservative application is Kindred’s because it is proposing to establish only 31 beds in existing, unused hospital space with a cost of only $1.4 million (or $45,300 per bed), as compared to Select- Marion’s 60 beds in a newly-constructed facility with a cost of $12.2 million (or $204,100 per bed). The higher costs associated with Select-Marion’s proposed LTCH will be borne primarily by Select, not the facility’s patients or the general public because approximately 75 percent of the facility’s revenues will come from Medicare reimbursements, which are made under a PPS rather than a cost- based system. The same is true for the costs of Kindred’s LTCH; it will just take Kindred Healthcare less time to recoup its investment than it will for Select to recoup its investment. The applicants also bear the primary financial risk if the Medicare reimbursement system for LTCHs becomes less favorable. However, as Mr. Gregg pointed out in his deposition, there is also a risk to the health care system in those circumstances because the approved LTCH would have an incentive to serve patients who might also be equally well-served in an another, less expensive post-acute care setting in order to recoup its capital investment. This consideration weighs in favor of approval of Kindred’s LTCH, which has less of a capital investment to be recouped. Other considerations also weigh in favor of the approval of Kindred’s application over Select-Marion’s application. Specifically, Kindred garnered more community support for its proposed LTCH, including support from the two largest acute care hospitals in Ocala from which most of the admissions to a proposed LTCH in Ocala would come, and Kindred has also already negotiated a transfer agreement with one of the hospitals, making it more likely that Kindred’s LTCH would actually receive the admissions that it has projected. Additionally, Kindred’s LTCH will be operational approximately a year sooner than Select-Marion’s LTCH.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency issue a final order approving Kindred’s application (CON 9648) and denying Select-Marion’s application (CON 9647). DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
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 Select Specialty Hospital-Marion, Inc.'s CON Application 9710, filed with the Agency for Health Care Administration, seeks establishment of a 44-bed Long Term Care Hospital (an "LTCH") in Polk County, AHCA Health Care Planning District 6. The Agency preliminarily denied the application. Select-Marion has challenged the denial and Kindred-Bay Area seeks intervention in the proceeding. The issues in this case are two: whether Kindred-Bay Area has proven it has standing to intervene in the proceeding and whether the application should be approved.
Findings Of Fact The Parties Select-Marion, the applicant, is a wholly-owned subsidiary of Select Medical Corporation. Select Medical Corporation provides long-term acute care services at 99 LTCHs in 26 states through various subsidiaries. In addition, Select Medical Corporation operates 741 outpatient clinics and has more than 400 "contract therapy locations for freestanding rehabilitation hospitals[.]" (Tr. 65.) Select has approximately 21,000 employees. The Agency is the state agency responsible for the administration of the Certificate of Need program in Florida. See § 408.034(1), Fla. Stat. Kindred-Bay Area operates a 73-bed freestanding, long- term care hospital in Tampa, Hillsborough County, Florida, in AHCA District 6, the health services planning district in which Select-Marion hopes to construct and operate the applied-for project. Kindred-Bay Area is owned and operated by Kindred Hospitals, East, LLC, which also owns and operates a number of other long-term hospitals in Florida and other states. LTCH Services The length of stay in an acute care hospital (a "short- term hospital" or a "general hospital") for most patients is three to five days. Some hospital patients, however, are in need of acute care services on a long-term basis. A long-term basis is 25 to 30 days of additional acute care service after the typical three to five day stay in a short-term hospital. Although some of these patients are "custodial" in nature (see paragraph 19, below) and not in need of LTCH services, many of these long-term patients are better served in an LTCH than in a traditional acute care hospital. In the health care continuum, LTCH care constitutes a component dedicated to catastrophically ill and medically complex patients in need of acute care services that exceed by a considerable amount the average length of stay for those patients in a general hospital. Typically medically unstable for the entire time of stay in the general hospital, these patients require extensive nursing care with daily physician oversight usually accompanied by some type of technologically advanced support. Quite commonly, the technological support includes a ventilator. Most often elderly, LTCH patients may be younger if victims of severe trauma. Whatever the age of the patients, for a variety of reasons, once they exceed the short-term length of stay in a general hospital intensive care unit ("ICU"), they rarely receive the health care treatment that is most appropriate for them in health care settings other than an LTCH. LTCH patients are not able to tolerate, for example, the three hours per day of therapy associated with comprehensive medical rehabilitation and so are not appropriate for Comprehensive Medical Rehabilitation ("CMR") units or hospitals. As compared to LTCH patients, moreover, CMR patients usually require significantly less nursing care. They receive on average 4 to 4.5 hours of nursing care per patient day, as compared to the average eight hours of nursing care per patient day required by LTCH patients. The services in an LTCH are distinct from those provided in a skilled nursing facility ("SNF") or a skilled nursing unit ("SNU") in that more nursing hours are dedicated to the patient and physician oversight is provided with more regularity, that is, on a daily basis. Patients in SNFs or SNUs are not likely to receive daily physician visits and observation or, in terms of hours, the intensity in nursing services required by the patient appropriate for LTCH care. The level of care provided in an LTCH is analogous to that provided in an ICU progressive care unit in a short-term acute care hospital. But staff orientation at an ICU in a short-term care hospital is different from LTCH staff orientation. The ICU staff is focused on stabilizing the patient and moving the patient to the next level of care within the continuum of care. With such a focus, it is difficult for the ICU in a general hospital to sustain the level of care for the long-term as required by a patient in need of long-term intensive care. Furthermore, when a patient has "fallen off . . . [the] clinical pathway" (tr. 19) and does not leave the ICU within the short time projected for the standard short-term acute care patient, the patient is viewed as a failure by the ICU staff. Staff perspective that there is little hope for the patient's recovery dampens the motivation necessary to provide consistently the service the patient requires over the long-term if the patient is to recover. Federal Government Recognition of LTCHs The federal government recognizes the distinct place based on the high level of patient acuity occupied by LTCHs in the continuum of care. The Prospective Payment System ("PPS") of the federal government treats LTCH care as a discrete form of care. LTCH care therefore has its own system of diagnostic related groups ("DRGs") and case mix reimbursement that provides Medicare payments at rates different from what PPS provides for other traditional post-acute care providers. Effective October 1, 2002, the Centers for Medicare and Medicaid Services ("CMS") implemented categories of payment designed specifically for LTCHs, the "LTC-DRG." The LTC-DRG is a decisive sign of the recognition by CMS and the federal government of the differences between general hospitals and LTCHs when it comes to patient population, costs of care, resources consumed by the patients and health care delivery. CON Application Process Select-Marion submitted CON Application 9710 in the second CON Application Review Cycle of 2003. The application was reviewed in comparison with CON Application 9709, submitted by SemperCare Hospital of Lakeland, Inc., through which SemperCare-Lakeland sought a 30-bed "hospital in a hospital" at Lakeland Regional Medical Center in Polk County. The Agency evaluated the applications in a State Agency Action Report ("SAAR"). The SAAR recommended denial of both applications. A basis for the denial of Select-Marion's application is summed up as follows: The applicant contends that Polk County LTCH appropriate patients are remaining in acute care hospitals within the county as no appropriate or available alternatives exist with an acceptable distance. The applicant did not demonstrate that Polk County residents are being denied access to existing appropriate post-acute care services including LTCH services. There are two licensed LTCHs with an average occupancy in calendar year 2002 below 75 percent located in adjacent Hillsborough County. Travel distances to existing LTCHs, skilled nursing facilities, comprehensive medical rehabilitation facilities, or any appropriate provider of post-acute care were not demonstrated to be unreasonable. AHCA Ex. 2, p. 34. The SAAR also recommended denial of SemperCare-Lakeland's application. On December 10, 2003, authorized representatives of AHCA adopted the recommendation contained in the SAAR and released it. See id., p. 37. Both Select-Marion and SemperCare-Lakeland timely challenged the denials of their respective applications. The petitions of the two were referred to DOAH and consolidated for purposes of hearing. SemperCare-Lakeland subsequently withdrew its challenge. An order was entered closing the DOAH file on the Sempercare challenge, see DOAH Case No. 04-0460CON, leaving this case to proceed on its own. Issues Aside from the standing issue with regard to Kindred- Bay Area, the issue in this case is approval of Select-Marion's application. This primary issue breaks into related sub-issues reflected in the provision of the SAAR, quoted above. Has Select-Marion demonstrated that there is need for an LTCH in Polk County despite the existence of other LTCHs in the district and given their less-than-optimal occupancy rates? If so, would an LTCH in Polk County enhance access to LTCH service for District 6 residents and specifically for those who reside or are hospitalized in Polk County? Put another way, is there a legally cognizable barrier to access for Polk County patients to LTCH beds available elsewhere in the district that would justify approval of the application? LTCH Need Methodology and AHCA's Concerns The Agency has not adopted a need methodology for LTCH services. Consequently, it does not publish fixed need pools for LTCHs. In response to a rise in LTCH applications over the last several years, the Agency has consistently voiced concerns about identification of the patients that appropriately comprise the LTCH patient population. Because of a lack of specific data from applicants with regard to the composition of LTCH patient population, the Agency is not convinced that there is not an overlap between the LTCH patient population and the population of patients served in other healthcare settings. In the absence of data identifying the LTCH patient population, AHCA has reached the conclusion "that there are other options available to those patients [the population targeted by the LTCH applicant], depending on . . . things such as physician preference." (Tr. 175.) Another expression of the Agency's view is that LTCH applicants have taken an "overly-broad" (id.) approach to determining the LTCH patient population with an emphasis on long lengths of stay in general hospitals. The Agency accepts that the candidate population for placement in a long-term care hospital includes at least some of those patients with extended lengths of stay in an acute care setting. But "in the absence of better data that evaluated severity of illness, as well," AHCA fears that the approval of an LTCH application "has a tendency to allow less severely ill people to drift into these otherwise very expensive facilities [that is, LTCHs]." (Tr. 175-176.) A better approach in AHCA's view would be to focus on severity of illness because some long stay patients in general hospitals whose stays are more custodial in nature are not appropriate candidates for LTCH services. These long stay "custodial" patients are neither catastrophically ill nor medically complex. For them, rather than the more specialized and highly technological-based services accompanied by intensive nursing care required by the LTCH patient, fewer services of less complexity suffice. When there is an oversupply of LTCH beds, moreover, they tend to attract less severely ill patients than those who are appropriate for LTCH services. The Agency draws support for its concerns from a report to the Congress in June 2004 by MedPAC.1 MedPAC's concern about LTCHs stems from the cost associated with LTCH services: a cost that is higher than other skilled nursing facilities or inpatient rehabilitation facilities. Just as the Agency has concluded, MedPAC expects LTCHs with an oversupply of LTCH beds to attract patients who are not severely ill enough to be appropriate for LTCH care. In a setting whose costs are higher than is appropriate for them, more Medicare dollars are expended on these patients than is necessary. The Agency's concerns about LTCH applications in general are compounded in this case by declining occupancies in LTCHs in District 6. "For the calendar year 2002, they were at 74.47%, and for calendar year 2004 they're at 66.65%, according to our [AHCA] records." (Tr. 178.) Existing LTCHs in District 6 There are currently two licensed LTCHs operating in District 6: Kindred Hospital-Central Tampa, and the Intervenor in this case, Kindred-Bay Area. Kindred-Bay Area is approximately 50 to 60 miles, and within an hour's drive of the Winter Haven Area where Select-Marion intends to locate its proposed LTCH; Kindred Hospital-Central Tampa is 5 to 7 miles closer to Winter Haven than is Kindred-Bay Area. Kindred-Central Tampa is a 102-bed LTCH. It is JCAHO accredited. The recent trend in its average occupancy is a declining one. In 2002, the average occupancy rate was 79.4%. In 2003, it fell to 70.6%. In 2004, it fell, yet again, although the decline was less dramatic, to 69.6%. On the average day, Kindred-Central Tampa had 30 to 32 beds available to accommodate additional patients. Kindred-Bay Area is a 73-bed LTCH in Hillsborough County. Also JCAHO accredited, it is licensed as an acute care hospital and is designated as an LTCH by the Medicare program. It offers a variety of long-term care services: respiratory/ventilator services, IV services, neurological services, wound care, dialysis and others. Kindred has a 4-bed ICU, an 8-bed "step down" unit, and 61 med-surg beds. Need Demonstration: the Applicant's Responsibility It is the applicant's responsibility to demonstrate under Florida Administrative Code Rule 59C-1.008(2)(e)2., that there is a need for the services for which approval is sought. The Agency analyzes LTCH applications on a district basis. The approach offered by Select-Marion, however, was a different one from the Agency’s. The approach is outlined in Select-Marion’s application. Extensive testimony about the approach, moreover, was offered at hearing through Select-Marion's expert health planner, Patricia Greenberg. Select-Marion’s Application and Proposal Submitted in the second application cycle for 2003, Select-Marion’s application was assigned CON 9710. Select-Marion estimates its total project costs to be approximately $11,244,000. It has not yet acquired the site for its proposed LTCH but anticipates that the facility will be located near or in Winter Haven in the central eastern region of Polk County. Select-Marion, however, has not conditioned its application on the location of the facility in the Winter Haven area. It has only offered to condition the application on the location of the facility in Polk County. If located in the Winter Haven area, the proposed LTCH will be within 20 miles of the existing acute care providers in the county, a location sufficiently close to the major referral sources for the facility. Uncontested Statutory and Rule Criteria By stipulation of the parties it has been agreed that Select-Marion's application meets most of the statutory and rule criteria applicable to CONs or that those criteria are not applicable. The primary exception to the parties' agreement is need. As testified at hearing by the Agency's sole witness, the applicant's alleged failure to demonstrate need is the sole reason the application was denied. (See Tr. 169.) Ms. Greenberg's Testimony Patricia Greenberg is the President of National Health Care Associates, "a health care consulting firm that specializes in health care planning, health care finance and health care operations." (Tr. 100.) She has extensive experience as a consultant on health care projects "including Certificate of Need work." (Tr. 101.) Since the Agency does not have an LTCH need methodology in rule nor an Agency policy on LTCH need methodology in place, Select-Marion is responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics: Population, demographics and dynamics; Availability, utilization and quality of like services in the district, sub-district or both; Medical treatment trends; and, Market conditions. See the testimony of Ms. Greenberg at tr. 115 and Florida Administrative Code Rule 59C-1.008(2)(e). Select-Marion addressed each of these topics in its application. On the basis of the each of the above-quoted topics and using several numeric need methodologies that follow general health planning principles, generally accepted by AHCA in other contested LTCH CON cases, as testified by Ms. Greenberg, there is a need for at least 44 LTCH beds in Polk County. Ms. Greenberg's analysis does not overlook the beds that are available elsewhere in the district, that is, in Hillsborough County where Kindred-Central Tampa and Kindred-Bay Area are located. But in her words, "[t]he facilities in the neighboring county [Hillsborough] are not accessible to this [the Polk County] population." (Tr. 135.) Ms. Greenberg elaborated on this point later in her testimony when discussing the extent of impact to Kindred-Bay Area that might occur should the application be granted, "Kindred-Bay Area may have beds, but they're not accessible to that population, or they would be using them." (Tr. 150.) The gist of the testimony with regard to accessibility was reiterated by Ms. Greenberg when asked directly whether the Kindred facilities in Tampa are "reasonable alternatives to the patients in Polk County": No, they are not reasonable alternatives at all. [The two Kindred facilities] have beds that are available. The physicians that support the need for the project, in the depositions I have reviewed[2], say they're not an alternative, they're not sending patients to them, they only get a few patients going [to the Kindred facilities] because of the family hardship, continuity of care, . . . . They're not an alternative at all for that patient population. (Tr. 162, 163.) In contrast to the approach of Select-Marion to need on a "Polk County" basis, as explained by Ms. Greenberg in her testimony, AHCA, however, does not approach LTCH need on a sub- district basis. The Agency approaches LTCH need on a district basis. Polk County is but one county in the multi-county health planning district in which it is located: District 6. District 6 At the time of filing of the application, the population in District 6 was over 1,955,700. The population included 323,869 in the age cohort of 65 and over, the age cohort eligible for Medicare services, and the cohort that contains patients primarily served by LTCHs. The population of Polk County at the time of the filing of the application was 507,839, including 94,950 in the age cohort, 65 and over. Approximately one-third of the District’s Medicare eligible population lives in Polk County. Polk County is one of five counties that comprise AHCA Health Care Planning District 6. (The other four are Hillsborough, Manatee, Hardee, and Highlands Counties.) The two LTCHs that presently exist in the District are Kindred-Central Tampa and Kindred-Bay Area. Evidence was presented as to Kindred-Bay Area's Patient Recruitment and Admissions Practices, the sources of its admissions, market conditions and impacts to Kindred-Bay Area's census and the adverse impact to Kindred-Bay Area. Kindred-Bay Area’s Patient Recruitment and Admissions Practices Kindred-Bay Area has “clinical liaisons” who serve to educate health care providers as to the availability of Kindred’s services to build relationships with potential referral sources, and to gather information for the evaluation of potential LTCH patients from other health care facilities. The majority of Kindred’s referrals and admissions come from short-term acute care hospitals, primarily intensive care units within such hospitals but also the med-surg units. The clinical liaison’s job includes conducting “in- service training” to educate hospital staff as well as physicians and other health care professionals of the services and treatments Kindred offers, and the types of patients for whom Kindred may be an appropriate placement option. Kindred- Bay Area’s clinical liaison for Polk County, Mindy Wright, has been performing in-service training in Winter Haven for ten years, typically once a year but more frequently if turnover demands. She attempts a visit to the Winter Haven area at least every two weeks and frequently for periods of every week. The clinical liaison also gathers information concerning potential referrals to Kindred from acute care hospitals in the Winter Haven area. The clinical liaison transmits this information to the hospital and the information is evaluated by a team consisting of the hospital’s CEO, CFO, internal case manager, and a nurse or physician to make a decision on admission. There is an incentive for LTCHs to admit patients who meet medical criteria for admission. Reimbursement from Medicaid and Medicare programs may be denied if a patient has not met appropriate admission criteria. Reimbursement, moreover, may be reduced if the patient initially met appropriate criteria but then turns out to have a relatively short length of stay in the LTCH. Some patients are denied admission to Kindred-Bay Area for clinical reasons. For example, the patient may not meet Interqual criteria for admission. Failure to meet clinical admission criteria can occur if the patient has been kept in the short-term acute care hospital too long, possibly even for several months, when the patient should have been referred to Kindred much sooner. The majority of patients referred to Kindred-Bay Area are admitted. Patients are also denied admission to Kindred for financial reasons. On principle, Select does not decry such a practice, acknowledging that it also seeks to assure that some revenue stream is available to assist in providing the expensive care that comprises LTCH services. Sources of Admissions to Kindred-Bay Area Kindred-Bay Area draws the majority of its patients (60 to 75%) from Hillsborough and Polk Counties and specifically from the cities of Tampa and Lakeland and the Brandon and Winter Haven areas. It has also drawn patients from the Orlando/Orange County area, other areas of Polk County, and from as far south as the Naples Area. In 2003, Kindred-Bay Area underwent renovations. The renovations limited the number of patients it could admit. In 2004, Mindy Wright, the clinical liaison responsible for the Orange County and Polk County areas, was on maternity leave for four months. Her absence significantly reduced Kindred’s presence in Polk County health care facilities. The hospital did not replace Ms. Wright. Although other clinical liaisons provided some coverage in her area, it was not as effective as Ms. Wright had been. The result was not unexpected; when clinical liaisons are not in regular contact with short-term acute care hospitals and other providers, referrals and admissions to the LTCH from such facilities usually drop significantly. In addition to renovations and Ms. Wright's absence, there were several other factors that had an impact on admissions to Kindred-Bay Area in the last few years. First, several hurricanes in 2004 had an impact on Central Florida. They seriously disrupted the delivery of health care services, particularly in Polk County. The disruption resulted in a drop in referrals and admissions to Kindred-Bay Area from Polk County. Second, turnover in staffs at hospitals to which Ms. Wright was assigned, including Winter Haven, had an impact on referrals. If the social worker at the hospital does not know about Kindred and its capabilities, the social worker may not identify patients meeting Kindred’s criteria for admission. The conditions that led to declining admissions to Kindred-Bay Area from Polk County were temporary. So far in 2005, the downward trend in admissions between 2002 and 2004 has been reversed. Admissions through the first four months of 2005 at Kindred-Bay Area have been 20% higher for the same period in 2004, higher than the same period in 2003 and nearly at the same level for the period in 2002. Admissions from Orange County, on the other hand, have dropped and are not likely to rebound. Orange County admissions went from 50 in 2002 to 28 in 2003 and only 10 in 2004. An LTCH operated by SemperCare, subsequently acquired by Select Medical Corporation, opened in Orange County in June 2003 (at a location about an hour’s drive from Winter Haven). The drop in Orange County admissions is likely to be exacerbated by the opening of another CON-approved Select facility in Orange County, a 40-bed, freestanding facility. LTCH Market Conditions and Impact on Census Kindred-Bay Area's census has declined in recent years, from an average daily census of 52 patients (72% occupancy) in 2002 to 48 patients (66%) in 2003 to 46 patients (63%) in 2004. On the average day in 2004, Kindred-Bay Area had beds available to accommodate another 27 patients. At the time of final hearing, Kindred-Bay Area's occupancy level was at 60% or about 44 beds. Optimal occupancy for Kindred-Bay Area would be 69 to 70 patients or about 95% occupancy. The existence of a decline in occupancy rates for District 6 LTCHs is supported by AHCA data which shows a decline from about 74.5% in 2002 to 66.7% in 2004. It is also reasonable to assume that some patients from eastern Polk County will follow historic trends and flow to the existing LTCH and approved LTCH in Orange County. The combination of declining occupancy in District 6 LTCHs and possible outmigration of eastern Polk County residents to Orange County for LTCH services diminish Select-Marion's claim that an LTCH is needed in Polk County. Other changes in the LTCH market are also likely to impact Kindred-Bay Area in terms of referrals and admissions from other areas. Select has won a recommendation for approval for an LTCH in Lee County in a formal administrative proceeding. At the time of filing of proposed recommended orders in this proceeding the recommended order in the Lee County proceeding was pending. Kindred-Bay Area maintains a clinical liaison in Lee County to seek referrals in much the same manner as conducted by Ms. Wright. If a Select facility opens in Ft. Myers, it will have an impact on the referrals that Kindred-Bay Area receives from Ft. Myers and surrounding areas. In addition, HealthSouth has received CON approval for an LTCH in Sarasota expected to open in August 2005. Kindred- Bay Area does not directly market to the Sarasota area. Another Kindred Hospital, Kindred-St. Petersburg markets in that area. It is reasonable to assume that the areas south of Sarasota toward Ft. Myers will begin to refer patients to the closer HealthSouth-Sarasota facility rather than continuing referrals to Kindred-Bay Area. Further, as HealthSouth-Sarasota seeks to establish its present in the market, it will likely engage in some marketing in the Tampa Bay area, in areas currently served by Kindred-Bay Area. Kindred-Bay Area's sister hospital, Kindred-Central Tampa, no longer a party to this proceeding, does not contend that the opening of a Select facility would result in the loss of patients to Kindred-Central Tampa. Kindred-Central Tampa, however, is available to accept referrals from Polk County health care providers, either directly or at the request of Kindred-Bay Area. Kindred-Bay Area, like Kindred-Central Tampa, has an open medical staff and any physician can apply for admitting or consulting privileges and would be granted them if they met qualifications. Further, declining occupancy levels at Kindred-Central Tampa, a 102-bed facility, demonstrates that there is available capacity at Kindred-Central Tampa to absorb patients from Polk County, just as there is capacity at Kindred- Bay Area to absorb additional patients from Polk County who are in need of LTCH services. Adverse Impact on Kindred For the periods of calendar years 2002 and 2003 and the first half of 2004, the gross revenue impact on Kindred-Bay Area attributable to the number of patients from Polk County that Kindred-Bay Area would have lost to Select-Marion's proposed facility ranged from $1.75 million to $4.7 million. In terms of net revenue and after-tax margin, however, the losses would be substantially smaller. For the 32 patients from Polk County admitted to Kindred-Bay Area in 2004, the total after-tax margin impact would be only $240,000. Furthermore, Kindred-Bay Area is not likely to lose all of its Polk County patients if the proposed project is located in the Winter Haven area since Lakeland area patients, located closer to Tampa than Winter Haven, might still choose LTCH services at Kindred-Bay Area over the proposed Select facility. As found earlier in this order, however, Select-Marion has not conditioned its CON on locating the proposed facility in Winter Haven. A Winter Haven facility, moreover, with a primary service area with a 20-mile radius would capture Lakeland in its primary service area. On balance, the impact of the proposed facility located in Polk County on Kindred is not substantial enough to confer standing on Kindred-Bay Area. The SAAR Following its review of Select's application, AHCA issued its State Agency Action Report (the "SAAR") recommending that CON 9710 be denied. Following the signature of officials at the Agency indicating approval of the recommendation, the SAAR became the preliminary action of the Agency subject to challenge under Chapter 120, Florida Statutes. At trial, the Agency, through its witness, Jeffrey Gregg, Chief of the Agency's Bureau of Health Facility Regulation, testified that the only reason the application was denied is the Select-Marion's failure in AHCA's view to demonstrate need for the facility. Select-Marion's expert health care planner testified that there is need in Polk County for the facility. The need is based on need methodologies that are both reasonable and appropriate from a health planning perspective and that are consistent with methodologies approved by final orders of the Agency. As discussed, above, however, there is a critical difference in the application of the need methodologies in this case from other cases. In this case the need methodologies developed by Select-Marion applied only to Polk County and not to the district as a whole. The Agency determines need on a district-wide basis. Select-Marion maintains that there are barriers to Polk County patients' access to existing LTCH facilities. The barriers are described as geographical based on physician referral patterns and family participation in rehabilitation. Patient and Physician Preference and Practice Select-Marion largely bases its case for need on allegations of the preferences of patients, family members and their physicians. As to family members, it is not to be doubted that family members wish to avoid the burdens of travel. To the extent, however, that family members value specialized care, they are more likely to have the patient travel the distance necessary to receive it. Indeed, some Polk County families of LTCH patients are willing to travel the distance necessary to visit family members who are patients outside Polk County. With regard to referring physicians, the majority of referring physicians choose not to serve as the attending physician for their patients once referred to an LTCH, even when the LTCH is located in the same city as the referring physician. Typically, a referring physician relies upon another doctor or a practice group to attend to his or her patient in the LTCH setting.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration deny CON 9710 filed by Select Specialty-Marion, Inc. DONE AND ENTERED this 31st day of October, 2005, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 2005.
The Issue The 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 Parties St. Joseph's is a tertiary care hospital located at 3001 West Buffalo Avenue, Tampa, Hillsborough County, Florida. There is spatial capacity for 703 beds at St. Joseph's, but only 649 beds are licensed, staffed and in use. It is sponsored by the Franciscan Sisters of Allegheny, and is a subsidiary of a holding company, St. Joseph's Health Care Center, Inc. Without CON approval, St. Joseph's cannot increase licensed bed capacity at its current facility on West Buffalo Avenue, or open the satellite facility which is here at issue. St. Joseph's current service area includes Hillsborough County, particularly the central and northern portions of the County. Occupancy rates for St. Joseph's in medical surgical areas have been approximately 80 percent, and at peak times have exceeded 90 percent. However during the last half of 1986, the occupancy rate fell to 74 percent. St. Joseph's provided 16.8 percent of all Medicaid care in Hillsborough County during 1982-83 and 17 percent during 1983-84. It is second to Tampa General in provision of health care to indigents in Hillsborough County. With the exception of Tampa General, St. Joseph's has the largest Medicaid patient admissions of all Hillsborough County hospitals. In 1986, the bad debt/charity care/Medicaid contractual discount for St. Joseph's was approximately $11.3 million. However, while 6.9 percent of all patient days county wide are Medicaid patient days, St. Joseph's has only 5 percent Medicaid patient days. The cost of indigent care is absorbed and offset by paying patients. St. Joseph's decision to seek approval for a satellite in the Carrollwood area is a wise business decision since there is a high percentage of paying patients residing in that area of Hillsborough County. St. Joseph's has a 23 percent market share of all patient days reported in Hillsborough County, the largest market share for all hospital medical- surgical services provided in the County, and also has the largest market share in the proposed service are of the satellite. Its market share of paying patients is much higher than for Medicaid or indigent patients. However, since 1984 St. Joseph's market share has been declining while Tampa General's has been increasing. A relatively high proportion of admissions at St. Joseph's current facility, over 40 percent, are obtained through its emergency room. The proposed satellite will have an emergency room, but it will not offer the same intensity of services as at the current facility on West Buffalo Avenue. The Department is the state agency with the authority and responsibility to consider CON applications. Intervenor Humana of Florida, d/b/a Tampa Women's Hospital (Humana) owns and operates a 192 bed women's hospital in Tampa, Florida, which includes 96 obstetrical beds. Its occupancy rate in 1986 was approximately 50 percent. Intervenor University Community Hospital (University) is an existing hospital with 404 licensed and 320 operating beds located on East Fletcher Avenue, Tampa, Florida, and offers a full range of acute care hospital services. University is located within the service area of the proposed satellite and has been experiencing a decline in patient days from 109,000 in 1983 to 84,000 in 1986. It has had to reduce its number of employees in the last three years by 15 percent-20 percent. University has a 57 percent occupancy rate. Intervenor Tampa General Hospital (Tampa General) operates a publically supported hospital in Tampa, Florida, providing a full range of acute care services, including obstetrical/gynecological services with 707 licensed and 619 operating beds. Tampa General has CON approval for 1000 beds if it completes planned renovations. It has an occupancy rate of 80 percent-82 percent and is treating 70 percent of all Medicaid patients in Hillsborough County. Tampa General has provided $70 million of indigent care, including $40 million in charity, annually. Carrollwood is within its service and marketing area. Intervenor AMI Town and Country Medical Center (Town and Country) is a 201 bed general acute care hospital located at 6001 Webb Road, Tampa, Florida. Its occupancy rate in 1986 was approximately 46 percent. There is no dispute among the parties regarding the standing of Intervenors in this proceeding. The occupancy rates at University, Town and Country and Humana are substantially below optimal levels, and substantial unused capacity exists at each of these hospitals. St. Joseph's proposed satellite will not offer any services that are not currently available to residents of the proposed service area, and will duplicate services at University, Town and Country, and Carrollwood Community Hospital, as well as services provided at St. Joseph's existing facility. The Application and Project On or about October 15, 1985 St. Joseph's filed with the Department an application for CON 4288. This application sought approval for a 150 bed general acute care satellite hospital in Carrollwood, Hillsborough County, Florida, and proposed the transfer of 150 existing licensed beds from St. Joseph's facility on West Buffalo Avenue, Tampa, to the satellite. The estimated total cost of this project was $16,775,000. Specifically, St. Joseph's proposed the transfer of 96 medical/surgical beds, including ICU, CCU and progressive care beds, 15 obstetrical beds and 39 pediatric beds, including PICU. The Department provided St. Joseph's with an omissions letter on or about November 14, 1985, to which St. Joseph's responded on or about December 30, 1985. By letter dated February 28, 1986, the Department preliminarily denied St. Joseph's application for CON 4288 stating, "The project is not justified by the 1985 District VI Health Plan or the 1985-87 Florida State Health Plan." The Department's decision to deny this application was published in Volume 12, Number 11, Florida Administrative Weekly, on March 14, 1986, and St. Joseph's filed its petition for formal administrative hearing on April 4, 1986. On or about February 18, 1987 St. Joseph's and the Department executed a Stipulation and Settlement Agreement which, in pertinent part, provides: DHRS finds and agrees that there is a need for St. Joseph's to relocate and transfer 100 acute-care beds (but not any licensed obstetrical beds) and acute-care services (but not any obstetrical services) from its existing acute-care hospital and construct a 100 bed acute-care satellite hospital in Hillsborough County in light of a balance review of all relevant criteria established by Section 381.494 Florida Statutes, including the levels of indigent and Medicaid care agreed to herein. The project will occur entirely within Hillsborough County and not result in any increase in licensed beds for St. Joseph's. DHRS agrees that a partial approval of the St. Joseph's CON Application will satisfy this need and that said application should be partially approved as hereinbelow further specified ... The agreements and commitments made by DHRS in paragraph 1 above are predicated on commitments made by St. Joseph's concerning its intention to provide certain percentages of Medicaid and indigent care in its proposed satellite hospital and to seek only partial approval of its application as specified herein... St. Joseph's commitments, which are relied upon by DHRS and which shall be set forth as conditions in said CON, are as follows: Not less than 3.5 percent of the total number of admissions at St. Joseph's satellite hospital shall be rendered to Medicaid patients. Not less than 3.0 percent of said total admissions shall be rendered to non-Medicaid "charity/uncompensated" patients whose family income as applicable for the twelve months prior to determination of eligibility is equal to or less than 150 percent of the then current Federal Poverty Guidelines. St. Joseph's shall obtain and retain sufficient information to verify this eligibility determination. The 3.0 percent "charity/uncompensated" patients shall be acknowledged as such at admission, shall not include patients receiving third party payments and shall be in addition to St. Joseph's "bad debt" patients... DHRS specifically recognizes the lengthy history and mission of St. Joseph's in providing extensive indigent care services in Hillsborough County. St. Joseph's agrees to undertake a diligent and good faith effort to encourage physicians on its medical staff to admit and treat Medicaid and charity/uncompensated care patients in such numbers as to comply with the minimum percentages established in paragraph (a)above ... (e) St. Joseph's agrees that it will request at hearing and henceforth seek only partial approval of its proposed CON Application, as follows: The satellite facility shall be reduced in scope from 150 licensed beds to 100 licensed beds. The number of licensed beds to be relocated from the existing St. Joseph's Hospital shall be reduced in scope from 150 licensed beds to 100 licensed beds. None of the licensed beds to be relocated to the satellite hospital shall include licensed obstetrical beds, nor shall the obstetrical services, if any, provided at St. Joseph's existing hospital be relocated to the satellite facility. Labor, delivery and nursery facilities shall be deleted from the satellite hospital. DHRS has consistently maintained the proposed square footage and project cost is inadequate for a 150 bed hospital and more appropriate for a 100 bed hospital. Therefore, the total square footage and total project cost shall remain unchanged... The Stipulation and Settlement Agreement referred to in Finding of Fact 21 was executed following, and in consideration of, additional information prepared and submitted by St. Joseph's to the Department on or about January 30, 1987 and February 9, 1987. At hearing, St. Joseph's and the Department sought partial approval of CON 4288 to conform to the terms of the Stipulation and Settlement Agreement. Intervenors opposed such partial approval. The partial approval sought by St. Joseph's and the Department represents an identifiable portion of St. Joseph's original CON application. Originally, St. Joseph's sought approval to transfer 150 acute care beds, including obstetrical, but at hearing St. Joseph's sought approval for a transfer of only 100 acute care beds, without obstetrical. Labor, delivery and nursery facilities have been deleted from the satellite proposal, but total square footage, physical designs and total cost of the project remain the same for the partial approval sought at hearing compared with the original application. The number of operating rooms has also remained the same. The proposed location in Carrollwood, Hillsborough County, remains unchanged. The project at issue in this case is a 100 bed acute care satellite hospital with, 96,500 total gross square footage (965 gross square feet per bed). The schematic plan submitted by St. Joseph's provides for the following beds and includes, but is not limited to, the following facilities: (72 private rooms, 2 Semi-private); pediatric beds (5 private, 5 semi-private), ICU/CCU (9 beds); space for radiology/nuclear medicine, emergency and outpatient services, laboratory, physical therapy, pharmacy, EEG/EKG, inhalation therapy, surgical suite, sterilization suite, cafeteria, laundry, storage, maintenance, chapel, nurses office, and other miscellaneous facilities. Total project costs are estimated at $16,775,000, the same as for the original 150 bed transfer proposal. The land upon which the satellite will be located was purchased for $3 million in cash. The satellite will be able to operate at a higher occupancy level than St. Joseph's existing hospital due to the larger proportion of single bed rooms and less severe cases being treated at the satellite. After review of St. Joseph's original application for the transfer of 150 acute care beds in March 1986, the Department concluded that the proposed gross square footage per bed of 643 was below the standard range of 800-1000 gross square feet per bed, and also that the total project cost estimate of $111,833 per bed was way below the average standard range of $175,000 to $200,000 per bed. After review of the identifiable portion of St. Joseph's application for which approval was sought at hearing, the Department concluded that the total gross square footage of the satellite, square footage per bed, construction estimates, and the total project cost estimates were reasonable and acceptable. The gross square footage was raised from 643 to 965, and the cost per bed was increased from $111,833 to $167,750. The Service Area The area which St. Joseph's proposes to serve with its satellite hospital is the Carrollwood area of northwest Hillsborough County which is located in the Department's District VI. This is the fastest growing area in Hillsborough County, with an average age which is lower than the rest of the County, and an average income level above the County average. Specifically, almost 35 percent of the population in the satellite's proposed primary service area was between 25 and 44 years old in 1980, compared with approximately 28 percent for the County. In the category of 65 years and older, the primary service area had 8.2 percent of its population, while the County had 11.4 percent. A higher percentage of paying patients reside within the proposed service area than for Hillsborough County as a whole. Nevertheless, 6 percent 7 percent of the service area population have incomes below the federal poverty level, compared with 16 percent for the County as a whole. The area is already served by Medicaid providers. St. Joseph's medical roster indicates over 140 of its physicians have offices in the satellite's proposed service area. However, approximately 100 of these physicians are also on the staffs of Intervenors. The site for the satellite was chosen after review of patient origin data and population growth projections for Hillsborough County. St. Joseph's is currently treating at its facility on West Buffalo avenue an average of 64 patients a day who reside within the proposed service area of the satellite and who are not cardiac, cancer or psychiatric patients. St. Joseph's has an average daily census of 519 patients and proposes to serve 64 of these patients, who reside within the satellite's primary service area, at the satellite. Stipulations The parties have stipulated that St. Joseph's is able to provide quality care at the proposed satellite, and also that St. Joseph's is not proposing or relying upon probable economies and improvements in service that may be derived from the operation of joint, cooperative, or shared health care resources, except to the extent that the project includes a satellite facility. Intervenors contend that health services will be most economically provided by not constructing the satellite facility. Finally, the parties stipulate that Section 381.494(6)(c)11., Florida Statutes, relating to the provision of a substantial portion of services or resources to individuals not residing in the service district in which the entities are located, or adjacent thereto, is not applicable in this case. Non-Rule Policy for Bed Transfers The Department currently has no rule governing the transfer of acute care beds. Rule 10-5.011(1)(m), previously Rule 10-5.11(23), does not apply to acute care transfers since it addresses new or additional beds. However, the Department has begun developing a departmental policy for review of acute care transfer applications which do not request additional beds, and is seeking industry and staff input for the concepts expressed in a draft policy. In its current conceptual form, the transfer policy follows the statutory review criteria as they might apply to transfer applications which do not request new beds. The emerging policy, urges review of acute care transfer applications with emphasis upon the following health care planning criteria: reduction of excess beds, better utilization of existing beds, the encouragement of hospital efficiency, improvement of financial and geographic access, the encouragement of quality care, and the encouragement of competition in the hospital industry. St. Joseph's partial approval request was reviewed for conformity with this emerging policy by Robert Sharpe, the Department's Director of Comprehensive Health Planning (the state's chief health planner), who is charged with development of the bed transfer policy. Bed reduction is a key element for consideration in the Department's emerging policy. However, St. Joseph's 79-80 percent occupancy is greater than the Department's 75 percent hospital occupancy threshold contained in the acute care rule (Rule 10-5.011(1)(m)). Application of a bed reduction formula is not reasonable, according to Sharpe, for a facility which is using its beds to a much greater extent than other facilities in the County. The Department's emerging policy would evaluate whether a proposed transfer of beds to a new site would encourage a better use of the beds than at the existing site. The emerging policy contemplates transfers of acute care beds within a single county or subdistrict in an effort to be responsive to the needs of communities. This concept is consistent with the District VI Local Health Plan's stated desire that planning occur on less than a county basis. The Department's emerging policy evaluates the relative efficiency of the hospital proposing a bed transfer. In evaluating the relative charges made by similar Florida hospitals, the Hospital Cost Containment Board has devised hospital groupings for evaluation purposes. Of the 23 hospitals that are characterized as "group nine" hospitals in Florida, St. Joseph's ranks 16th of those 23 and is below the 50th percentile in gross revenues per adjusted admission. This means that St. Joseph's has lower charges per adjusted admission than most of the other comparable hospitals in Florida. Despite the fact that St. Joseph's is a large tertiary facility, Hospital Cost Containment Board data establishes that St. Joseph's is an efficient hospital facility. Another aspect of the Department's emerging policy is that of improving Medicaid and indigent access for patients. Excluding Tampa General, St. Joseph's has more Medicaid patient admissions than all other hospitals in Hillsborough County. During the past four years, St. Joseph's has consistently provided approximately 17 percent of the Medicaid care to hospital patients in Hillsborough County. The Department considers St. Joseph's to be an indigent care facility in Hillsborough County. The Department also considers geographic access when reviewing transfers. The State Health Plan has an objective that 90 percent of the population in an urban area be within 30 minutes drive time to an acute care facility by 1989. The Local Health Plan has concluded that all of Hillsborough County is currently within a 30 minute drive time. The quality of care provided by a facility proposing a transfer is also considered, and the parties have stipulated that St. Joseph's will provide quality health care services. The Department examines the competitive affects of approval of a transfer of acute care beds. In this case, the charge levels, costs per admission, and current inventory of beds at Hillsborough County acute care hospitals were examined. Since St. Joseph's charges and costs are low relative to other hospitals, and since there is an excess of beds in the County, the Department assumed that there would be competition for existing patients, and further concluded that approval of the satellite facility would promote price and non-price competition among hospitals in Hillsborough County. Considering each of the outlined elements of the Department's emerging policy, the state's chief health planner testified that the emerging policy supports the requested approval of an identifiable portion of the St. Joseph's satellite application. Need And Consistency With State and Local Plans Health planning for CON purposes involves the assessment of need on a community-wide, rather, than an institution specific, basis. Planning on less than a county-wide basis is inappropriate in Hillsborough County. In 1986 there was an excess capacity of 1400 acute care beds in Hillsborough County. District VI is overbedded by nearly 700 beds. The Local Health Council projects that in 1992 there will still be a surplus of nearly 800 beds in the County. Since this application proposes the transfer of beds, it neither increases or decreases this excess capacity. The State Health Plan as well as the Department's non-rule policy recommends eliminating excess bed capacity, but this proposal is not consistent with that recommendation. Existing acute care hospitals in Hillsborough County experienced only percent occupancy in 1986, a drop from 71 percent in 1984. Patient days have declined at an average of 2.6 percent per year since 1983 while the population in Hillsborough County actually increased 11.2 percent during this time. In spite of a significant reduction in hospital utilization and average lengths of stay in the area, the number of licensed hospital beds in Hillsborough County increased from 3,028 in 1981 to 3,457 in 1986, an increase of 14.2 percent or 429 beds. The State Health Plan contains a stated goal of 80 percent occupancy by 1989. The Local Health Plan recognizes 80 percent for medical-surgical and ICU/CCU occupancy for all beds in the County and 90 percent occupancy for each institution. Only Tampa General and St. Joseph's are currently achieving these occupancy level goals. In fact, occupancy rates for the five hospitals within, or adjacent to, the proposed satellite's service area range from 40 percent to percent. Based upon review and consideration of the expert testimony and evidence presented at hearing, it is found that an acceptable hospital optimum occupancy rate would be from 75 percent to 85 percent overall, and 90 percent for medical-surgical beds. Of the 649 beds currently at St. Joseph's, on average there are 149 unoccupied beds on any given day. St. Joseph's proposal does not address the key element of the State Health Plan and the Department's non-rule policy which calls for bed reduction when transfers are considered. This failure is particularly significant in view of the substantial overbedding which currently exists in Hillsborough County and which is projected to exist through 1992. To the contrary, the proposal actually would result in a net increase of 3 coronary care unit beds and 3 pediatric intensive care unit beds. The most important stated purpose of the acute care policies in the 1985 District VI Health Plan is "optimizing utilization of existing resources", and this purpose is implemented through a policy that provides, "Suture changes in the hospital facilities and services systems should occur so as to maintain the fiscal and programmatic integrity of all institutions providing a full range of services... " This proposal is inconsistent with this aspect of the Local Health Plan since it does not reduce the number of excess beds, while at the same time it would transfer 100 beds to a predominantly affluent, young and growing area of the County from which St. Joseph's would realize a substantial number of paying, as opposed to indigent or Medicaid, patients. This could reasonably be expected to increase St. Joseph's already very strong patient payor mix, and increase occupancy rates above 80 percent while other facilities are at or below 50 percent. At the same time, this proposal could actually weaken St. Joseph's financial position since its margin of revenue over expenses was 12.5 percent in 1985 and 10 percent in 1986, and the pro forma for the satellite, although overly optimistic as discussed below, shows only a 4.8 percent margin in the second year of operation. Underutilization of existing facilities is not consistent with sound health care planning because it ultimately results in higher costs to patients. Other facilities currently serving the proposed service area will be more likely to achieve optimum occupancy levels if the satellite is not built, than if it is. Another important purpose of the Local Health Plan is "promoting access for the indigent and underserved population to adequate health care," a purpose also stated in the Department's non-rule policy. The service area of the proposed satellite has a median family income of $30,132 which is 26 percent higher than for Hillsborough County as a whole. Locating a hospital in a predominantly affluent area, does not generally increase access for indigents. In fact, by the terms of its Settlement Agreement, St. Joseph's will actually decrease its commitment to Medicaid patients from the current 5 percent to the proposed 3 percent at the satellite. The percentage of charity care to gross revenues at St. Joseph's in 1986 was .6 percent, and was budgeted at .5 percent for 1987. This is not a significant charity commitment in relation to gross revenues, and the satellite proposal will not improve this commitment. The State Health Plan states as an objective achieving a ratio of less than 4.11 beds per thousand by 1989. This proposal does not promote this objective because it does not represent any net reduction in total number of beds. This proposal is also inconsistent with the State Health Plan which recommends a minimum pediatric size of 20 beds since it will have only 18. Need In Relation to Geographic Accessibility According to the 1985 District VI Health Plan, "The geographic distribution of hospital services in Hillsborough County is such that the entire population is within the 30 minute drive time standard of adequate resources." Ernest J. Peters, who was accepted as an expert in traffic engineering, testified that the entire proposed satellite service area is within 30 minutes of at least one existing hospital. The 30 minute drive time standard is set forth as Objective 2.2 in the 1985-87 State Health Plan. Residents of the proposed service area have geographic accessibility to hospital services within a 30 minute drive time. St. Joseph's does not dispute this fact, but rather Barbara Myres-Fernandez, who was not accepted as an expert in traffic studies, testified that at peak travel times the 30 minute standard was exceeded. However, according to Robert Sharpe, the Department's Director of Comprehensive Health Planning, who was accepted as an expert in health care planning, as well as Ward Koutnik and Ernest J. Peters, who were accepted as experts in traffic engineering, all of the proposed service area is within 30 minutes of existing hospital facilities. Peters testified that if the satellite is built, travel times to the nearest hospital would only be improved by 2.77 minutes for Carrollwood residents in 1990. The weighted average travel time, according to Peters, for the entire proposed service area to the nearest acute care hospital is 13.13 minutes, which will only increase to 13.96 minutes in 1990. The evidence therefore establishes that there would be an insubstantial geographic access gain to Hillsborough County residents if the satellite is approved, and in any event need based upon a lack of geographic accessibility has not been established. Need In Relation to Financial Accessibility According to Myres-Fernandez, it is St. Joseph's contention on the issue of accessibility that approval of the satellite will improve financial accessibility to hospital services for indigent and Medicaid patients. In order to maintain its commitment to indigent, Medicare and charity care, St. Joseph's argues it must continue to attract and maintain its market share of private pay patients, and the Carrollwood area provides a growing source of such patients. However, according to St. Joseph's, 64 of the patients to be treated at the satellite are already being treated at West Buffalo Avenue. These 64 do not include cardiac, cancer or psychiatric patients. Therefore, only 16 "new" patients would be served at the satellite if it were to achieve the goal of 80 percent occupancy. Even with St. Joseph's predicted 90 percent occupancy rate, only 26 "new" patients would be served. No evidence was offered to establish that a higher level of indigents should be expected at the satellite hospital than at St. Joseph's existing facility, particularly since in its Agreement with the Department, St. Joseph's has committed to serve a lower percentage of indigents than is presently true at the main facility on West Buffalo. St. Joseph's current payor mix is very favorable, and no reasons have been shown why it should deteriorate in the foreseeable future. In fact, the mix may actually be improving, according to Hospital Cost Containment Board data. Indigent access to health care is not improved by locating a satellite hospital in a predominantly affluent area in which only 6-7 percent of the population is below the poverty level, as compared to 16 percent for the County as a whole. This proposal represents a wise business decision by St. Joseph's because it is an attempt to increase its number of private pay patients. However, it will not improve indigent access. Financial accessibility is a criteria to be evaluated under Section 381.494(6),(c), Florida Statutes, and the Department's non-rule policy. This proposal does not improve access for indigents and therefore is not consistent with this statutory and policy criterion. Availability and Adequacy of Alternatives There are five existing hospitals within, or adjacent to, the proposed service area with substantial unused capacity, including University and Carrollwood Community Hospital which is a 120 bed facility offering general acute care, emergency room and outpatient services. Carrollwood Community Hospital has an occupancy rate of approximately 50 percent, and thus has excess capacity. While one-third of its patients are osteopathic, two-thirds are allopathic; only one-fifth of its physician staff is comprised of osteopaths. The proposed service area of the satellite is within the current service areas of Intervenors. Thus, adequate alternative facilities are available to residents in the Carrollwood area. Since there are existing alternative acute care facilities within thirty minutes of the proposed service area, an ambulatory surgical center might be an appropriate alternative to the satellite proposal. However, St. Joseph's did not explore such an alternative, and presented no evidence to establish the basis for its assertion that this would not be appropriate. Such a facility could maintain and even enhance referral patterns to the main facility on West Buffalo. Additionally, it has not been shown that splitting St. Joseph's 649 beds between two locations will be more efficient than leaving all 649 beds on West Buffalo, and thereby saving the $16,775,000 in capital expense to construct the satellite. Therefore, alternatives to the construction of a satellite facility do exist, and St. Joseph's has not shown that such alternatives are less feasible or less efficient than the satellite proposal at issue. Needs For Special Equipment and Services It has not been established that any need exists within the proposed service area for special equipment and services which this proposal would provide, and which are not reasonably and economically accessible in adjoining areas. Need For Research and Educational Facilities It has not been shown that any need exists in the proposed service area for research and educational facilities which this application would address. Availability of Manpower During the hearing, the parties stipulated to the adequacy of the staffing patterns proposed by St. Joseph's for the 100 bed satellite, and also their ability to recruit and fill those staffing needs. Approval of this satellite would not have an adverse impact on Intervenors' ability to attract or retain qualified staff since the staff for the satellite would be primarily transferred from the West Buffalo Avenue facility along with the transfer of 100 beds. Since 64 patients who reside in the satellite's service area are currently being treated at the West Buffalo Avenue site, staff who serve these patients will be transferred to the satellite when it opens. Additionally, St. Joseph's conducts an extensive recruitment program outside, as well as within, the Hillsborough County area. It is therefore unlikely that staff for the satellite will come in any significant number from any of the Intervenors. It is recognized that there is almost a 20 percent vacancy level for registered nurses in District VI, and a 33 percent vacancy level for critical care nurses. However, St. Joseph's turn-over rate is relatively low, and therefore it is reasonable to expect that the satellite would be staffed predominantly with staff already employed at the West Buffalo location. Availability of Funds St. Joseph's revenues exceeded expenses by $10-$12 million for fiscal year ending June 30, 1986, and it is among the five most profitable hospitals in the State. It has no long term debt, and is the only facility of its size in Florida which has no debt. Financially, St. Joseph's is in an extremely sound position. St. Joseph's has the ability to financially support the satellite facility and to internally finance its construction. Third-party financing is also being considered. However, its operating margin will decrease slightly as a result of the construction of the satellite. Historically, it has realized an operating margin exceeding 10 percent, although it projects a profit margin of slightly under 5 percent for fiscal year 1987. Financial Feasibility St. Joseph's proposed satellite's total gross revenue for the first two years of operation was determined by multiplying the current average bed rate at the facility on West Buffalo by the expected occupancy. Proposed deductions from revenue were also based upon St. Joseph's historical experience. Assumptions utilized to prepare the satellite's pro forma relied upon St. Joseph's historical information, including but not limited to revenues, fixed expenses and variable expenses. St. Joseph's used a patient admission rate of 125 per 1,000, and a proposed average length of stay of 6 days compared with a current average length of stay at the main facility of 7-7.2 days. A basic assumption used by St. Joseph's was that on the first day of operation, 64 patients currently being treated at the main facility who reside in the Carrollwood area, will be transferred to the satellite for treatment, and thereafter an average of 64 of the satellite's beds will be occupied each day by Carrollwood residents who would have sought treatment at the West Buffalo location in the absence of the satellite. St. Joseph's assumed a case mix intensity level of 1.36 for the satellite, compared with 1.46-1.48 at the West Buffalo location. A decrease in the case mix index results in a corresponding decrease in revenues and expenses. Complex hospitalizations receive a high case mix index, and simple procedures receive a low case mix index. St. Joseph's did not conclusively establish that 64 patients presently at the main facility, except for cardiac, cancer and psychiatric patients, who reside in the service area of the satellite could be transferred on the first day of operation, or that this daily census could be maintained. Physician and patient preferences determine where a patient is admitted. Severity of illness or age of the patient are also factors. Admissions through the emergency room, which account for nearly 50 percent of the admissions on West Buffalo, cannot be redirected. It has not been shown that physicians or patients would prefer admission to a satellite, or that the very severe cases or aged patients, as well as emergency room admissions, could be redirected away from the main facility. While the satellite will have an emergency room, the satellite will not be equipped to handle the complexity of cases presently admitted on West Buffalo. Additionally, transferring 64 patients by ambulance on the first day of operation from West Buffalo to the satellite, in the middle of treatment, has not been shown to be reasonable or feasible, or that physicians and patients would tolerate such a procedure. The opening of a satellite usually begins incrementally and gradually while staff becomes familiar with the new facility and equipment. St. Joseph's has not shown that it is feasible to open the satellite with an immediate occupancy of 64 percent on day one, and 82 percent in the first year of operation. Historically, occupancy levels at satellites run between 20 percent-40 percent the first year. Forecasted revenues are unrealistic because St. Joseph's basic assumption about the transfer of 64 Carrollwood residents is unreasonable and unsubstantiated. St. Joseph's has also failed to correctly and fully estimate salary expenses at the satellite because salary estimates do not account for shift and weekend differentials paid to nurses. More than 50 percent of nurses at St. Joseph's receive shift differential pay, which is a 15 percent increase above their base hourly rate. Given the age of the service area population, a more accurate use rate for the satellite would be between 90 and 95 admissions per 1,000 population, rather than the 125 per 1,000 used by St. Joseph's. The lower use-rate reduces the available pool of patients in the service area from 136 estimated by St. Joseph's to 109. 94 Assumptions based on historical data from the main facility are inappropriate for developing the satellite's pro forma because the satellite will treat less complex cases than the main facility, and the age and income levels in the satellite's service area are significantly different from the County as a whole. Rather than a case mix index of 1.36, an average satellite and community hospital case mix index is 1.00. Using a corrected case mix index of 1.00 rather than 1.36, results in a projected loss for the satellite rather than a profit in its second year of operation. Because construction and operation of the satellite will reduce St. Joseph's overall operating margin below 5 percent-6 percent, which is a minimum standard, St. Joseph's will be less able to provide charity, indigent and Medicaid care after construction of the satellite than it is currently. Impact On Health Care Costs St. Joseph's proposal to spend approximately $16 million on construction of the satellite to serve from 16 to 26 "new" patients could reasonably be expected to adversely affect health care costs. This is exacerbated by the shelled-in space at both the satellite and the existing facility. The size of the satellite was not reduced when beds were reduced from 150 to 100, and the St. Joseph's architect testified there is enough square footage to add back the 50 beds. Despite St. Joseph's assertions that it will not increase rates to subsidize the satellite as a business investment in its own future, it appears reasonable to expect that rates would have to be increased if St. Joseph's is to maintain its historical profit margin, and to offset its failure to properly project salaries, use rates and the case mix index at the satellite. The satellite will continue to lose money through its second year of operation, and this would have to be recouped through increased charges, or reduced profit margins, which could then be expected to result in a reduced ability to fund charity, indigent and Medicaid patients. Project Costs Construction cost estimates are reasonable. The estimated cost for fixed equipment for a 150 bed satellite facility was reduced by $250,000 to reflect the decrease cost of moving 50 beds and the obstetrical surgical suite. This $250,000 savings provides an inflationary contingency in case of construction delays, and while it does increase construction costs from $9,650,000 to 9,900,000, it does not have a negative impact on the appropriateness of the proposed construction costs. Equipment cost estimates as well as total project cost estimates, with the exception of salary estimates, are reasonable. Admitting Practices St. Joseph's has a written admissions policy which requires that it receive patients regardless of their ability to pay. There is no evidence that St. Joseph has ever denied admission to any patient in a life threatening situation. It is standard practice at St. Joseph's to request a deposit on admission and to inform patients that arrangements for payment can be made upon discharge. However, inability to pay the deposit or to make financial arrangements does not result in a patient being denied admission. Patients who are unable to pay are sometimes admitted at St. Joseph's through, the emergency room when a physician sends such patients to the emergency room. Effect On Competition Enhancement of future competition is a factor which is considered under the Department's non-rule transfer policy There is substantial competition among acute care hospitals in Hillsborough County which are currently engaged in aggressive marketing campaigns. Dominance by one provider in a market can be anti-competitive, and at the present time St. Joseph's is the dominant provider for paying patients in Hillsborough County. The current market shares for hospitals already serving the satellite's proposed service area are: St. Joseph's - 33.45 percent; University - 28.92 percent; Town and Country - 17.72 percent; Tampa General - 11.06 percent; and Carrollwood Community - 8.86 percent. The satellite will allow St. Joseph's market share to increase and possibly approach 40 percent. Such market dominance is not consistent with a competitive market. St. Joseph's increase in market share will take patients away from the other hospitals now serving the Carrollwood area, particularly University which receives almost 38 percent of all its patients from this area. University is already projecting an operating loss for fiscal year 1987 of $563,000. Tampa General is a disproportionate provider of indigent services in the County. The Local Health Plan has as one of its objectives protecting such providers of indigent care. Tampa General lost $12 million in fiscal 1983, and in order to improve its financial condition embarked on a $160 million renovation and building effort. It is now indebted to bondholders in that amount. Tampa General's payor mix has begun to improve, and it is actively marketing in the proposed service area. Approval of this project will not further the Local Health Plan objective of protecting disproportionate indigent providers, because it will result in the loss to Tampa General of a significant number of paying patients.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order denying St. Joseph's application for CON 4288 for the establishment of a satellite hospital with the transfer of 100 acute care beds. DONE AND ENTERED this 8th day of September, 1987, in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of September, 1987. APPENDIX TO RECOMMENDED ORDER Rulings on St. Joseph's Proposed Findings of Fact are as follows: Adopted in Finding of Fact 1. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 1. Adopted in Findings of Fact 1, 2. Rejected as unnecessary and irrelevant. Adopted in Finding of Fact 2. Adopted in Finding of Fact 1. Adopted in Finding of Fact 8. Adopted in Finding of Fact86. Rejected as irrelevant. Adopted in Findings of Fact 3, 7. Adopted in Findings of Fact 4, 38. Adopted in Finding of Fact 4. Adopted in Findings of Fact 38, 54. Adopted in Findings of Fact 38, 6, 70, 54. Adopted in Finding of Fact 5. Adopted in Finding of Fact 5. Adopted in Finding of Fact 5. Rejected as irrelevant and not supported by competent substantial evidence. Adopted in Finding of Fact 5. Adopted in Findings of Fact 5, 44. Adopted in Finding of Fact 6. Rejected as irrelevant and unnecessary. Rejected as irrelevant and unnecessary. Rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 6, 38, 70. Adopted in Finding of Fact 7. Rejected as irrelevant and unnecessary. 30-34. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 10. Adopted in Finding of Fact 11. Adopted in Finding of Fact 12. Rejected as irrelevant. Adopted in Finding of Fact 108. Adopted in Finding of Fact 12. 41-43. Rejected as irrelevant and unnecessary. Rejected as cumulative and unnecessary. Rejected as speculative, irrelevent and unnecessary. Adopted in Finding of Fact 12. Adopted in Findings of Fact 21, 23, 50. Adopted in Finding of Fact 21. Rejected in Findings of Fact 59, 68. Rejected in Findings of Fact 65, 71, 97, 106. Rejected as not based on competent substantial evidence. Adopted in Findings of Fact 18, 21, 22. Adopted in Finding of Fact 24. Adopted in Finding of Fact 24. Rejected as unnecessary and cumulative. Adopted in Findings of Fact 32, 67, but rejected in 89, 90. Adopted in Findings of Fact 32, 67. Adopted in Finding of Fact 21. Adopted in Finding of Fact 26. Rejected as not based competent substantial evidence, and irrelevant. Adopted in Finding of Fact 29. 62-63. Rejected as cumulative and unnecessary. 64-65. Adopted in Finding of Fact 29. Rejected in Findings of Fact 11, 72. Rejected in Findings of Fact 65, 72. Adopted in Finding of Fact 30. Adopted in Finding of Fact 31. 70-71. Adopted in Finding of Fact 7. Rejected as unnecessary and not based competent substantial evidence. Adopted in Findings of Fact 6, 70. Rejected as irrelevant and speculative. 75-76. Adopted in Finding of Fact 7. 77-78. Adopted in Finding of Fact 6. Rejected in Findings of Fact 59, 60, 68, 70, 95. Adopted in Findings of Fact 6, 70. Rejected as irrelevant. Adopted in Finding of Fact 30. 83-91. Rejected in Findings of Fact 7, 105 and otherwise rejected as cumulative and unnecessary. Adopted in Finding of Fact 34. Adopted in Finding of Fact 35. Adopted in Finding of Fact 36. Adopted in Finding of Fact 37. Adopted in Finding of Fact 38. Adopted in part in Finding of Fact 39. Rejected as cumulative. Adopted in Finding of Fact 40. Adopted in Finding of Fact 41. Adopted in Finding of Fact 42. Adopted in Finding of Fact 43. Adopted in Finding of Fact 44 104-105. Rejected as cumulative. Adopted and rejected in part in Finding of Fact 45. Adopted in Finding of Fact 46. Adopted in Finding of Fact 47. Rejected in Findings of Fact 47, 106, 107, 108. Adopted in Finding of Fact 48. 111-122. Rejected in Findings of Fact 63, 64, 65, and otherwise irrelevant and cumulative. Rejected in Findings of Fact 68, 70, 71. Adopted in Findings of Fact 29, 70. Adopted in Finding of Fact 78. Adopted in Finding of Fact 78. Rejected as unnecessary. Adopted in Finding of Fact 80. Rejected as cumulative. Adopted in Finding of Fact 81. 131-133. Rejected as cumulative and unnecessary. 134. Adopted in Findings of Fact 78, 83, 98, 99. 135-138. Rejected in Findings of Fact 50, 56, 57, 59, 61, 62, 65, 71, 108. Rejected as unnecessary. Adopted in part in Finding of Fact 59, but otherwise rejected as unnecessary and not based competent substantial evidence. 141-146. Rejected as unnecessary and irrelevant. 147. Rejected as not based on competent substantial evidence. 148. Rejected in Findings of Fact 50, 56, 57, 59, 61, 62, 65, 71, 108. Rejected in Finding of Fact 75. Rejected in Finding of Fact 73. Rejected in Findings of Fact 72-75. 152-153. Adopted in part in Findings of Fact 89, 90 but otherwise rejected as unnecessary. 154-155. Rejected as irrelevant and unnecessary. Adopted and rejected in part in Finding of Fact 72. Rejected as irrelevant. Adopted in Finding of Fact 42. Adopted in Finding of Fact 107. Rejected as unnecessary and speculative. Rejected in Findings of Fact 87, 89. Rejected as not based on competent substantial evidence. Rejected as irrelevant and not based on competent substantial evidence. Rejected as irrelevant and unnecessary. Rejected as not based on competent substantial evidence. 166-169. Rejected as irrelevant. 170-171. Rejected in Finding of Fact 106. 172. Rejected as unnecessary. 173-174. Rejected as not based on competent substantial evidence and irrelevant. 175. Rejected as unnecessary. 176-177. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Finding of Fact 82. Adopted in Finding of Fact 83. Rejected as unnecessary. Rejected in Findings of Fact 91-94. Adopted and rejected in part in Finding of Fact 83. Rejected in Findings of Fact 84-95. 185-189. Adopted in part in Finding of Fact 85 but otherwise rejected as unnecessary. Rejected in Finding of Fact 97. Adopted in Finding of Fact 85. Rejected as unnecessary. Rejected as unnecessary. 194-195. Rejected in Finding of Fact 92. 196-197. Rejected as unnecessary. 198. Adopted in Finding of Fact 85. 199-200. Rejected as unnecessary and irrelevant. Adopted in Finding of Fact 86 and rejected in Finding of Fact 93. Adopted in Finding of Fact 86. Adopted in Finding of Fact 87. Rejected as not based on competent substantial evidence. Rejected in Findings of Fact 89, 90, 91. Adopted in Finding of Fact,.88. Adopted in Finding of Fact 88, but rejected in Finding of Fact 94. Adopted in Finding of Fact 88. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 89. Adopted in Finding of Fact 42. Adopted in Finding of fact 43. 213-217. Rejected as unnecessary and irrelevant. 218. Adopted in part in Finding of Fact 97, but otherwise rejected as irrelevant. 219-220. Rejected as unnecessary. Rejected as cumulative. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 98. 224-233. Missing. Adopted in Finding of Fact 98. Adopted in part in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary. 236-241. Adopted in Finding of Fact 28. Adopted in Finding of Fact 96. Adopted in Finding of Fact 24. Rejected as irrelevant and unnecessary. 245-246. Adopted in Finding of Fact 100. 247. Adopted in Finding of Fact 102. 248-250. Adopted in Findings of Fact 100, 101. 251. Adopted in Findings of Fact 100-102. 252-253. Adopted in Finding of Fact 101 Adopted in Finding of Fact 102. Adopted in Findings of Fact 100-102. 256-259. Rejected as cumulative. 260. Rejected as irrelevant. Rulings on Department of Health and Rehabilitative Services Proposed Findings of Fact: Adopted in Finding of Fact 34. Adopted in Finding of Fact 35. Adopted in Finding of Fact 36. Adopted in Finding of Fact 37. Adopted in Finding of Fact 38. Adopted in Finding of Fact 39. Rejected as cumulative. Adopted in Finding of Fact 40. Adopted in Finding of Fact 41. Adopted in Finding of Fact 42. Adopted in Finding of Fact 43. Adopted in Finding of Fact 44. Rejected as cumulative. Rejected as cumulative. Adopted in Finding of Fact 45. Adopted in Finding of Fact 46. Adopted in Finding of Fact 47. Adopted in Finding of Fact 47. Adopted in Finding of Fact 48. Rulings on University Community Hospital's Proposed Findings of Fact: Adopted in Finding of Fact 1. Adopted in Finding of Fact 17. Adopted in Findings of Fact 19, 20. Adopted in part in Finding of Fact 21. Adopted in Finding of Fact 49. Rejected as unnecessary and cumulative. Adopted in Findings of Fact 19, 20. Adopted in Findings of Fact 37, 48. Adopted in Findings of Fact 50, 56. Adopted in Findings of Fact 51, 52, 57. Adopted in Finding of Fact 59. Adopted in Finding of Fact 61. 13-14. Rejected as unnecessary. 15. Adopted in Finding of Fact 58, but otherwise rejected as irrelevant and unnecessary. 16-17. Adopted; in Findings of Fact 63-65. 18. Rejected as irrelevant 19-21. Adopted in Findings of Fact 68-71. Adopted in part in Finding of Fact 29. Adopted in Finding of Fact 16. Adopted in Findings of Fact 72, 76, 77, 104. Adopted in Findings of Fact 56, 81. Adopted in Findings of Fact 80, 81 and otherwise rejected as not based on competent substantial evidence. 27-35. Adopted in Findings of Fact 85-94 but otherwise rejected, as cumulative and unnecessary. 36-38. Adopted in Findings of Fact 85, 94. 39-40. Adopted in Findings of Fact 88, 94. Adopted in Finding of Fact 94. Adopted in Finding of Fact 92. Adopted in Finding of Fact 73. 44-49. Adopted in Findings of Fact 96, 97 but otherwise rejected as cumulative, irrelevant and not based on competent substantial evidence. Adopted in Finding of Fact 6. Rejected as cumulative and unnecessary. Rejected as irrelevant. Adopted in Finding of Fact 105. Adopted in Finding of Fact 69. Adopted in Finding of Fact 69, but otherwise rejected as unnecessary and cumulative. Adopted in Findings of Fact 68, 95, 97. Adopted in Finding of Fact 60. Adopted in Finding of Fact 35. Adopted in Findings of Fact 38, 50. Adopted in Finding of Fact 55, but otherwise rejected as irrelevant and unnecessary. Rejected as cumulative. Adopted in Finding of Fact 53. 63-65. Rejected as cumulative and unnecessary. Adopted in Finding of Fact 104. Adopted in Finding of Fact 105. Adopted in Findings of Fact 82, 83. Adopted in Finding of Fact 105. 70-71. Rejected as unnecessary and cumulative. 72. Adopted in part in Finding of Fact 106, but otherwise rejected as cumulative and unnecessary. 73-76. Adopted in part in Findings of Fact 96, 97, but otherwise rejected as cumulative and unnecessary. Adopted in part in Finding of Fact 95, but otherwise rejected as unnecessary. Adopted in part in Findings of Fact 91, 97, but otherwise rejected as unnecessary. Rejected as cumulative. Adopted in Findings of Fact 1,1, 107. Adopted in Finding of Fact 30. 82-84. Adopted-in Finding of Fact 107, but otherwise rejected as cumulative. Rulings on Tampa General's Proposed Findings of Fact: Adopted in Finding of Fact 17. Adopted in Finding of Fact 18. Adopted in Finding of Fact 19. Adopted in Finding of Fact 22. Adopted in Finding of Fact 21. Rejected as unnecessary. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary. 8-9. Adopted in part in Finding of Fact 1, but otherwise rejected as unnecessary. Adopted in Findings of Fact 1, 3. Adopted in Finding of Fact 4. 12-13. Rejected as irrelevant. Adopted in part in Findings of Fact 82, 83, but otherwise rejected as unnecessary. Adopted in Findings of Fact 7, 29, 57, 69, 105. Adopted in Finding of Fact 5. Adopted in Finding of Fact 11. Adopted in Finding of Fact 13. Adopted in Finding of Fact 12. Adopted in Findings of Fact 10, 72. Adopted in Findings of Fact 10, 11, 12, 13, 15, 72. Adopted in Findings of Fact 49, 50. Adopted in part in Findings of Fact 10, 11, 12, 13, 15, 50, 51, 52, 53, 54 and 72, but otherwise rejected as cumulative. Adopted in Finding of Fact 29. 25-26. Rejected as irrelevant. 27. Adopted in Finding of Fact 16. 28-35. Adopted in part in Findings of Fact 17, 21, 24, 25, 28, but otherwise rejected as unnecessary. Adopted in Findings of Fact 83, 97. Adopted in Findings of Fact 34, 35. Rejected as cumulative and unnecessary. 39-44. Adopted in Findings of Fact 63-65, but otherwise rejected as cumulative and unnecessary. 45-51. Adopted in Findings of Fact 66-71, but otherwise rejected as cumulative and unnecessary. 52-55. Adopted in Findings of Fact 36, 38, 50, 56, but otherwise rejected as unnecessary and cumulative. Adopted in Findings of Fact 12, 104. Adopted in Findings of Fact 14, 16, 72, 106. Adopted in Finding of Fact 106. Adopted in Findings of Fact 105, 106, 107. Adopted in Finding of Fact 108. Rejected as cumulative and unnecessary. Adopted in Finding of Fact 74. Rejected as irrelevant and unnecessary. 64-65. Adopted in part in Finding of Fact 74, but otherwise rejected as irrelevant. Adopted in Finding of Fact 16 Adopted in Finding of Fact 73. 68-69. Rejected as unnecessary and without specific citations to the record. 70-73. Adopted in Findings of Fact 91, 94, 95, 97, but otherwise rejected as cumulative and unnecessary. Adopted in part in Findings of Fact 81, 97. Adopted in part in Finding of Fact 57, but otherwise rejected as cumulative. Adopted in Finding of Fact 107. 77-83. Adopted in Finding of Fact 108, but otherwise rejected as cumulative and irrelevant. Rulings on Town and Country's Proposed Findings of Fact: 1-3. Introductory matters. Adopted in Finding of Fact 1. Adopted in Finding of Fact 17. Adopted in Findings of Fact 19, 20. Adopted in Finding of Fact 21. Adopted in Findings of Fact 24, 25. Adopted in Finding of Fact 56. Rejected as cumulative and unnecessary. Rejected as unnecessary. 12-16. Adopted in Findings of Fact 87, 89, 90. 17. Adopted in Finding of Fact 8. 18-24. Rejected as unnecessary and cumulative. 25-26. Adopted in Finding of Fact 67, but otherwise rejected as unnecessary. 27. Rejected as without citation to the record and cumulative. 28-37. Adopted in Findings of Fact 86, 93, but otherwise rejected as unnecessary and cumulative. 38-39. Adopted in Findings of Fact 106-108. Rejected as without citation to record and unnecessary. Adopted in Findings of Fact 15, 50, 51. 42-44. Adopted in Finding of Fact 51. Adopted in Finding of Fact 52. Adopted in Findings of Fact 4, 12, 38. Adopted in Findings of Fact 11, 13, 72. 48. Rejected as without citation to the record and unnecessary 49-51. Rejected as unnecessary and not based on competent substantial evidence Adopted in Finding of Fact 50. Rejected as without citation to the record and unnecessary. 54-55. Adopted in Finding of Fact 53. 56. Adopted in Finding of Fact 54. 57-58. Adopted in Finding of Fact 58. Rejected as cumulative. Adopted in Finding of Fact 60. Rejected as unnecessary. Adopted in Findings of Fact 5, 60. 63-64. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 29, 70. Adopted in Finding of Fact 29. Adopted in Findings of Fact 71, 95. 68-70. Adopted in Findings of Fact 45, 63-65. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 103-108. 73-74. Adopted in Finding of Fact 16. 75-77. Adopted in Findings of Fact 82, 83. Rejected as unnecessary. Adopted in Finding of Fact 82. Rejected as cumulative. Rejected as irrelevant. Adopted in Finding of Fact 105. Adopted in Finding of Fact 82. Rejected in Finding of Fact 99. 85-92. Rejected in Finding of Fact 98, and otherwise rejected as not based on competent substantial evidence. 93-96. Rejected in Finding of Fact 99, and otherwise rejected as not based on competent substantial evidence. Adopted in Finding of Fact 97. Rejected as unnecessary. 99-103. Rejected as cumulative and unnecessary. 104-105. Adopted in Findings of Fact 95, 97, but otherwise rejected as unnecessary and cumulative. Adopted in Finding of Fact 95. Rejected as cumulative. Adopted in Finding of Fact 95. Adopted in Finding of Fact 97. Adopted in Findings of Fact 95, 97. 111-114. Rejected as cumulative and unnecessary. 115-116. Adopted in Finding of Fact 97, but otherwise rejected as cumulative and unnecessary. 117. Rejected as without citations to the record. 118-119. Adopted in Finding of Fact 88. 120-122. Adopted in Finding of Fact 94. 123. Rejected as cumulative and without citations to the record. 124-128. Adopted in Finding of Fact 92, but otherwise rejected as cumulative and unnecessary. 129-130. Rejected as not based on competent substantial evidence. 131-133. Rejected as cumulative and unnecessary. 134. Adopted in Finding of Fact 14. Rulings on Humana's Proposed Findings of Fact: 1-2. Adopted in Finding of Fact 1. Adopted in Finding of Fact 17. Adopted in Finding of Fact 19. Adopted in Finding of Fact 21. Adopted in Finding of Fact 24. Adopted in Finding of Fact 25. 8-10. Adopted in Finding of Fact 16. 11-12. Adopted in Finding of Fact 3. 13-14. Rejected as cumulative. 15-17. Adopted in Finding of Fact 50. Adopted in Findings of Fact 53, 54. Adopted in Finding of Fact 51. 20-21. Adopted in Finding of Fact 52. Adopted in Finding of Fact 51. Adopted in Finding of Fact 55. 24-41. Adopted in Findings of Fact 45, 63-65, but otherwise rejected as unnecessary and cumulative. 42-46. Adopted in Finding of Fact 29. Adopted in Finding of Fact 21. Rejected as unnecessary. Adopted in part in Finding of Fact 59. 50-51. Adopted in Finding of Fact 60. 52. Rejected as unnecessary. 53-55. Adopted in Findings of Fact 85-95, but otherwise rejected as unnecessary. 56-57. Adopted in Finding of Fact 90. 58-66. Adopted in Findings of Fact 86, 93, but otherwise rejected as unnecessary. 67-71. Adopted in Findings of Fact 87, 89, 90, 91. Adopted in Finding of Fact 88. Rejected in Finding of Fact 88. Rejected as cumulative. 75-77. Adopted in Finding of Fact 94, but otherwise rejected as unnecessary. 78-81. Adopted in Finding of Fact 92. 82-85. Rejected as unnecessary. 86-92. Adopted in part in Finding of Fact 97, but otherwise rejected as cumulative and unnecessary. 93-94. Adopted in Finding of Fact 82, but otherwise rejected as unnecessary. 95. Adopted and Rejected in part in Findings of Fact 4, 12. 96-97. Adopted in Findings of Fact 105, 106, 107. Rejected as cumulative. Adopted in Finding of Fact 61. 100-101. Adopted in Findings of Fact 63-65. 102. Adopted in Finding of Fact 50. 103-104. Rejected as cumulative. 105-107. Adopted in Findings of Fact 57, 107, 108. 108-109. Adopted in Finding of Fact 60. 110-114. Adopted in Findings of Fact 82, 83, but otherwise rejected as cumulative and unnecessary. Adopted in Finding of Fact 108. Rejected as unnecessary. Rejected as cumulative. 118-119. Adopted in Finding of Fact 62. 120-121. Adopted in Findings of Fact 72-75. 122. Adopted in Findings of Fact 50, 56. 123-125. Rejected in Finding of Fact 28 and as not based competent substantial evidence. COPIES FURNISHED: Ivan Wood, Esquire WOOD, LUCKSINGER & EPSTEIN The Park in Houston Center 1221 Lamar Street, Suite 1400 Houston, Texas 77010 Howard J. Hochman, Esquire Southeast Financial Center 200 S. Biscayne Blvd, Suite 3700 Miami, Florida 33131 James C. Hauser, Esquire Post Office Box 1876 Tallahassee, Florida 32302 John Radey, Esquire 101 North Monroe Street, Suite 1000 Tallahassee, Florida 32302 Cynthia Tunnicliff, Esquire Post Office Box 190 Tallahassee, Florida 32302 Douglas L. Mannheimer, Esquire Post Office Drawer 11300 Tallahassee, Florida 32302 Theodore E. Mack, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Michael J. Cherniga, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Conclusions THIS CAUSE came before the State of Florida, Agency for Health Care Administration (“the Agency") for the issuance of a final order. 1. On June 28, 2013, Sebring Hospital Management Associates, LLC d/b/a Highlands Regional Medical Center (“Highlands Regional”) requested a formal administrative hearing to contest the preliminary denial of Certificate of Need (“CON”) Application No. 10182, which it submitted to establish a seven-bed comprehensive medical rehabilitation unit in District 6 (Highlands County). Filed May 15, 2014 4:07 PM Division of Administrative Hearings 2. The matter was referred to the Division of Administrative Hearings (“DOAH”) where it was assigned Case No. 13-2512 CON. 3. On June 28, 2013, Haines City HMA, LLC d/b/a Heart of Florida Regional Medical Center (“Heart of Florida”) requested a formal administrative hearing to contest the preliminary denial of CON Application No. 10180, which it submitted to establish a 14-bed comprehensive medical rehabilitation unit in District 6 (Polk County). 4. The matter was referred to DOAH where it was assigned Case No. 13-2513 CON. 5. On July 23, 2013, DOAH issued an Order of Consolidation. 6. On April 23, 2014, Highlands Regional filed a Notice of Voluntary Dismissal. 7. On April 23, 2014, Heart of Florida filed a Notice of Voluntary Dismissal. It is therefore ORDERED: 8. The denial of Highlands Regional’s CON Application No. 10182 is upheld. 9. The denial of Heart of Florida’s CON Application No. 10180 is upheld. ORDERED in Tallahassee, Florida, on this He day of thax , 2014. Elizabeth Dudek, Secretary Agency for Healjh Care Administration
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct copy of this Final Order was served on the below- named persons by the method designated on this [Ema Loe , 2014. . Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 John D. Newton, IT Lorraine M. Novak, Esquire Administrative Law Judge Office of the General Counsel Division of Administrative Hearings Agency for Health Care Administration (Electronic Mail) (Electronic Mail) James McLemore, Supervisor Corrine T. Porcher, Esquire Certificate of Need Unit Susan C. Smith, Esquire Agency for Health Care Administration Geoffrey D. Smith, Esquire (Electronic Mail) Sabrina B. Dieguez, Esquire Smith & Associates 3301 Thomasville Road, Suite 201 Tallahassee, Florida 32308 Corinne@smithlawtlh.com Susan@smithlawtlh.com Geoff@smithlawtlh.com Sabrina@smithlawtlh.com LL (Electronic Mail)
Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration (“the Agency") concerning the preliminary approval of Certificate of Need (“CON”) Application No. 10199 submitted by Select Specialty Hospital-Daytona Beach, Inc., (“Select-Daytona”), to establish a 34-bed Long Term Acute Care Hospital (“LTCH”) in District 4. 1. The Agency preliminarily approved Application No. 10199 submitted by Select- Daytona to establish a 34-bed LTCH in District 4. 2. In response to the Agency’s decision, Kindred Hospitals East, LLC (“Kindred”) filed a petition for formal hearing, challenging the preliminary approval. The matter was referred to the Division of Administrative Hearings (“DOAH”) where it was assigned Case No. 14-0121CON for hearing. Select-Daytona filed a Motion to Intervene in the DOAH and the case was styled with Select-Daytona being treated as an intervenor. Filed March 17, 2014 2:04 PM Division of Administrative Hearings 3. Subsequently, Kindred filed a corrected notice of voluntary dismissal of its petition in the DOAH, which closed the case. It is therefore ORDERED: 4. The preliminary approval of CON No. 10199 is upheld and will be issued subject to the conditions noted in the State Agency Action Report. ORDERED in Tallahassee, Florida, on this IE day of far ch. Elizabeth Dudelj, Secretary Agency for Health Care Administration 2014,
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules, The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct copy of this Final Order was served on the below- —_— named persons by the method designated on this SL ‘a day of LS ere 4 , 2014. Shoop, Agency Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 Facilities Intake Unit Agency for Health Care Administration (Electronic Mail) Lorraine M. Novak, Esquire Office of the General Counsel Agency for Health Care Administration (Electronic Mail) R. Bruce McKibben Administrative Law Judge Division of Administrative Hearings www.doah.state. fl.us M. Christopher Bryant, Esquire Oertel, Fernandez, Cole cbryant@ohfe.com amooney@ohfc.com (Electronic Mail) (Electronic Mail) Michael J. Glazer, Esquire James McLemore, Supervisor Ausley and McMullen Certificate of Need Unit mglazer@ausley.com Agency for Health Care Administration (Electronic Mail) (Electronic Mail)
Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration, (the "Agency") regarding certificate of need ("CON") application No. 10164 filed by Lakeland Regional Medical Center, Inc. (““LRMC”). 1. LRMC filed this CON application which sought the establishment of a 32-bed comprehensive medical rehabilitation unit within its hospital located in Polk County, Florida, Service District 6. The Agency approved LRMC’s CON application 10164. 2. At the same time, the Agency denied: (a) CON application 10162 filed by HealthSouth Rehabilitation Hospital of Polk County Filed October 21, 2013 3:41 PM Division of Administrative Hearings (“HealthSouth”), which sought the establishment of a 50-bed comprehensive medical rehabilitation unit within its hospital located in Polk County, Florida, Service District 6. (b) CON application 10163 filed by Haines City, HMA, LLC, d/b/a Heart of Florida Regional Medical Center (“Heart of Florida”), which sought the establishment of a 14-bed comprehensive medical rehabilitation unit within its hospital located in Polk County, Florida, Service District 6. (c) CON application 10165 filed by Sebring Hospital Management Associates, LLC, d/b/a Highlands Regional Medical Center (“Highlands”), which sought the establishment of a 7-bed comprehensive medical rehabilitation unit within its hospital located in Highlands County, Florida, Service District 6. 3. HealthSouth, Heart of Florida and Highlands each filed a petition for formal hearing challenging the Agency’s approval of LRMC’s CON application and the denial of their respective CON applications. LRMC filed a petition for formal hearing supporting the approval of its CON application as well as the denial of CON applications filed by HealthSouth, Heart of Florida and Highlands. 4. HealthSouth has since voluntarily dismissed its petition for formal hearing as to both the denial of its CON application and the approval of LRMC’s CON application. 5. Heart of Florida has since filed a partial notice of voluntary dismissal of its petition for formal hearing solely as to the approval of LRMC’s CON application. The challenge of the denial of its CON application remains pending before the Division of Administrative Hearings. 6. Highlands has since filed a partial notice of voluntary dismissal of its petition for formal hearing solely as to the approval of LRMC’s CON application. The challenge of the denial of its CON application remains pending before the Division of Administrative Hearings. 7. Based upon these voluntary dismissals, the Division of Administrative Hearings entered an Order Closing File and Relinquishing Jurisdiction in the above styled matter. IT IS THEREFORE ORDERED: 8. The denial of HealthSouth’s CON application 10162 is UPHELD. 9. The approval of LRMC’s CON application 10164 is UPHELD. ORDERED in Tallahassee, Florida on this_Zf day ot Crepe. .2013. Elizabeth\Qudek, Secretary Agency for'Health Care Administration
Other Judicial Opinions A party who is adversely affected by this final order is entitled to judicial review, which shall be instituted by filing the original notice of appeal with the agency clerk of AHCA, and a copy along with the filing fee prescribed by law with the district court of appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida appellate rules. The notice of appeal must be filed within 30 days of the rendition of the order to be reviewed. CERTIFICATE OF SERVICE 1 HEREBY CERTIFY that a true and correct copy of the foregoing Final Order has been furnished by U.S. Mail or electronic mail to the persons named below on this /& day of CA Ofer 13. Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 Janice Mills James McLemore, Supervisor Facilities Intake Unit Certificate of Need Unit Agency for Health Care Administration Agency for Health Care Administration (Electronic Mail) (Electronic Mail) R. Bruce McKibben Administrative Law Judge Division of Administrative Hearings (Electronic Mail) Lorraine M. Novak, Esquire Assistant General Counsel Agency for Health Care Administration (Electronic Mail) R. Terry Rigsby, Esquire Pennington, Moore, Wilkinson, Bell & Dunbar, P.A. 215 South Monroe Street, 2" Floor Tallahassee, Florida 32301 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 285 Peachtree Center Avenue 1500 Marquis Two Tower Atlanta, GA 30303 Counsel for HealthSouth Co-Counsel for LRMC (U.S. Mail) (U.S. Mail) Geoffrey D. Smith, Esquire John D. Hoppe, Esquire Smith & Associates Peterson & Myers, P.A. 2834 Remington Green Circle, Suite 201 Tallahassee, FL 32308 Counsel for Heart of Florida and Highlands (U.S. Mail) 225 East Lemon Street, Suite 300 Lakeland, FL 33802-4628 + Co-Counsel for LRMC (U.S. Mail)
