The Issue The issue is whether HRMC's Certificate of Need Application No. 9881 to establish an 84-bed acute care hospital in the Viera area, Brevard County, Florida, AHCA Subdistrict 7-1, should be approved.
Findings Of Fact THE PARTIES The Agency AHCA is the single state agency responsible for administering the certificate of need ("CON") program, and is authorized to evaluate and make final determinations on CON applications pursuant to the Health Facilities and Services Development Act, Sections 408.031-408.045, Florida Statutes. HRMC and Affiliates The applicant is HRMC, a not-for-profit Florida corporation, holding tax exempt status pursuant to Section 501(c)(3) of the Internal Revenue Code. HRMC is a subsidiary of Health First, Inc. ("Health First"), an Internal Revenue Code Section 501(c)(3) holding company having no shareholders. It is managed by a 13-member board of directors, 11 of whom are outside directors representing a cross section of community leaders. As a 501(c)(3) organization, Health First pays no dividends to shareholders. It has no shareholders so it pays no dividends. Its earnings are reinvested in the community to support existing health programs, to offer new or expanded services, and to provide new medical facilities in areas of need. Health First's overall mission in Brevard County is to enhance the health status of the citizens by providing direct health care services, education, outreach, and prevention. For the first six years of its operation, Health First was headquartered in Viera, but in 2003 it relocated to larger corporate offices in South Rockledge. Through its subsidiaries, Health First operates three hospitals in Brevard County: Holmes Regional Medical Center ("Holmes") in Melbourne, Palm Bay Community Hospital ("PBCH") in Palm Bay, and Cape Canaveral Hospital ("CCH") in Cocoa Beach. All three hospitals are Joint Commission on Accreditation of Healthcare Organizations (JCAHO) accredited. HRMC is the license holder for Holmes and PBCH. Holmes is a 514-bed acute care hospital. It has 504 acute care and 10 Level II neonatal intensive care unit beds. It also provides adult open-heart surgery services, is a designated Level II Trauma Center, and is the only trauma center serving Brevard and Indian River Counties. Holmes sits on approximately 18 acres of land. Health First has acquired an extensive amount of property surrounding the hospital that is available for future growth and development. PBCH, a 60-bed acute care hospital, is located south of Holmes. It opened in 1992, sits on 30-40 acres of land about a mile from an I-95 interchange, and offers neither obstetrical nor tertiary services. CCH is a 150-bed acute care hospital. Health First Health Plans, Inc., is a health maintenance organization and subsidiary of Health First, operating in Brevard County. Wuesthoff Wuesthoff Health System, founded in 1941, is a not- for-profit health care system. In addition to its two acute care hospitals, Wuesthoff Health System owns and operates a nursing home, an assisted living facility, a hospice, a home health agency, a diagnostic imaging center, and other health care related services. Wuesthoff Health System also operates a foundation whose role is to identify and raise capital to support the organization's mission. Wuesthoff-Rockledge is a not-for-profit 267-bed acute care hospital comprised of 240 acute care beds, 17 psychiatric beds, and 10 Level II Neonatal Intensive Care Unit beds. Wuesthoff-Rockledge also provides tertiary care services, including adult open-heart surgery and angioplasty. It is currently constructing a 24-bed Intensive Care Unit expansion that is due to come online in October 2006, bringing the licensed bed complement of that facility to 291. Wuesthoff-Melbourne, which opened in December 2002 as a 65-bed acute care hospital, is located approximately five miles north of Holmes. It is a not-for-profit hospital with a current acute care bed complement of 115. Both Wuesthoff hospitals are JCAHO accredited. HRMC's CON APPLICATION The letter of intent and CON application at issue were timely and properly filed, and satisfy the requirements of Section 408.039, Florida Statutes. The signatures on Schedules C and D-1 of the application are authentic. The application satisfies the content requirements of Section 408.037, Florida Statutes. HRMC has sufficient availability of funds for capital and operating expenditures for the proposed project in accordance with Subsection 408.035(4), Florida Statutes. The proposed project demonstrates immediate financial feasibility in that HRMC has sufficient availability of funds for capital and operating expenses for the proposed project in accordance with Subsection 408.035(6), Florida Statutes. The criterion set forth in Subsection 408.035(10), Florida Statutes, is not applicable to this project. The projected staffing patterns (i.e., the numbers of full time equivalents ["FTEs"] needed by position) and the projected salaries in Schedule 6A of the CON application filed by HRMC are reasonable with regard to the census levels projected in the application. HRMC's CON application adequately documents the reasonableness of the costs (including equipment), methods of construction, and energy provision for its project as proposed in its application, in accordance with Subsection 408.035(8), Florida Statutes. Further, the architectural drawings submitted by HRMC with its application satisfy applicable code requirements. Schedules 1, 2, 3, 9, and 12 of the application are accurate. The time intervals contained in the project completion forecast depicted in Schedule 10 of the HRMC application are reasonable. This proceeding involves the third application by HRMC for this proposed hospital. The first application, CON No. 9759, was preliminarily denied by AHCA. Following an extensive final hearing, a Recommended and Final Order of denial were entered. Official recognition was taken of that in Holmes I. The second application, CON No. 9836, was filed in the first batching cycle of 2005. The head of the CON program, Jeff Gregg, recommended, and AHCA preliminarily denied, that application. The denial was initially challenged by HRMC, but the Petition was later dismissed voluntarily. By the time HRMC filed its second CON application for this project, the CON law had been amended to allow existing hospitals to increase their bed capacity at existing facilities without a CON. The third Application, CON No. 9881, was filed in the second batching cycle of 2005, and was followed by a preliminary decision in December of that year. Following staff review of the application at issue here, Mr. Gregg went to then-AHCA Secretary Alan Levine without a recommendation to either approve or deny the application. At that brief meeting (five minutes or so), Secretary Levine seemed interested in approving the application and appeared to be aware of the conditions proposed by the applicant. Wuesthoff attempted to tie the meeting with Secretary Levine, and his desire to approve the HRMC application, to Health First's support of a Medicaid reform bill then pending before the Florida Legislature that Secretary Levine strongly supported. While it is not uncommon for hospitals to communicate their views on particular CON proposals to AHCA officials, including the secretary, Wuesthoff alleges that the timing of this meeting, along with the fact that AHCA had recently denied the same CON application filed by HRMC, makes this a coincidence that cannot be ignored. Moreover, it is not uncommon for CON applicants to apply more than once in separate batching cycles for AHCA approval of a proposed hospital in a particular area. The circumstances relating to the need for a hospital in a particular area change over time due to numerous factors such as population increases, high utilization of existing providers, and the needs of underserved segments of the population. For example, Wuesthoff-Melbourne filed three CON applications with AHCA before it was finally approved. HRMC's application proposes to establish an 84-bed acute care hospital in the unincorporated area of Viera in Brevard County. AHCA reviews each application filed in a separate batching cycle independent of the reviews it conducted on previous applications filed for the same project. On December 16, 2005, AHCA issued its State Agency action report ("SAAR"), summarizing its findings and conclusions based upon its review of HRMC's application, and recommended approval of CON No. 9881. AHCA reaffirmed its support of HRMC's CON application through the final hearing testimony of Jeff Gregg. The Proposed Site Viera is an unincorporated area in south-central Brevard County being developed by The Viera Company ("TVC"), a for-profit land development company. TVC is a wholly-owned subsidiary of A. Duda & Sons, Inc. The initial Viera Development of Regional Impact ("DRI") contained approximately 3,200 acres east of I-95. Its residential area was planned for 4,200 units, and is currently 98 percent built out. The DRI development order was later amended to add 6,000 acres west of I-95, bringing the size of the DRI to over 9,000 acres. The current DRI entitlements include approximately 19,000 residential units, 2.9 million square feet of commercial space, and 3.7 million square feet of office space. The DRI also includes a 7,500 seat stadium and spring training facility for the Washington Nationals, a Major League baseball team. Six public schools are planned for the area west of I-95 as part of the DRI. Three elementary schools and a high school have already opened. A 107,000-square-foot Veterans' Administration clinic is located on the Viera DRI, just north of the proposed Viera Medical Center ("VMC") site. Authority to construct a 150-bed hospital within the confines of the Viera DRI has already been approved as part of the Master Development Plan. Viera has experienced tremendous growth in the past 10 years. As of June 1, 2006, over 7,200 homes were built. Nearly one million square feet of commercial space and another million square feet of office space have been completed. Demand for home-sites in the Viera area has been strong. According to testimony, people have camped overnight to wait in line to purchase certain properties. A. Duda & Sons owns another 11,500 acres adjacent to Viera, and it has applied to add that land to the current DRI. The proposed addition to the DRI would bring the residential entitlements to almost 30,000 units, the commercial entitlements to over 3.4 million square feet, and the office entitlements to over 3.5 million square feet. By 2010, the greatest growth in population will occur in the 45-64 age cohort, followed by the 65+ age cohort--the age cohort with the highest utilization of acute care inpatient services. At build out, Viera will have approximately 30,000 residential units and a population expected to exceed 40,000. The Proposed Viera Medical Center Health First began to seriously evaluate the opportunity to establish a new hospital in the Viera area in 2002. Based upon the significant growth in the area, Health First purchased 50 acres from TVC, located just west of I-95, at the intersection of Wickham Road and Lake Andrew Drive. VMC will initially offer a full array of acute care services, not including obstetric services, but including a larger than average emergency department. It will occupy 20 acres of the 50-acre site and will be part of an integrated health care campus (Viera Health Park) that will offer a continuum of services to the community, emphasizing health, wellness, and outpatient care, while also meeting the needs of the more acute patients. The remaining 30 acres will be used for related health care functions that are not CON reviewable. Health First also has an option to purchase additional land at the same location, if needed for future expansion. The purchase price allotted to the 20-acre portion of the site is approximately $3.4 million, which is reasonable. In determining the scope of the initial services, HRMC analyzed the population, demographics, service area, and needs of the community. The land purchase contract contained an exclusivity provision, not uncommon for large commercial projects such as this. The provision prevents the sale by TVC of any property to be used to construct another acute care hospital in Viera. TVC had a similar contractual provision with Wuesthoff relating to property it purchased in Viera in the 1990s. Prior to the hearing, the exclusivity provision in HRMC's contract covering hospital beds and services was amended to apply to a period of seven years from the opening of VMC. This reduced term of exclusivity is considered reasonable when examining the circumstances in this case. All planning and zoning approvals to develop the site as a health care center are already in place. Viera is the central seat of Brevard County government. The Moore Justice Center and the school board headquarters are located a short distance from the proposed site. The site is located within the Viera DRI. As a condition of the DRI, the developer was required to spend $8 million to make road improvements throughout the county to address traffic congestion. VMC will share management and administrative support services with HRMC rather than duplicating those services. Health First's goal is to operate all of its hospitals in a similar fashion to share overhead expenses, consolidating where practical to provide a more efficient operating model. The proposed total project cost for VMC is approximately $105 million. This cost was not challenged and is reasonable. Outside the proposed project, Health First anticipates developing the proposed site in several phases. Phase I will consist of a medical office building and a large health and fitness center. Health First has already been awarded a disturbance permit for this phase, allowing it to move sod and dirt on the site. Phase II will consist of the proposed hospital (VMC) and, potentially, additional office space. Health First has set a system-wide goal and adopted a formal policy to convert its inpatient facilities to private rooms. Accordingly, all of the beds at VMC will be in private rooms. This is consistent with the recent trend for hospitals to be designed with all private rooms. The American Institute of Architects ("AIA") recently adopted a draft guideline requiring 100 percent private rooms, with semi-private only by exception. The AIA guidelines form the basis for hospital design regulations in most states, including Florida. Private rooms are important not just as a means of enhancing patient comfort, but also to protect patient privacy, to achieve operational efficiencies, and to provide an optimal clinical environment. They provide a quieter, more restful environment, lessen the risk of infection, and better protect the patient's confidential clinical information under the Health Insurance Portability and Accountability Act ("HIPAA"). Mr. Jeff Leitner, Wuesthoff's Director of Plant Operations, acknowledged that HIPAA now imposes stringent privacy requirements on hospitals. The standard of care has evolved over the years to where patients now prefer private rooms. Due to changing hospital environments, the Health First Board of Directors is troubled that patients at their most sick and most vulnerable time are required to share a room with a stranger and the stranger's family. Wuesthoff agrees that private rooms should be offered to patients. It implemented a local marketing campaign to promote the fact that all of the rooms at its Melbourne facility are private. Both of Wuesthoff's architect witnesses acknowledged that private rooms are now the standard in the industry. The evidence strongly demonstrates that private rooms are no longer just an amenity; they offer substantial benefits to patients. Prior to undertaking this project, HRMC considered a number of alternatives to ensure that VMC was the best option. One alternative was to expand Holmes. This option was dismissed for several reasons: the cost of expansion; the traffic congestion that would result from further enlargement of that facility; and the need to decompress the Holmes campus rather than expand its patient volume. Holmes is a regional tertiary referral center, with a comprehensive open-heart program, a Level II trauma center, helicopter medical transport, and a Level II Neonatal Intensive Care Unit (NICU). It also provides comprehensive high-level cancer services. In its most recent fiscal year, Holmes received approximately 1,200 trauma visits, and almost 70,000 total visits to its emergency department ("ED")--almost twice that of other hospitals in the county. Approximately 3,300 births were recorded at Holmes during that same period. Holmes is a very large, busy, and congested hospital. Occupancy tends to remain above 80 percent and has, on occasion, exceeded 100 percent. For example, on the Thursday night before the final hearing, 15 patients admitted to the hospital had to wait on gurneys in the ED hallways before rooms became available. VMC will help decompress Holmes' high occupancy. Holmes is already seeking to address its high occupancy concerns by adding a new patient tower that is called the "North Expansion." This additional space will allow Holmes to consolidate its cardiac services into a new heart center. The North Expansion will also include a new ED and trauma center. The North Expansion will include 108 progressive care beds to provide care for cardiac patients. "Shelled-in" space is available to add 36 more progressive care beds in the future. Holmes does not intend to increase its licensed bed capacity with the new beds in the North Expansion, but will convert semi-private rooms in the older part of its facility to private rooms, keeping the total number of licensed beds the same. This will allow it to move to its all private beds platform and relieve congestion in the hospital. Given Holmes' persistent high utilization rates and the strong regulatory preference (from the new AIA guideline) for all private rooms, this approach is reasonable. Wuesthoff argues that increasing the number of licensed beds at Holmes is preferable to approving VMC. Moreover, it argues, the North Expansion and the footprint of the hospital will support as many as 144 licensed beds. Finally, states Wuesthoff, Holmes has significant land holdings adjacent to the existing facility. Each of these reasons, states Wuesthoff, supports Holmes' ability to add the additional beds it requires at the existing location rather than expanding into Viera. Holmes' campus is only 18 acres, which is relatively small for a large regional hospital. The facility has been expanded in piecemeal fashion over the years. That approach is not the optimal way to go. Even after completion of the North Expansion, over 50 percent of the existing facility is more than 25 years old. The useful life for a modern hospital is 25 to 30 years. Because of the hospital's age, many of the spaces used to support patient care are undersized by current standards, particularly for the level of care provided. Further increasing Holmes' licensed beds will strain its already overburdened support services. Holmes admittedly has acquired a number of parcels adjacent to its campus, but will use these to ease its chronic parking shortage. Holmes currently provides a substantial amount of employee parking at an off-site location. It shuttles employees back and forth by bus. Wuesthoff's efforts to show that these adjacent properties could be used to expand Holmes' existing facility were not persuasive. Any new construction must comply with current development regulations. No credible evidence was produced to demonstrate that the major development proposed for Holmes by Wuesthoff could be undertaken consistent with storm water, parking, and other local zoning and development regulations. Expanding PBCH beyond the currently planned expansion from 60 to 100 beds was also considered by HRMC as an alternative to developing a new hospital in Viera. That facility, however, is located at the far southern end of Brevard County, which is too distant to adequately and efficiently serve the needs of the Viera residents. Adding beds at CCH is not an option, given its land- locked location and the access difficulties concerning its existing beds, which are located about 17 miles from Viera. Because the actual facility is owned by a special taxing district and is leased to Health First, its beds cannot be transferred to Viera. In preparing and filing its CON application in this case, HRMC chose to begin its analysis regarding the size and scope of its services anew. HRMC cites several major factors in support of its project: a) a large population base, significant population growth, and a high percentage of elderly residents; b) improving access without an adverse impact on other providers; c) enhancing quality of care; d) enhancing access to cost- effective, quality care for all residents of the service area, including the uninsured and Medicaid patients; and overwhelming community support for the project. HRMC also proposed the following conditions for approval: a) To demonstrate its commitment to addressing the health care needs of the greater Brevard County community, Health First agrees to provide not less than 19.5 percent of all inpatient admissions and births across the entire Health First System for patients in "safety net" categories, including Medicaid, Medicaid HMO, self-pay, uninsured, KidCare, and charity. By the year 2010, VMC's first full year of operation, these categories are projected to represent approximately 10,000 annual admissions and $380 million in hospital charges. This commitment will remain in effect for no less than five years; Health First will continue to provide a majority of local support for the Brevard Health Alliance, a federally qualified health clinic whose mission is to provide care to the poor and uninsured. This commitment will represent a minimum of $4 million commencing in 2005 and continuing through 2007; Recognizing that Health First must work together with other social service organizations in its community, Health First commits to provide support in the form of cash, goods, and services not less than annually for the next 10 years. This support represents a total commitment of $1 million to support organizations such as the American Cancer Society, Brevard Alzheimer's Association, Habitat for Humanity, United Way, and many more health and social service organizations; Health First has created a Special Needs Plan (SNP) for low-income seniors, which provides enriched health and drug benefits for poor citizens. This program is administered by Health First Health Plans and is approved by the Centers for Medicare and Medicaid Services (CMS). Their goal is to ensure that all low income seniors in the community have access to essential medical services through this program. Health First commits to provide this essential community service for no less than four years; HRMC, the tertiary flagship hospital of Health First and the CON applicant, commits to continue to operate the region's only Level II Trauma Center and air ambulance for those patients requiring the highest level of care, through at least 2015; Mindful of the need to promote tomorrow's health care work force, HRMC commits to provide half of the instructional costs associated with the expansion of the nursing program at Brevard Community College. HRMC will provide $2 million by 2014 for a grand total of over $3 million after matching funds from the Florida Legislature; and Finally, responding to concerns surrounding the continued growth and success of existing hospital facilities in the community, HRMC agrees not to seek to expand the number of licensed acute care beds at VMC for its first five years of operation, unless the average occupancy rate of VMC, based on inpatient utilization of all licensed acute care beds, exceeds 80 percent for at least a 12-month period. AHCA's Review of HRMC's Application AHCA reviews CON applications under the criteria set forth in Section 408.035, Florida Statutes. AHCA does not give equal weight to each criterion. It has a standard procedure it follows each time it reviews a CON application, which was followed by AHCA in its review and consideration of CON No. 9881. Each CON application is reviewed by a staff analyst assigned to the project (assisted by the Agency accountant and architect) who makes a report of his or her analysis. This is called the State Agency Action Report ("SAAR"). The draft SAAR is then reviewed by the analyst's supervisor, who edits and forwards the SAAR to the CON Bureau Chief. The chief typically confers with the deputy secretary of AHCA. A final draft SAAR is prepared, and a meeting is scheduled with the secretary of AHCA to review the proposed decisions and obtain the secretary's input. In 2004, the Florida Legislature significantly amended the CON law. Bed additions to hospitals were deregulated, and the requirement to publish a fixed need pool was eliminated. Existing providers now have opportunities they never had before to make their own decisions. AHCA no longer considers individual beds to be the building blocks of a hospital proposal. Rather, it looks more holistically at a proposal for a new hospital. Each CON applicant is now encouraged to frame the issues they deem most important. In approving HRMC's application, AHCA determined that a number of key circumstances significantly differed from the first CON application. First, this application was considered after the 2004 changes to the CON application were fully implemented. Second, significant population growth had occurred in Viera during the two years since HRMC's first application. In fact, the time this application was filed, the projected population growth in Viera exceeded what had earlier been projected for this period in HRMC's first application. Further, the overall occupancy rate of acute care beds within the county continued to increase, despite the opening of Wuesthoff-Melbourne in late 2002, and the net addition of 94 acute care beds in the county between 1999 and 2004. Admissions, average length of stay, and patient days are all higher, and the average daily census grew faster than the beds that have been added. The proposed opening date of the VMC facility is nearly two years later than the first proposed date, which accounts not only for two more years of population growth, but two more years that Wuesthoff-Melbourne will have been open. Wuesthoff-Melbourne now will have seven years of operations, and ample opportunity to become fully established before the Viera facility opens. HRMC made adjustments in response to previous AHCA criticisms relating to financing and ability to staff the proposed facility, which AHCA considered significant. Finally, HRMC significantly changed the proposed conditions to the project, from what was a typical Medicaid and charity care utilization proposal, to a much broader, health system-wide commitment. APPLICATION OF STATUTORY CRITERIA Subsection 408.035(1), Florida Statutes: The need for the health care facilities and health services being proposed. Service Area The primary service area ("PSA") for VMC consists of Zip Codes 32904, 32934, 32935, 32940, and 32955. The proposed PSA contains one zip code not contained in HRMC's first application--32904. This change was made to increase the proposed PSA from 69 percent of total hospital discharges to 75 percent of total discharges which follows a more traditional definition of a PSA. HRMC's health care planning expert, Dr. Finarelli, also re-examined the area, which revealed that the market shares of the existing hospitals had changed over time. As a result, VMC's market share was increased in some zip codes and reduced in others. The fact that VMC's market share increased in Zip Code 32904 from 8 percent to 10 percent caused that zip code to be shifted from the secondary service area to the PSA. Even if, as Wuesthoff asserts, the 32904 Zip Code is in the secondary service area rather than the PSA, this would result in only 100 fewer patient admissions per year, an insignificant amount. Wuesthoff asserted that VMC's proposed PSA is too large, yet it approximates the size and same number of zip codes of the PSA proposed by Wuesthoff in the CON application for its Melbourne facility. Wuesthoff also argued that the proposed VMC PSA includes two existing hospitals. While true, the two existing facilities are located about 10 miles from the proposed site. They are on the extreme outer fringes of the PSA. 2. Population Growth Population is a fundamental aspect of virtually every proposal for a new hospital. The proposed project will be located in Zip Code 32940, which is projected to grow by more than 12,000 persons between 2005 and 2012. It is easily the zip code with the largest projected growth in Brevard County. Two other zip codes in the PSA, 32955 and 32904, are projected as the second and third fastest growing zip codes in the county between 2005 and 2012. The projected population growth in the proposed PSA compares favorably with the population growth for nine previous hospital projects approved by AHCA. It falls within the mid- range of those other projects. AHCA recognized that the VMC proposal is in a rapidly growing suburban community. Brevard County has experienced explosive growth in population, construction, and services. Area physicians testified that their practices have grown significantly in the past five years, requiring additional hiring to handle the increase. The population of the VMC PSA alone is projected to increase by almost 30,000 people between the filing of the application in 2005 and 2012, VMC's projected third year of operation. This increase represents half of the entire county's growth during that time period. Such market conditions fit well within the type of conditions that have led AHCA to approve other CONs for new hospitals. The projected population in the greater Viera community and the absolute number of new people, as well as the annual growth rates, support the proposed hospital. Just as population growth drives the need for new schools, roads, and utilities, the health care infrastructure must be increased to meet the rise. The healthcare infrastructure is a key component of the Viera DRI. Sound health planning creates capacity where it is needed. Hospital discharges involving residents of the VMC PSA are projected to grow by 41 percent between 2004 and 2012, reflecting strong growth in the PSA. Physicians who practice in Brevard County and support the proposed Viera project overwhelmingly agreed that the area population is growing rapidly. That population growth results in an increase in patients seeking health care services. The average age of the PSA's population is also increasing as older people move into the PSA. The population in the PSA over 65 is projected to grow three times as fast as the rest of the county. This is significant because people over 65 utilize hospital services at the greatest level. Wuesthoff claims that the tremendous increase in population in Viera does not create a need for a hospital there. In July 2003, however, Mr. Emil Miller, Wuesthoff's CEO, expressly acknowledged in a letter to The Viera Company the significant growth of Viera, and sought to purchase land in Viera upon which to build a hospital, specifically recognizing that such a hospital was necessary to "meet the health care needs of that growing population." He sought, at that time, the exclusive right to be the only hospital in Viera. This letter was written after the opening of Wuesthoff-Melbourne. From a health planning perspective, new capacity should be created where population growth is occurring, as opposed to expanding existing hospitals that are site- constrained, short on space, poorly configured, aged, and far removed from the area experiencing high population growth. HRMC has demonstrated that the tremendous population growth in Viera requires the creation of new capacity. 3. Need Analysis AHCA no longer has a numeric methodology for calculating need for short-term acute care beds or services. Therefore, HRMC presented its own analysis of need for a new acute care hospital in this case. Although no longer in rule form, AHCA considers a five-year planning horizon for short-term acute care facilities to be appropriate. The amended CON law allows hospital providers to add beds at existing facilities without prior CON approval, but that fact does not control whether a hospital should be built in Viera. If that were the case, AHCA would never approve another hospital because existing hospitals would always argue that they can meet need over time by adding beds at existing facilities--a plainly inappropriate way to meet future health care needs. Instead, new capacity should be created where population growth is occurring. HRMC sufficiently demonstrated short term need. HRMC also demonstrated a long term need. An underlying premise of HRMC's application is that sound long- range planning requires consideration of where the needs are today and where they are projected to be in the future. Dr. Finarelli testified as an expert on the need for VMC. His role was twofold: (1) to determine whether there is a population-based need for a new hospital in Viera; and (2) to judge the impact such a hospital would have on existing hospitals in south and central Brevard County. Dr. Finarelli prepared a need analysis for this project. He examined the past five years of utilization and noted strong and steady growth in the sub-district. He then projected future growth to 2012, the third year of operation for VMC. He projected a steady growth in demand, and he determined that the acute care bed need would extend beyond the capacity available and planned to be added in Brevard County. In the last five years, a significant number of acute care beds have been added to the county's bed inventory: Holmes added 76 beds, Wuesthoff-Rockledge added 22 beds, and Wuesthoff- Melbourne opened with 65 beds in late 2002 and now has 115 beds. Wuesthoff-Rockledge will open a 24-bed ICU within the next year. PBCH is planning a 40-bed expansion, bringing its total to 100 beds. PBCH will also shell-in an additional 40 beds for future expansion at that campus. Even if these additional beds come online earlier than anticipated, the effect on the proposed VMC will be minimal because PBCH is located more than 20 miles from Viera. Mr. Mark Richardson, Wuesthoff's health planner, acknowledged that PBCH does not really serve the residents of Viera. Although these planned expansions will help meet the increased demand for acute care services, they are not a long- term solution for future growth or the demand for acute care services in Brevard County. The health care industry generally recognizes an optimum occupancy level of 75 percent. Annual occupancy rates at this level mean that a hospital sometimes runs in excess of 90 percent at peak times. When this is combined with the fact that the midday census typically runs 10 percent higher than the reported midnight census, the conclusion is that hospitals with an optimum occupancy level of 75 percent actually run at greater than 100 percent occupancy at times. Table 21 of HRMC's application demonstrates that if the proposed VMC is denied, Holmes' occupancy rates will escalate from 83 percent in 2010 to 86 percent in 2012; PBCH's occupancy rates will increase from 77 percent to 80 percent in 2012; and Wuesthoff-Rockledge's occupancy rates will increase from 74 percent to 77 percent in 2012, even after the currently planned bed increase at PBCH and Wuesthoff-Rockledge. Dr. Finarelli noted that the two fastest growing segments of the population in VMC's PSA are the over 65, and 45 to 64 age groups, who demand the most acute care. The over- 65-age demographic is two percent higher than the county as a whole, and nearly three percent higher than the statewide average. Demand for inpatient services in Brevard County has increased by approximately seven percent per year from 2000 to 2005. In the Viera PSA alone, however, the demand for inpatient services has grown by 40 percent between 2000 and 2004, twice the 19 percent growth for the rest of the county. Dr. Finarelli determined that the VMC project is appropriately sized and is expected to be well utilized. He based this upon the fact that the VMC PSA alone had 4,000 more discharges from 2000 to 2004. Total discharges in Brevard County during that time period increased by 10,000 during that same period. The rate of increase in discharges for the VMC PSA was twice that of the county as a whole. The VMC PSA is expected to have 20,400 discharges by 2012, compared with 14,400 in 2004, a substantial increase. Dr. Finarelli's assumption that VMC will capture 20 percent of the PSA's market is conservative and reasonable. In preparing his need analysis, Dr. Finarelli analyzed the appropriate change in age-specific discharge rates in Central and South Brevard County. Decisions about how to project future use rates is a market-based analysis that varies from market to market. Historical trends and comparative use rates must be examined to determine the most appropriate growth factor to use. Although historical use rates had increased an average of four percent per year from 2000 to 2004, Dr. Finarelli chose to use a more conservative admission rate increase of approximately 1.5 percent per year from 2005 and 2010, less than half the most recent historical experience. Mr. Richardson, Wuesthoff's health planner, acknowledged that he would employ a forecast model in basically the same form as Dr. Finarelli's. However, he differed as to the appropriate change in use rates and how the VMC market share should be allocated. Dr. Finarelli assumed a 1.5 percent annual increase in use rate through 2010, and a flat rate thereafter in his analysis. Mr. Richardson argued that the 1.5 percent annual increase was too optimistic, but he acknowledged that the average increase in use rate is one to two percent. When undertaking his analysis, Mr. Richardson testified that he had not examined the District VII Health Council's quarterly reports, whose numbers differed from its annual reports. When shown the quarterly figures, he acknowledged that utilization, on average, had trended upward. Using the revised data, the growth rate in admissions from 2002 to 2003 was 6.8 percent, with a six percent increase in patient days for the same time period. Mr. Richardson agreed that no authoritative literature exists stating that use rates should be kept flat for this type of analysis. He acknowledged he had previously used a variable use rate trend when he prepared the CON application for Wuesthoff's Melbourne facility. The use rate analysis employed by Dr. Finarelli is more persuasive. Another material factor that must be considered in this analysis is that between 2003 and 2005, all Brevard County hospitals experienced a significant increase in average length of stay ("ALOS") of a quarter day or more. This caused the average daily census to increase steadily even as admission growth slowed to some extent. The most likely explanation is that patient acuity increased in the county. As a result of the upward trend in ALOS, Dr. Finarelli used an estimated 4.27 days as the projected length of stay in this case. This figure is consistent with Wuesthoff-Melbourne's current 4.29-day ALOS and PBCH's projected 4.27-day ALOS in 2010. Wuesthoff does not oppose the 4.27-day ALOS projection. The projection is reasonable in this case. Dr. Finarelli projected growth in demand for adult medical-surgical and total acute care, using both admissions and average daily census ("ADC"). According to his calculations, residents of the VMC PSA will account for a cumulative increase in ADC of 75 patients by 2012, while ADC will increase by 188 patients in the county overall. The county-wide increase translates to a need for an additional 250 beds in Brevard County by 2012. Table 15 of the CON application shows hospital utilization of just above the 75 percent optimum level by the end of the third year of operation. Even using a flat admission rate, as proposed by Wuesthoff, the average annual occupancy would still be 74 percent by 2012. Dr. Finarelli's analysis took into account the current addition of 24 ICU beds at Wuesthoff-Rockledge, the shelled-in space for 19 beds at Wuesthoff-Melbourne, and the planned 40-bed expansion at PBCH. Even Mr. Richardson acknowledged the need for more than 126 additional beds by 2010. In allocating market share to VMC, Dr. Finarelli relied on his experience that patients are more likely to shift from one hospital to another within the same system than they are to change systems altogether. For that reason, for the four zip codes of the PSA that are in South Brevard County, Dr. Finarelli assumed that 75 percent of the patients admitted to VMC would be patients who would otherwise use a Health First facility, while 25 percent of the patients admitted would otherwise use a Wuesthoff facility. Mr. Richardson agreed with Dr. Finarelli's volume forecast, but opined that the patients should be allocated 50/50 between Wuesthoff and Holmes. It is more persuasive that patients will keep their physicians and remain within a known health system than they are to change health care providers. The utilization and market shares projected for VMC are reasonable and attainable. VMC's application projects that it will capture the majority of its patients from HRMC, but it will also capture some patients from Wuesthoff-Rockledge and Wuesthoff-Melbourne. In spite of this, Dr. Finarelli projects that the Wuesthoff hospitals will gain in excess of 5,000 admissions (a 34 percent increase) from 2004 to 2012. Admissions at Health First would increase by 29 percent during the same period. In addition to projected in-patient admissions, VMC is expected to have more than 26,000 ED admissions by 2012. This projection is reasonable and attainable. The evidence in this case demonstrates that the most appropriate response to address the demonstrated bed need is through the construction of a new hospital in Viera. The population growth in Viera will more than adequately support a new facility, and the new hospital will foster enhanced access for the community. Wuesthoff raised questions as to whether HRMC's application meets the traditional "not normal" circumstances required in the absence of a numerical bed need. Since the repeal of the numeric bed need methodology, however, the concept of "not normal" does not apply, as each applicant may present its own argument for need. HRMC has done so here. 4. Overwhelming Community Support VMC enjoys strong support from the local community. It received hundreds of letters of support from a broad cross- section of the community, including health care and law enforcement officials, physicians, business and civic leaders, and members of the general public. HRMC's application also included petitions containing over 10,000 resident signatures supporting a new hospital for Viera. It developed a website devoted to this project. Prior to the hearing, over 5,000 e-mails were received by the website in support of the new hospital. Samples of these were included in HRMC's application. 5. Disaster Preparedness During the planning process for the proposed hospital, HRMC sought input from a number of county officials as to how the hospital could be designed to improve the county's capability to respond to a large-scale emergency or catastrophic event. HRMC met with Mr. Robert Lay, Director of the county's Emergency Management Office, and several representatives of local law enforcement agencies. The proposed hospital design incorporates a number of their suggestions and has received strong support from local officials. As director of the Brevard County Emergency Management Office, Mr. Lay is responsible for developing emergency management plans to ensure public safety in the event of an emergency or disaster. He considers the site of the proposed VMC to be a significant benefit because of its inland location and proximity to I-95. The hospital would be further inland than any existing hospital in Brevard County, making it less susceptible to damage from hurricanes and other severe storms. Moreover, its close proximity to I-95 provides easy access to hospital services in the event of a hurricane or mass casualty. The proposed VMC would exceed minimum hurricane standards, allowing it to withstand higher wind speeds and projectile impacts of a hurricane or other major storm. The proposed hospital would offer additional "surge capacity" in Brevard County, that is, the ability to expand treatment facilities to accommodate a large influx of patients in a short period of time. Existing hospitals in Brevard County do not have adequate surge capacity. The proposed hospital would be located near the county health department which would provide additional support for the public clinic located there. The hospital could potentially be used to provide Disaster Medical Assistance Team ("DMAT") support. This is a mobile medical team that can provide emergency medical services in the event of a disaster. The proposed hospital would include facilities specifically designed to support a DMAT in the event of a disaster or other catastrophe. This includes a site that is stabilized and equipped with all necessary utility connections, including potable water, power, data, and sanitary sewer. The proposed facility plans to include isolation rooms, negative pressure beds, and special air handling equipment that may be used in responding to a bioterrorism event. Expert meteorologists testified for both HRMC and Wuesthoff at hearing concerning the potential for hurricanes striking Brevard County. Their testimony differed as to the probability of a catastrophic storm hitting the county, based upon historical precedent and the laws of probability. Clearly, CCH is particularly vulnerable to storms because of its location on a causeway nearly surrounded by water. The remaining hospitals in Brevard County, while slightly more vulnerable to storm damage than the proposed VMC due to their locations, appear to be safe from all but the most catastrophic storms. While building the proposed hospital to the latest Florida Building Code requirements will make it more hurricane resistant than the existing hospitals in Brevard County, this fact alone does not render the existing hospitals in the county unsafe or not suitable to withstand the infrequent storms projected to strike Brevard County. The proposed hospital design includes other elements to assist in the event of a disaster. These include multiple- site entrances that can be controlled and used for specific emergency operations; enlarged ambulance access and discharge areas to facilitate efficient flow of multiple emergency vehicles; a ground helipad designed to handle military aircraft; and a large area near the ED that could be used for decontamination purposes. The proposed hospital will improve Brevard County's capability to respond to emergency or mass casualty events. While this finding, in and of itself, does not justify approval of the CON application, it reflects positively in HRMC's favor. Subsection 408.035(2), Florida Statutes: The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant. The parties stipulated that the Health First and Wuesthoff hospitals are all JCAHO accredited. The evidence at hearing demonstrates that good quality care is provided at the Health First and Wuesthoff hospitals. Holmes is at or near capacity at times. When full, patients have to be cared for in hallways until appropriate rooms are available. The County Emergency Office has been aware of various occasions when hospitals must be called to determine space availability. Many of the county's hospitals, especially in the winter months, experience extremely high occupancy and limited availability of space for handling emergency patients. A number of area physicians testified regarding the frequent difficulty in getting patients admitted to Holmes due to overcrowding. The proposed VMC offers an opportunity to provide additional capacity for emergency and acute care patients in Brevard County. Continued high occupancy rates can lead to a deterioration of quality of care if patients are forced to wait for available beds. The evidence concerning demand supports the existing hospitals as well as the proposed facility in Viera. HRMC sufficiently demonstrated the availability, quality of care, accessibility, and extent of utilization of existing health care facilities in the district. Subsection 408.035(3), Florida Statutes: The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. AHCA is well aware of HRMC's excellent quality of care record. The quality of care offered by HRMC is excellent. The general consensus of those testifying at hearing was that HRMC has an excellent reputation and provides excellent quality care. A number of Wuesthoff's witnesses acknowledged that Health First has a good reputation for providing quality care. Only one physician testified, on behalf of Wuesthoff, that he believed the care offered at Holmes did not meet his standards. All three Health First hospitals are JCAHO accredited. Both Holmes and PBCH have received Magnet Designation, the highest award given by the American Nurses credentialing Center ("ANCC") for excellence in nursing. Less than two percent of hospitals in the country receive such designation, and no other Brevard County hospitals are so designated. In awarding Magnet Designation to a hospital, the ANCC takes into consideration a number of factors, including nursing management, best practices, quality of care, and the supportive environment for nurses to grow both personally and professionally. Holmes was recently ranked the number one cardiac hospital in Florida. In the past year, Holmes was recognized by the Florida Health Care Coalition for high quality service. Health Grades, a national consumer provider website, recognized Holmes as being in the top five to ten percent rankings in cardiac, vascular, pulmonary, and orthopedic services during the past year. Health First has instituted a hospitalist program at its three existing hospitals. This program provides for inpatient specialty care. Health First has made significant strides in the past several years towards its electronic medical model, which helps the system achieve superior quality in patient safety. All clinical applications are now accessible on the Web to allow physicians access to a patient's records from an off-site location. Health First operates an e-ICU system to improve clinical care management. The e-ICU program covers all six units of critical care patients at the Health First hospitals. Health First has implemented a PACS (picture archive communication system) to provide a digital environment for radiology management. Each of these programs will be implemented at VMC. Holmes has been recognized the past two years as one of the "100 Most Wired" hospitals in the country. The evidence was not persuasive that approving VMC would exacerbate any nursing or physician shortages in Brevard County, thereby having a negative impact on quality of care in the county. HRMC clearly demonstrated its ability to provide quality care. Subsection 408.035(4), Florida Statutes: The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment, and operation The parties stipulated that HRMC has sufficient funds available for capital and operating expenditures for the proposed project. The parties further stipulated that the proposed staffing patterns and the projected salaries contained in Schedule 6A are reasonable for the census levels projected in the application. AHCA, as part of its review, determined that HRMC's application met this criterion. HRMC is confident it can recruit and hire the necessary staff to operate the proposed hospital. HRMC has made the development of leadership and management programs a priority. It has focused heavily on recruitment, especially of nurses. Health First proactively approaches staffing. It had a successful recruiting campaign in the past year and was able to recruit and hire "one hundred nurses in one hundred days." Health First is committed to working with educational organizations to enlarge area nursing programs. With the addition of two new nursing programs in Brevard County, the capacity within the county itself to produce qualified nursing graduates has grown. The most recent data from the Florida Hospital Association shows that both nursing turnover and nursing vacancies have decreased from their reported high in 2001. Human resources for Health First hospitals is a corporate function, and services such as recruitment and retention are provided consistently throughout the health system. In addition to staffing, HRMC and Health First have the ability to provide management resources to establish and operate the proposed hospital. The proposed hospital will benefit from the shared resources and efficiencies gained by its affiliation with Holmes and Health First. Corporate functions, such as human resources, finance, marketing, and information technology are provided throughout the organization. Health First operates on a matrix management system under which one person serves as the matrix director for all three current labs, as well as physical therapy, pharmacy, environmental services, and health information management. Although a shortage of nurses and specialty physicians exists in the county, as well as in the rest of the country, the situation is improving. The shortage has improved over the last three to four years. Today, Health First is able to staff its hospitals with competent, skilled nurses. HRMC and Health First demonstrated that they are able to successfully recruit competent staff for certain specialty staff positions, such as radiology technicians. Health First recently recruited more than 15 new physicians in Brevard County, including specialists in neurology, neurosurgery, gynecology, cardiology, internal medicine, family practice, general surgery, and gastroenterology. HRMC's recruiting success complements the more than 180 physicians with offices in the Viera/Suntree area. The number of physicians in this area continues to grow. Moreover, Wuesthoff is able to attract competent, qualified nurses who meet the community standards in terms of education and experience. HRMC was initially concerned that the opening of the Wuesthoff-Melbourne hospital in late 2002 would have an adverse impact on its ability to retain and recruit necessary staff. The impact Health First has experienced, however, has been slight. Also, Wuesthoff publicly claimed that it had no problems in staffing its new Melbourne facility. Wuesthoff-Melbourne opened in December 2002, and staffed its entire facility. The hospital was able to meet the quality standards for the community. Wuesthoff-Melbourne has continued to improve the quality and availability of services. Dr. Williams, whose group practice has an exclusive provider contract with Wuesthoff to provide emergency physicians, testified that Wuesthoff-Melbourne has a full complement of ED physicians and that the quality of care provided by Wuesthoff's EDs is acceptable and within the standard of care for the community. Within months of opening, Wuesthoff-Melbourne had over 300 physicians on staff. Additionally, Wuesthoff-Melbourne has continued to attract better specialist coverage over the past three years. Disapproving the VMC project will not favorably affect the staffing challenges in the county. The core staff needed to care for patients at the new hospital would be needed to staff increased bed capacities at any of the existing Brevard County hospitals. ED call coverage tends to be a problem in Brevard County. The evidence was not persuasive, however, the problems experienced in Brevard County are as significant as they are in other parts of the state, or that approving VMC would materially exacerbate the problem. The evidence did not demonstrate that physicians would be on call at more than one hospital if VMC were approved. The evidence did not prove that physicians would give up their privileges at other Brevard County hospitals to accept privileges at VMC in such significant numbers that other hospitals would be unable to staff their EDs. The VMC project has drawn considerable support (over 78 letters) from physicians in the community. Many of these physicians are interested in joining the VMC medical staff. HRMC has demonstrated that it has ample resources available and funds for capital and operating expenditures to accomplish its proposed project. Subsection 408.035(5), Florida Statutes: The extent to which the proposed services will enhance access to health care for residents of the service district The extent to which the proposed services will enhance access to health care for residents is a significant criterion when considering a proposal to establish a new hospital. The VMC project demonstrates compliance with this factor as it emphasizes access to emergency services, as well as basic hospital services, in a rapidly-growing suburban market. AHCA has favored projects similar to what HRMC proposes, recognizing a national trend to approve projects that propose smaller, suburban hospitals rather than adding beds at existing urban hospitals. Such applications emphasize access to emergency care and basic hospital services. In terms of traffic, the proposed site is approximately 10 miles from the nearest Wuesthoff hospital, and 15 miles from the nearest Health First hospital. As the population continues to grow, traffic access will diminish. Wuesthoff presented a travel time study analyzing the time it takes to travel from the proposed Viera hospital location to Wuesthoff-Rockledge and Wuesthoff-Melbourne during morning and afternoon peak traffic hours. The report concluded that a driver could reach either Wuesthoff-Rockledge or Wuesthoff-Melbourne from the propose Viera site within 20 minutes during both the morning and afternoon peak hours. The results of the study are not entirely persuasive for several reasons. The study claimed to use three test runs for each of the routes examined, yet the I-95 route result was based upon one run only. Next, the peak times used for the traffic runs were defined as 7:00 a.m. to 9:00 a.m. and 4:00 p.m. to 6:00 p.m. The actual runs, however, were made almost exactly at the beginning of the peak hours as so defined (all between 7:00 and 7:10 a.m. for the morning runs, and between 4:00 and 4:07 p.m. for the afternoon runs). This study failed to take into account any possible variations during both the morning and afternoon rush hours. Moreover, Dr. Finton, a physician who lives in Suntree (near Viera) testified that the same runs take him 30-45 minutes to reach any of the three hospitals, Wuesthoff-Rockledge, Wuesthoff-Melbourne, or Holmes. The travel time study was incomplete and, therefore, unpersuasive that the existing hospitals can be reached within 20 minutes during peak travel times. Diversion The Brevard County EMS system controls which hospital can go on diversion, and works based upon the hospital's good faith assumption that it will act in the patient's best interest. In 2005, the EMS policy on diversion for south Brevard County changed. If any one of the three existing hospitals in that part of the county can take patients, the diversion request is granted. The factors that typically trigger a hospital to diversion status are a sudden influx of critical patients or the lack of available beds in the ED. When a hospital goes on diversion, its emergency room is, in effect, closed. This strains and compromises the delivery of medical services. In 2005, diversion status was granted 53 times. In 2006, approximately 40 diversion requests had been granted as of the date of hearing. Although the number of diversion requests in 2006 was down from the 2005 level, the number of hours the hospitals remained on diversion status increased. In some instances, Holmes' diversion request has been denied because PBCH was at capacity and could not take more patients. A week before final hearing in this case, Holmes was operating at capacity with as many as 36 patients in the ED waiting for beds, and was forced to go on diversion status. Even when a hospital is denied diversion status, the EMS system feels the impact because patients taken to the ED cannot be accepted due to lack of a bed. This forces the paramedic to wait with the patient for an hour or more, which takes the emergency vehicle and the paramedic out of service. Approval of VMC would improve emergency medical care for the residents of Brevard County. Adding more beds in Viera would decompress the high census problems at Holmes and PBCH. The EMS transport times in Midwest Brevard County would decrease, especially in the areas served by the Viera and Suntree stations. The Viera project will enhance access to a rapidly growing community as recognized by the testimony of Brevard County health officials and health care providers. 2. Financial Access HRMC's proposed CON conditions will improve financial access for low income residents of Brevard County. This access is assured through Health First's commitment to approval of VMC on the conditions it proposed. Wuesthoff acknowledged that patients making up the payor class addressed by HRMC's 19.5 percent condition, including Medicaid, Medicaid HMO, self-pay, the uninsured, KidCare, and charity care could be deemed "safety net" patients. Wuesthoff has no system-wide condition concerning safety net care, and Wuesthoff-Rockledge has no hospital-wide condition regarding Medicaid or charity care. HRMC demonstrated that its proposed services will enhance access to health care for residents of the service district. Subsection 408.035(6), Florida Statutes: The immediate and long-term financial feasibility of the proposal Immediate or short-term financial feasibility The parties stipulated that the proposed project demonstrates immediate financial feasibility, since HRMC has sufficient funds for capital and operating expenses available for the proposed project. 2. Long-tern financial feasibility AHCA tests the reasonableness of an applicant's financial projection by comparing them with their peer group experience. In this case, AHCA concluded that HRMC's financial ratios were within the reasonable range. Generally, a CON project is financially feasible if it will at least break even in the second year of operation. However, a project is not financially feasible in the long-term if it continues to show a loss in the second year of operation, unless it is nearing break-even and can demonstrate that it will break even within a reasonable period of time. New hospitals are not developed for a two- to three-year projection. The life of a hospital is measured in decades, not years. The net operating revenue projected on Schedule 7A of the HRMC application, the starting point for the net income/loss projected on Schedule 8A, is reasonable. Holmes projects it will generate a net loss of just over $1 million in its first year of operation, but will generate net profits of $5.6 million and $11.7 million in its second and third years of operation. On a stand-alone basis, the proposed VMC project is financially feasible in the long term. When viewed on a consolidated basis with the other two HRMC hospitals, Holmes and PBCH, as well as on a health system-wide basis (Health First), VMC is also feasible in the long term. Wuesthoff argued that HRMC would be better served by investing its money in some high yield instrument rather than building a new hospital. Since the hospitals involved in this proceeding are not-for-profit corporations, and involved in the health care business, maximizing profits and returns on investment are not of primary concern. Wuesthoff's health planner, Rick Knapp, acknowledged that the primary mission of both Wuesthoff and Health First is to provide medical facilities and services in their communities. The manner in which HRMC accounted for the management fee line item in the VMC pro forma is consistent with how it is treated for PBCH, and is reasonable. The criticisms leveled by Wuesthoff against HRMC's application concerning financial feasibility focused on alleged differences between the Wuesthoff and Health First case mix adjusted prices; the outpatient competition from Phase I of Viera; the "lost" investment opportunity for the funds spent in developing VMC; and the effect the opening of VMC will have by stealing patients from Wuesthoff. The evidence supported HRMC's contention that its case mix adjusted prices were well within, if not below, the parameters for other counties of similar size. Wuesthoff did not quantify the alleged impact the outpatient services in Viera would have on VMC's outpatient revenues. The project is financially feasible with the funds being spent for the delivery of health care services, not for seeking potential "lost" income on investments, which is clearly not a goal of Health First. No provider is guaranteed a particular share of the market. Health First and Wuesthoff must compete with all providers for their patients. Dr. Eisenstadt's challenge to VMC's financial assumptions is not persuasive. He sought to compare the facilities' financial feasibility based upon data from Holmes. The percent to gross revenue, the percent payor mix, the gross charges per case, the gross charges per patient day, and the case mix index are all different, and not comparable. HRMC demonstrated that the proposed VMC project is financially feasible in both the short and long term. Subsection 408.035(7), Florida Statutes: The extent to which the proposal will foster competition that promotes quality and cost-effectiveness Generally, competition for hospital services benefits consumers because it leads to lower prices, creates incentives for hospitals to lower costs, and leads to improved quality of care. The proposed Viera facility will add bed capacity which will permit increased supply to serve the growing demand for health care services. The proposal will add not only beds, but the proposed site is in an area in which demand is demonstrating particularly strong growth. The Viera facility is well-positioned for convenient or lower cost access for patients requiring hospitalization. AHCA believes that a CON applicant can overcome the potential adverse impact associated with a proposed new hospital project on an existing provider by offering to extend access to lower income persons. HRMC and Health First have agreed to do this through the conditions set forth in the application. Table 13 of HRMC's application provided a market share analysis to show what share the new hospital is expected to capture in each of the five zip codes in the PSA by the third year of operation. HRMC projects that it will take three years for it to achieve its market share of just under 21 percent of the PSA. These projections are reasonable and accurate. Table 16 of the application indicates sufficient demand and population growth in the VMC PSA to support the proposed Viera hospital as well as the existing providers. Figure 18 of the application represents the change in adult medical/surgical discharges by hospital between 2004 and 2012, assuming VMC is opened. It demonstrates that, with the exception of Holmes, every other hospital in Brevard County will see a significant increase in adult medical/surgical discharges over that eight-year period, even if VMC is built. As stated previously, the decline in discharges at Holmes is a desirable effect of building the new hospital because it will allow Holmes to decompress its currently over-utilized state. The decision to establish Wuesthoff-Melbourne was a centerpiece in the Wuesthoff Health Systems strategy to be more attractive to managed care providers by having a presence in south Brevard County. Wuesthoff's CEO acknowledged that it is now competitive with Holmes from a pricing perspective. No managed care organization has refused to negotiate with Wuesthoff since it opened its Melbourne facility in late 2002. Wuesthoff hospitals now have managed care contracts with four of the five major managed care organizations. It does not have a managed care contract with Health First Health Plans (HFHP). Wuesthoff has never attempted to contract with HFHP. Candidly, Wuesthoff conceded that it would not be in its best interest to attempt to contract with a competitor (Health First) and therefore promote the competitor's growth. Wuesthoff-Melbourne has attempted in the past to expand its current bed capacity. In 2004, it filed a CON application to expand to 134 licensed beds, a 19-bed addition. Although the 2004 amendments to the CON law eliminated the need to request regulatory approval to add beds, and despite having the space for the additional beds shelled-in, Wuesthoff has yet to expand beyond 155 beds at its Melbourne facility. Wuesthoff argues that its Melbourne campus needs a more complete array of services, including open-heart surgery and Level II NICU, in order to better compete with Holmes. Wuesthoff-Melbourne, however, has not committed to expanding its bed capacity at any time over the next 10 years, nor does it have a current written plan for the timing of any future expansion. Further, Wuesthoff-Rockledge has made no public plans to expand its facility at any particular time in the future. Approval of HRMC's application is pro-competitive. Dr. Lynk's testimony in this regard is persuasive. Dr. Lynk, an industrial organization economist, has testified in CON matters for over 20 years and employs generally accepted data and economic regression methods and variables that are generally accepted in the field of industrial economics. Based upon Dr. Lynk's testimony, it is found that HRMC's prices are within the observed range of hospital prices for inpatient services in competitive Florida markets, and are at competitive levels, as measured by reliable objective data and generally accepted econometric methods. Wuesthoff's prices, on average, are currently lower than HRMC's. This comparison, however, does not determine whether the prices are competitive, because in a comparison of two hospitals, one must necessarily be lower than the other. A comparison of pricing alone does not lead to the conclusion that one hospital is pricing below, at, or above competitive levels. The price difference between HRMC and Wuesthoff hospitals is within the observed range of price differences between hospital providers observed in a large number of other Florida markets with multiple competing hospitals. HRMC provided extensive data to support this finding. Wuesthoff's claim that HRMC's prices are above competitive levels is not supported by the evidence. Construction of the new Viera facility will expand capacity in a market that is experiencing growing demand, particularly in the PSA. Because it will expand bed capacity in Brevard County, especially in the fastest growing area of the county, the new facility will competitively benefit Brevard County residents in need of hospital services. Dr. David Eisenstadt testified on certain competition issues in this case. Dr. Eisenstadt is an experienced and respected economist. However, the opinions he offered concerning the anti-competitive effects of approving HRMC's CON application are not persuasive. Dr. Eisenstadt's testified that the Viera project will harm hospital competition in southern Brevard County if VMC prevents Wuesthoff-Melbourne from expanding to 200 beds from its current size. Further, he opines, the new hospital will increase hospital costs to the managed care industry in Brevard County by approximately $189 million in 2004 dollars. Dr. Eisenstadt's opinion in this regard is not found to be persuasive. Dr. Eisenstadt's opinion on the competitive impact of the new Viera hospital was based upon his regression analysis. In conducting this analysis, Dr. Eisenstadt relies upon his measure of hospital "dominance" in a particular market. The dominance measure used by Dr. Eisenstadt is new and not generally accepted in the economic community. He concludes that managed care prices in Brevard County will decrease by a total of $189 million if the Wuesthoff-Melbourne hospital increases in size from 115 to 200 beds. Of course, Wuesthoff-Melbourne has neither attempted to increase its bed complement to 200 nor to produce evidence of a written long-term plan setting forth a timetable for increasing the hospital's bed capacity. Dr. Eisenstadt's dominance variable regression technique is not found to be persuasive for several reasons. First, it has not been shown to be generally accepted by the economic community. He has never used the particular theory in the past nor can he point to another expert who has employed the theory. The technique he has chosen to use in this case has not been critically reviewed by the community of economists and is, therefore, not persuasive. Dr. Eisenstadt's cost savings analysis is driven entirely by bed numbers. He testified that so long as Wuesthoff-Melbourne increased in size from 115 to 200 beds, while Holmes remained the same size, HRMC's dominance would drop along with the prices leading to his estimated cost savings. In short, a change in number of beds drives a change in dominance. This theory is not borne out when examining all hospitals in Florida. Such an examination reveals no link between bed numbers and a particular hospital's dominance in a market. Dr. Eisenstadt's dominance measure is not consistent with testimony from other managed care representatives about what makes a hospital dominant. The evidence supports that it is not just the size of the hospital, but the availability of complex services that makes one hospital dominant over another. In this case, Holmes provides a far more complex mix of services than Wuesthoff-Melbourne, which should support a more dominant position for Holmes based upon the services offered, not the relative size of the two facilities. Yet, a comparison of the supposed "dominance" of hospitals throughout Florida, as measured by Dr. Eisenstadt, with the acuity of patients (as measured by case mix), shows no correlation. Dr. Eisenstadt's methodology did not accurately predict actual pricing behavior by Holmes when it was applied historically. Dr. Eisenstadt's model predicts that as Wuesthoff-Melbourne grows compared to HRMC, HRMC's prices should decrease. However, Dr. Eisenstadt conceded that the data from December 2002 (when Wuesthoff opened its new 65-bed campus in Melbourne and Holmes added no new beds) through December 2004 showed that Holmes' prices did not decrease relative to Wuesthoff's. This directly contradicts Dr. Eisenstadt's methodology. Dr. Eisenstadt's measure of dominance in his regression study classifies a number of hospitals commonly regarded as prominent and desirable facilities (and therefore expected to have substantial market power), such as the University of Florida Shands teaching hospital, as not being "dominant." Conversely, he classifies several relatively small hospitals as "dominant," such as St. Cloud Hospital, when they do not possess the size and characteristics of traditionally strong hospitals in the marketplace. These classification aberrations, when viewed in the context of a methodology that has not been generally accepted in the economics community renders the reliability of this regression analysis suspect. Dr. Eisenstadt did not testify that building the Viera facility would prevent expansion of Wuesthoff-Melbourne, nor could he testify that Wuesthoff-Melbourne would be expanded at any specific time in the future. His dominance-based pricing analysis also assumed that neither Holmes nor PBCH added beds. His estimate of an increase of $189 million in managed care costs to the market is based upon two unsubstantiated assumptions: 1) that Wuesthoff-Melbourne would not and could not expand if Viera is built; and 2) that Wuesthoff-Melbourne would expand to 200 beds if VMC is not built. The evidence at hearing supports neither of these assumptions. Dr. Eisenstadt also testified that building VMC will be anti-competitive, regardless of whether Wuesthoff-Melbourne's expansion is affected by VMC's construction, because he concludes that VMC's charges will be higher than Wuesthoff's. The result, he opines, will be that VMC will cost managed care organizations and employers $75 million more than if the patients were treated at a Wuesthoff facility. His opinion in this regard is also not persuasive. Dr. Eisenstadt assumes, for purposes of this opinion, managed care organizations cannot direct their patients to less costly hospitals if they perceive prices to be above competitive levels. This is not so as evidenced by the fact that the Harris Corporation, one of Brevard County's largest employers, is self- insured, and it steers its plan members to Wuesthoff because of Wuesthoff's lower prices. Interestingly enough, the Harris Corporation supports the Viera facility proposed here which argues against a perception that VMC will not be competitively priced. The substantial growth in Brevard County, especially in the VMC PSA, supports the establishment of a new hospital. Based upon this fact, and the fact that the new facility proposed by HRMC will not be anti-competitive, the proposed facility will not have a material adverse impact on any existing provider. Subsection 408.035(8), Florida Statutes: The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction The parties stipulated that HRMC's application demonstrated the reasonableness of the costs (including equipment), methods of construction, and energy provision for the project as proposed. The architectural drawings submitted by HRMC with its application satisfy all applicable code requirements. The parties also stipulated that the time intervals contained in the project completion forecast depicted in Schedule 10 of the application are reasonable and require no further proof. Subsection 408.035(9), Florida Statutes: The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent HRMC provides its fair share of health care services to Medicaid patients and the medically indigent population of Brevard County. Holmes provides the greatest percentage of charity care as well as the largest volume in terms of total dollars of charity care in the subdistrict. It is also the largest provider of Medicaid services in the subdistrict. HRMC is the largest provider of safety net services in the county. It is larger than all other providers combined. Health First and its member hospitals serve everyone, regardless of insurance or ability to pay. It is fully committed to meeting the needs of the citizens of Brevard County, and does so without receiving tax dollars. In the early 1990s, HRMC established HOPE, a Health Outreach, Prevention, and Education project to serve the health care needs of Brevard County. Since that time, HRMC and Health First have created a series of fixed-site medical clinics to serve the medically needy, in addition to providing a mobile health care delivery clinic that travels to various sites within the county. HRMC has a strong record of providing health care services to Medicaid patients and the medically indigent. Subsection 408.035(10), Florida Statutes: The applicant's designation as a Gold Seal Program nursing facility pursuant to §400.235, Fla. Stat., when the applicant is requesting additional nursing home beds The parties stipulated that this criterion is not applicable. CONFORMANCE WITH RULE CRITERIA When no Agency methodology exists to determine need, an applicant is responsible for demonstrating need through a needs assessment methodology which includes: 1) population, demographics, and dynamics; 2) availability, utilization, and quality of like services in the district, subdistrict, or both; 3) medical treatment trends; and 4) market conditions. Fla. Admin. Code R. 59C-1.008(2)(e). HRMC's application conforms with the preferences contained in Florida Administrative Code Rules 59C-1.008(2)(e) and 59C-1.030. To the extent population growth and utilization outpace hospital expansion, the result creates an access issue. Access to inpatient hospital services affects not only convenience, but also matters of life and death. Access is improved by the distribution of health care facilities where the population needs them most, not by concentrating services in one or two areas. The proposed Viera site is in a rapidly growing suburban community, where the projected population growth in the immediate service area is greater than in the planning area as a whole. Additionally, for the VMC PSA, the elderly population and its growth rate are both projected to increase in the future. The HRMC proposal addresses issues of financial access, based upon HRMC and Health First's system-wide condition of 19.5 percent of admissions for Medicaid and charity care patients. Such a substantial commitment to the underserved mitigates Wuesthoff's contention that approval of VMC will force it to take on a greater share of the indigent patient care. AHCA has a CON condition review process in place which requires an annual report as to the provider's performance in meeting its CON conditions, authorizing it by statute to impose a fine of up to $1,000 per day, and up to $365,000 per year, for any violations. AHCA has utilized its enforcement power in the past, imposing fines of as much as $1.5 million in cases of multi-year violations of CON conditions. IMPACT OF VMC ON WUESTHOFF VMC is projected to capture approximately 30 percent of its patient volume from patients who would otherwise seek care at one of the two Wuesthoff hospitals. At the same time, however, based upon the projected growth in Brevard County, especially in the Viera/Suntree area, inpatient admissions to Wuesthoff are expected to grow by more than 30 percent between 2004 and 2012. Therefore, any impact on Wuesthoff from the new VMC will be short term. While some competitive effect will occur due to the establishment of the new facility in Viera, it will not rise to the level of a substantial adverse impact since the income levels of both Wuesthoff-Rockledge and Wuesthoff- Melbourne are reasonably expected to be at higher levels in 2012 than they were in 2006. According to Dr. Finarelli's projections, Health First, even with VMC coming online, will actually lose market share in certain zip codes as the utilization of Wuesthoff- Melbourne increases. Based upon projections, at a system-wide level, the market shares of Health First and Wuesthoff should remain at the same level in 2012 as they were in 2004, 55 percent and 40 percent, respectively. Wuesthoff argues that approval of VMC would have a significant adverse impact on its two hospitals by jeopardizing its ability to meet bond covenants and by inhibiting its ability to implement its expansion projects. In order to quantify the magnitude of the adverse impact, Wuesthoff offered a sensitivity analysis based in part upon an internal template that Wuesthoff had been using for three to four years. A sensitivity analysis is a type of financial analysis. Normally, revenues and expenses would be projected separately in a financial analysis. In this case, Mr. John Van Gorp, Wuesthoff's expert in health planning and financial analysis, made some assumptions that are contrary to the evidence presented at hearing. First, the growth utilization projections for Wuesthoff for the period 2010 to 2012 are the same for each scenario, with or without VMC. Second, Mr. Van Gorp assumed an annual three percent growth in admissions for the internal projections provided for planning purposes at Wuesthoff-Rockledge, yet assumed only a four percent annual increase combined for growth in admission and price increases. Third, Mr. Van Gorp failed to forecast a specific increase in managed care reimbursement rates for the period 2007 to 2012. Next, his analysis accounts for $1.75 million in additional expenses for hypothetical construction projects of $35 million in 2010, but showed no increasing revenues resulting from these expansion projects at either Wuesthoff facility. Finally, he assumes $35 to $40 million of capital expansion projects at a time when its borrowing capacity, as reflected in its own calculations, shows its borrowing ceiling to be below $35 million. The Van Gorp sensitivity analysis is done at too broad a level to predict detailed information such as cash on hand projected out to 2012. The analysis is too general to predict how the specific bond covenants will or will not be met five to six years in the future. Further, Mr. Van Gorp relies heavily on projections made by the same Wuesthoff financial analysts who projected in two previous Wuesthoff-Melbourne CON applications that the project would be financially feasible within two years. AHCA found both those projects not to be financially feasible and denied them. The sensitivity analysis presented by Wuesthoff has too many weaknesses to serve as a basis for denying HRMC's CON application. Armand Balsano, HRMC's expert in health care finance and planning, prepared an analysis of the impact the approval of VMC would have on both Wuesthoff hospitals. Assuming a 2010 opening date for VMC, by 2012 both Wuesthoff-Rockledge and Wuesthoff-Melbourne are projected to be at their pre-VMC admission levels. Whenever a new hospital enters the market, some effect on existing providers will occur. In this case, the entry of VMC will not create a long-term adverse impact on the Wuesthoff Health System, and will not jeopardize its long-term financial feasibility. Since 2000, Wuesthoff-Rockledge has a net worth of $67.5 million. Wuesthoff-Rockledge is the main economic engine of the Wuesthoff Health system, and continues to show strong growth and improvement in net revenues and cash flows, demonstrating a positive operating income. It experienced more than $24 million in cash flow in its most recent fiscal year. In the most recent fiscal year, Wuesthoff-Melbourne generated a cash flow of approximately $2.5 million, a significant improvement over the previous two years. Furthermore, the operations at Wuesthoff-Melbourne have continued to improve in the current fiscal year, reflecting a positive EBIDA (earnings before interest, depreciation, and amortization) of $6.7 million, evidence of a strong financial improvement. Overall, Wuesthoff-Melbourne has made strong financial headway, despite being a new hospital. Although not in line with its projections in previous CON applications, Mr. Fayer testified that it typically takes four to five years for a new hospital to generate a positive operating income. Wuesthoff-Melbourne is in its fourth year of operation and is nearly there. Mr. Fayer acknowledged that Wuesthoff Health System projects to further improve its financial viability in the next three years. Interestingly, Wuesthoff has developed a master plan to add 40 beds at a cost of more than $80 million at the same time stating that it can barely maintain its bond covenants. Wuesthoff has already spent more than $100,000 on developing expansion plans for its Rockledge campus. If built as now proposed in its master plan, Wuesthoff-Rockledge would expand to 410 beds at a cost of at least $123 million, not including equipment. Since the opening of Wuesthoff-Melbourne, Mr. Fayer has not been turned down by any managed care organization he sought to contract with on behalf of Wuesthoff. He has not contacted Health First Health Plan to determine whether that organization would contract with Wuesthoff. Since its opening in December 2002, Wuesthoff- Melbourne has met or exceeded its projected patient volumes. Wuesthoff-Melbourne cannot argue that it has not yet made a profit due to not meeting its patient volumes. Patient volumes continue to rise at the hospital and it is moving toward a positive bottom line. Wuesthoff-Rockledge has enjoyed an excess of revenues over expenses in every year between 1998 and 2005, except in 1999, that year, Wuesthoff lost $11 million, at least a portion of which was due to mismanagement, lack of overall leadership within the system, and volume variances. Wuesthoff took the necessary and appropriate steps to correct the management issues and quickly returned to a positive bottom line. The adverse impact analysis prepared by Mr. Knapp, based upon patient volume information received from Mr. Richardson, did not present an accurate picture of the alleged adverse impact of VMC on the existing Wuesthoff hospitals. It, therefore, is not persuasive.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency issue a final order approving HRMC's CON Application No. 9881. DONE AND ENTERED this 26th day of January, 2007, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN 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 26th day of January, 2007. COPIES FURNISHED: Michael J. Glazer, Esquire E. Dylan Rivers, Esquire Martin B. Sipple, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 R. Terry Rigsby, Esquire Daniel C. Brown, Esquire W.Douglas Hall, Esquire Carlton, Fields, P.A. Post Office Drawer 190 Tallahassee, Florida 32302 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 William G. Kopit, Esquire Lee Calligaro, Esquire Patricia M. Wagner, Esquire Epstein, Becker and Green, P.C. 1227 Twenty Fifth Street, Northwest Washington, District of Columbia 20037 Jerome W. Hoffman, Esquire Holland & Knight, LLP Post Office Drawer 810 Tallahassee, Florida 32302 David E. Mathias, Esquire Health First, Incorporated 6450 United States Highway 1 Rockledge, Florida 32955 Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Andrew C. Agwunobi, M.D., Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308
Findings Of Fact Life Care Centers of America, Inc. ("Life Care"), a Tennessee corporation, filed a letter of intent, on or about October 31, 1991, and, subsequently, an application for a certificate of need ("CON") to construct a 120 bed community nursing home in Flagler County, Florida, in Department of Health and Rehabilitative Services ("HRS") District 4. HRS published its preliminary intent to approve the Life Care proposal in March, 1992. Life Care manages over 143 nursing homes, and owns or leases 39 of the nursing homes, four in Florida, two in West Palm Beach, and one each in Altamonte Springs and Punta Gorda. On Schedule 2 of Life Care's CON application, no projects or expenditures were listed in Category A - approved or underway. Life Care listed five projects or expenditures, totaling $15,343,867, in Category B - applied for, pending approval or planned. In addition to the projects listed on Schedule 2, NHC Colonial and AHCA assert that Life Care should have also included the following: 1) $800,000 to $1 million in capital projects at the 39 facilities owned or leased by Life Care; 2) an approved CON in Paducah, Kentucky, for $3.7 million; 3) the purchases of facilities in Globe, Arizona and of two Tennessee projects known collectively as Athens/Ridgeview; and 4) a nursing home project in Casper, Wyoming. Capital Projects at Various Facilities Life Care argues that, due to its decentralized organizational structure, it is impossible to determine the total amount of capital projects underway at its facilities at any specific time. The executive directors of Life Care's various facilities submit proposed capital projects for each year. Approval in the form of budget sign-off sheets is given at corporate headquarters for the projects planned for the year. Life Care describes budget sign-off sheets as "wish lists," subject to further review before expenditures are made, and before a determination is made whether the project will be financed or funded from cash flow from operations. At the time an executive director is ready to proceed with a project, the executive director submits a request for capital expenditures ("CER") form for approval at the corporate headquarters. At that time, the method for financing the project is determined. Even if a project is financed through cash flow, it may still be capitalized, if required by generally accepted accounting principles. Life Care asserts that omissions of small capital projects, most of which are likely to be funded by cash flow and are mainly replacement items, minor repairs or renovations, are inconsequential to its ability to fund the project which is proposed in this application. Kentucky CON In 1990, Life Care obtained a CON for a replacement facility in Paducah, Kentucky. The CON was approved and held by Life Care at the time this application was filed in 1991, and at the time of hearing. Life Care asserts that the Paducah nursing home project is not going to be undertaken by Life Care, due to failed negotiations over Medicaid capital reimbursements from the State of Kentucky. Assuming, arguendo, that an approved CON does not have to be listed as a capital project if the applicant has no intentions of using the CON, the problem is that evidence was presented that the project is the subject of some continuing negotiations. For example, the project reappears on April, July, October, November and December, 1991 Life Care project status reports, after having been omitted from August and September reports. In addition, there was testimony regarding continuing efforts to negotiate related land purchases. AHCA takes the position that the Paducah facility had to be disclosed, as a valid or "approved" project, regardless of whether the applicant intends to carry out the project. Purchases in Other States Life Care maintains that the purchase of two Athens, Tennessee facilities, collectively the Athens/Ridgeview project, was intended to be made by an affiliated partnership, not by the applicant, Life Care. Life Care, the applicant, however, was the entity which entered into the purchase contract, and which ultimately purchased the facility. The contract was signed in December 1991, after the letter of intent deadline. Although Life Care first tried to purchase Athens/Ridgeview in August 1991, the sellers accepted the offer of a higher bidder in October. Only when that purchase failed, early in December 1991, Life Care again engaged in negotiations to purchase Athens/Ridgeview. NHC and Colonial alleged that Life Care should have also included on Schedule 2, its purchase of Heritage Health Care Center, Globe, Arizona. Life Care established that the purchase was accomplished prior to the filing of its letter of intent by a partnership not the applicant corporation. AHCA concurs that a project accomplished prior to the letter of intent deadline would not be required to be disclosed. Finally, Life Care failed to list a project in Casper, Wyoming. Life Care leased, but did not purchase the facility in Wyoming. Life Care established that the lease is not a capitalized expenditure, but an operating lease funded by cash from operations. AHCA concurs that, payments from operating expenses are not required to be disclosed in Schedule 2.
Recommendation Based on the foregoing it is RECOMMENDED that The Agency for Health Care Administration enter a Final Order dismissing the application of Respondent, Life Care Centers of America, Inc., for Certificate of Need No. 6834. RECOMMENDED this 10th day of December, 1992, in Tallahassee, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 1992. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 92-2766, 92-2769 Petitioner Colonial Healthcare, Inc.'s, Finding of Fact: Subordinate to Finding of Fact 2. Accepted in Finding of Fact 2. 3 - 5. Accepted in Finding of Fact 4. 6. - 7. Accepted in Finding of Fact 3. Subordinate to Finding of Fact 3. Accepted in Finding of Fact 4. Accepted in Finding of Fact 3 and 6. Subordinate to Finding of Fact 3 and 6. Subordinate to Finding of Fact 4. 13 - 15. Subordinate to Finding of Fact 3. 16. Accepted to Finding of Fact 7. 17 - 18. Accepted to Finding of Fact 8. Accepted in Finding of Fact 3. Subordinate to Finding of Fact 9. Accepted to Finding of Fact 8. Subordinate to Finding of Fact 8. Rejected in Finding of Fact 11. Accepted in Finding of Fact 10. Petitioner National Healthcorp, L. P.'s Finding of Fact: 1. Subordinate to Finding of Fact 2. 2 - 3. Accepted in Finding of Fact 4. 4 - 6. Accepted in Finding of Fact 3. 7. Subordinate to 3, in part, and Accepted in 4-5, in part. 8. Accepted in Finding of Fact 6. 9. Accepted in Finding of Fact 5. Accepted in Finding of Fact 4. Accepted in Finding of Fact 3 and 6. Accepted in Finding of Fact 6. Subordinate to Finding of Fact 3. Subordinate to Finding of Fact 3. Subordinate to Finding of Fact 3 and 6. 16 - 17. Subordinate to Finding of Fact 6. 18. Accepted in Finding of Fact 4. 19 - 20. Subordinate to Finding of Fact 3 and 6. Accepted in Finding of Fact 7. Accepted in Finding of Fact 8. Accepted in Finding of Fact 7. Accepted in Finding of Fact 8. 25 - 26. Accepted in Finding of Fact 7. Accepted in Finding of Fact 8. Subordinate to Finding of Fact 8. Subordinate to Finding of Fact 1. Subordinate to Finding of Fact 3. 31 - 34. Subordinate to Finding of Fact 3. Accepted in Finding of Fact 9. Subordinate to Finding of Fact 4. Subordinate to Finding of Fact 3. Subordinate to Conclusions of Law 2. Respondent Life Care Centers of America, Inc.'s Finding of Fact: Subordinate to Finding of Fact 1 and 2. Accepted in Finding of Fact 2. 3 - 4. Subordinate to Finding of Fact 2. Subordinate to Finding of Fact 4. Accepted in or Subordinate to Finding of Fact 1. Accepted in Finding of Fact 3. Accepted in Finding of Fact 7 and 8. See, except last sentence, in Finding of Fact 7. 10. Accepted in Fending of Fact 9. 11 - 12. See in or Subordinate to Finding of Fact 8. 13. Accepted in Finding of Fact 12. 14. Accepted in or Subordinate to Finding of Fact 10 and 11. 15. Accepted in Finding of Fact 13. 16. Accepted in Finding of Fact 4. 17. Accepted in Finding of Fact 4. 18. Subordinate to Finding of Fact 4. 19. Accepted in Finding of Fact 4. 20. Subordinate to Finding of Fact 4. 21. Accepted in Finding of Fact 4 and 6. 22. Accepted in Finding of Fact 6. 23. Rejected in Conclusion of Law 22 and 23. Respondent Agency for Health Care Administration's Finding of Fact: Subordinate to Finding of Fact 3. Accepted in Finding of Fact 3. 3 -5. Subordinate to Finding of Fact 3. Accepted in Finding of Fact 3. Accepted in Finding of Fact 3. Accepted in Finding of Fact 8. Accepted in Finding of Fact 3 and 8. Subordinate to Finding of Fact 8. Subordinate to Finding of Fact 9. Subordinate to Finding of Fact 8. 13 - 15. Accepted in Finding of Fact 3. Accepted in Finding of Fact 4 and 6. Subordinate to Finding of Fact 3 and 6. COPIES FURNISHED: Thomas Cooper, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gerald Sternstein, Esquire McFarlain, Sternstein, Wiley & Cassedy Post Office Box 2174 Tallahassee, Florida 32316-2174 Theodore E. Mack, Esquire Cobb, Cole & Bell Suite 500 315 South Calhoun Street Tallahassee, Florida 32301 R. Bruce McKibben, Jr., Esquire Haben, Culpepper, Dunbar & French, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Sam Power, Agency Clerk Agency for Health Care Administration 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact The Agency hereby adopts the findings of fact set forth in the Recommended Order.
Conclusions This case was referred to the Division of Administrative Hearings (‘DOAH”) where the assigned Administrative Law Judge (“ALJ”), David M. Maloney, conducted a formal administrative hearing. At issue in this proceeding is whether the Agency for Health Care Administration (“Agency”) should approve the certification of need (“CON”) applications of Miami Jewish Home and Hospital for the Aged, Inc. (“Miami Jewish Home”) to establish a 30- bed hospital within a hospital on its existing campus, and Kindred Hospitals East, LLC (“Kindred”), Promise Healthcare of Florida XI, Inc. (“Promise”) and Select Specialty Hospital- Dade, Inc. (“Select-Dade™) to establish 60-bed free-standing long-term care hospitals in Miami- Dade County, Agency Acute Care District 11. The Recommended Order dated May 17, 2007, is attached to this final order and incorporated herein by reference.
Findings Of Fact At all times material hereto, Respondent has been a registered nurse having been so licensed by the State of Florida. At all times material hereto, Respondent has been employed at Mount Sinai Medical Center. She was originally employed at Mount Sinai as a nursing assistant and was later cross-trained as a patient care assistant. She enrolled in the nursing program at Miami-Dade Community College and graduated in 1979. Mount Sinai reclassified her as a graduate nurse and later reclassified her as a registered nurse in approximately March, 1980, when she successfully completed the examination for state licensure as a registered nurse. Shortly thereafter, Respondent became ill and was diagnosed as suffering from a meningioma, or benign tumor. On October 15, 1980, Respondent underwent a bifrontal craniotomy for removal of the meningioma. The brain surgery was successful, and in three months, Respondent had recovered from the surgery. During the period of surgery and recovery therefrom, Respondent was on medical leave from Mount Sinai. In approximately March or April of 1981, Respondent returned to the hospital and reported for work as a registered nurse. Upon speaking with the Respondent, the Director of Nursing decided instead to allow Respondent to return to work only as a patient care assistant, a job requiring less technical sophistication and responsibility than that of a registered nurse. This decision was initially based on Respondent's disheveled appearance and incoherent speech. Respondent's placement in the patient care assistant position was on a probationary basis and was contingent on Respondent passing a medication examination required of its registered nurses and licensed practical nurses by Mount Sinai. The medication exam utilized by Mount Sinai was written by, and is administered by, its own employees. It is administered as a routine part of employment in, or transfer to, a position as a registered nurse or a licensed practical nurse at Mount Sinai. Successful completion of the examination is viewed as demonstrating knowledge in generic medication and ability to compute and calculate medication dosages. The examination is divided into parts: Part I covers generic medications, and Part II covers dosages. If an applicant fails the examination the first time it is taken, then tutoring is available to the applicant before the test is taken the second time. If an applicant fails the test three times, the applicant's employment, or potential employment, is terminated. Respondent took the examination on May 16, 1979, while she was a student at Miami-Dade Community College and prior to her brain surgery. Respondent scored 98 percent of 100 percent on Part I and 86 percent of 100 percent on Part II. When Respondent took the examination on August 5, 1981, she was administered a different but comparable examination which utilized the same format and covered the same areas. The questions were similar, and Respondent agreed that both tests were fair in application and contents. However, Respondent scored only 42 percent of 100 percent on Part I and 60 percent of 100 percent on Part II. Respondent's performance on the second examination demonstrates markedly reduced medical knowledge. Since failing the examination on August 5, 1981, Respondent has retained the right to take the exam twice more pursuant to Mount Sinai's policy. She has not done so and has made no arrangements to retake the medication exam. The duties of a patient care assistant include working with and assisting the registered nurse in taking vital signs, such as blood pressure, temperature, and respiration. Patient care assistants also assist in giving baths and making beds. They have some secretarial duties and receptionist duties insofar as they answer the telephone and patients' call lights through an intercom system. They take medication orders by telephone from physicians and enter those orders in a computer, the accuracy of which entry is later verified by a registered nurse. Since returning to work, Respondent has not performed her duties as a patient care assistant in a manner consistent with her previous abilities. She has difficulty transcribing telephone messages correctly and in inserting information under the proper heading on patient care forms. She has been repeatedly reoriented as to the methodology of taking and recording temperatures and other vital signs. She requires a lot of direction and close supervision in addition to daily reinforcement. Many of the duties of a patient care assistant are the same duties of a registered nurse. Registered nurses take orders from physicians by telephone, and they must make detailed notes regarding a patient's condition. During the formal hearing in this cause, Respondent was posed a question from the examination which she took on May 16, 1979. The question required the person being tested to convert 75 milligrams into an equivalent in grains. Respondent had correctly answered 1.25 grains when she took the test in 1979. After calculating the conversion equation during the hearing in this cause, Respondent arrived at an answer of 11 grains. Respondent recently commenced working part-time as a registered nurse at a medical clinic in addition to her full-time employment as a patient care assistant at Mount Sinai Medical Center.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED THAT: A final order be entered finding Respondent, Victoria F. Perez Martinez, guilty of the allegations contained in the Administrative Complaint filed herein and suspending her license No. 1147872 until such time as Respondent can demonstrate that she can resume the competent practice of nursing with reasonable skill and safety. RECOMMENDED this 22nd day of October, 1982, in Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings Department of Administration 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of October, 1982. COPIES FURNISHED: W. Douglas Moody, Jr., Esquire 119 North Monroe Street Tallahassee, Florida 32301 Robert V. Shea, Esquire 220 Miracle Mile, Suite 231 Coral Gables, Florida 33134 Mr. Samuel R. Shorstein Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Ms. Helen P. Keefe Executive Director Board of Nursing Department of Professional Regulation 111 East Coastline Drive Room 504 Jacksonville, Florida 32202
