The Issue The issue for consideration in this hearing is whether Petitioner meets the academic requirements for licensure as a registered nurse in Florida.
Findings Of Fact At all times pertinent to the issues herein, Respondent, Board of Nursing, has been the state agency responsible for the licensing of registered and licensed practical nurses in Florida and the regulation of the nursing profession in this state. On November 25, 1998, while residing in France, Petitioner, Pascal Canesse, filled out an application for nursing licensure (DH Form 1204. 8/98), seeking licensure by examination as a registered nurse in Florida which he submitted in January 1999. Prior to the hearing, the parties stipulated, and it is found, that: Petitioner attended the nursing program at Institute Formation en Soins Infirmiers (the Institute) in France from 1993 - 1995, The Official Transcript submitted by the Institute does not list classroom instruction or clinical practice in obstetrics. The Training Sessions, or clinical practice, portion of the Official Transcript submitted by the Institute includes a breakdown of 350 hours of surgery training that includes the following subject areas: emergency polyvalent intensive care digestive surgery and urology The Form B submitted by the Institute states that Petitioner had 600 hours of classroom instruction and 490 hours of clinical practice in surgical nursing. The Training Sessions, or clinical practice, portion of the Official Transcript submitted by the Institute lists a total of 1,715 hours of training. The theoretical Assessment portion of the Official Transcript submitted by the Institute does not include the number of hours of instruction but breaks down the training to include nursing care to patients in the following categories: psychosis patients patients with breathing problems patients with ENT-stomatology- dermamtology troubles patients with endocrinous troubles patients with digestive troubles patients with troubles of the nutriment duct pediatrics and child psychiatry elderly patients with neuropsychiatry troubes elderly patients patients with nervous system troubles patients in emergencies-intensive care-blood transfusions patients with hematology/urology/nephrology troubles In answer to question 6 on his application, Petitioner stated that he completed 40 hours of training in obstetrical nursing under the categories listed on the transcript. The Form B - Transcript of Nursing Education in a Foreign Country submitted by the Institute and relating to Petitioner reflects that he received 40 hours of classroom instruction in obstetrical nursing. No hours of clinical practical in obstetrical nursing are reflected. In correspondence to the Board dated June 10, 1999, Petitioner set forth his explanation of the discrepancies in the application, Form B, and his transcript. Petitioner contends that when he filled out his application and the supporting documentation therefor, he listed 525 hours of clinical medical nursing practice and 490 hours of clinical surgical nursing practice. While he reflected 40 hours of instruction in obstetric nursing, he failed to indicate any obstetric clinical practice. He claims the number of hours claimed as being in medical/surgical area comprises the number of hours in both, including obstetrics. His failure to enter any clinical practice in the obstetrics area was the result of a combination of that discipline with medical/surgical training as is done in France. This reflects clinical hours only. His claim of 40 hours training is for classroom work in obstetrics only. It is not combined with surgery. It would have been much clearer if he had marked down the course he took rather than just the hours taken. A review of the Official Transcript provided by the Institute to be submitted to the Florida authorities in support of Petitioner’s application clearly fails to specifically indicate any obstetrical training. The "Addendum to Transcript" dated May 4, 1999, reflects 70 hours of obstetric classroom in addition to two weeks' clinical obstetrics experience. This is different from the surgical nursing that had been combined with surgical nursing on the Form B originally submitted. Other documentation from the Institute, a letter dated June 25, 1999, indicates that two "weeks" is equivalent to 70 hours. That same letter notes that much of the training in France is hospital-based with a significant amount of training being clinical in nature with a heavy emphasis in surgery. The French authorities claim that those surgical hours are comprehensive, and it is in that curriculum that the students receive clinical and classroom obstetrics training, with the clinical portion being a full two weeks - that is, "a minimum of 70 hours." Petitioner also introduced a syllabus for the module in the Institute’s nursing training program which relates to gynecology. This reflects the areas covered and includes a significant amount of information apparently related to obstetrics and childbirth. The syllabus reflects an extensive amount of clinical instruction over the three years of nursing training. However, again, the supporting documentation does not clearly quantify that portion of the training which deals with obstetrics, nor does it show where the training is integrated into the surgical nursing training as claimed by Petitioner. Petitioner was unable to convincingly recall at which point in the three-year training program he took the required clinical obstetrics training. At one point, in his deposition, he claimed it was integrated in his emergency medicine training. At hearing, however, he claimed it was integrated with medical surgical training. The fact that the obstetrical clinic may have been integrated with another service is not, of itself, disqualifying. The Board of Nursing accepts integrated nursing training, under certain conditions. When course integration is claimed, however, the Board requires the submission of a detailed course outline that delineates where the specific course content, here, obstetrics, is presented. Further, the Board considers the integration of obstetrics with emergency surgery as inappropriate because the basic nature of the disciplines is not the same. While one is reactive, the other is pro-active. No doubt, Petitioner was exposed to an obstetrics curriculum which included both classroom and clinical instruction. From the state of the evidence presented, however, it is impossible to determine the breadth and content of this exposure. According to Ms. Jacobsen, the Board’s nursing education director, staff which reviewed Petitioner’s application was concerned over the unexplained inconsistency in the supporting documentation submitted therewith. None of the information on the various submitted documentation matched. On its Notice of Educational Deficiencies dated May 20, 1999, it was suggested that Petitioner have his school write a letter explaining the discrepancy. The Institute’s letter of June 25, 1999 asserts that the required clinical training was provided, but does not define with any particularity at which point in the training the obstetrics discipline is treated. It appears to be integrated into the surgical clinical training, but from the state of the documentation presented, the particulars cannot be determined.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is recommended that Petitioner’s application to sit for examination for licensure as a registered nurse in Florida be denied until he provides sufficient explanation of the clinical training he received in obstetrical nursing or proof of completion of the required training at an alternative approved site. DONE AND ENTERED this 28th day of April, 2000, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 2000. COPIES FURNISHED: Doris A. Bunnell, Esquire 608 15th Street, West Bradenton, Florida 34205 Lee Ann Gustafson, Esquire Office of the Attorney General Department of Legal affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 William Large, General Counsel Department of Health 2020 Capital Circle, Southeast, Bin A02 Tallahassee, Florida 32399-1703 Angela T. Hall, Agency Clerk Department of Health 2020 Capital Circle, Southeast, Bin A02 Tallahassee, Florida 32399-1703 Ruth Stiehl, Executive Director Board of Nursing Department of Health 1940 North Monroe Street Tallahassee, Florida 32399-0750
The Issue Whether Respondent, Rick J. Billings, O.D., committed the acts alleged in the Administrative Complaint and, if so, what disciplinary action shall be taken against his license to practice optometry.
Findings Of Fact Petitioner, the Department of Health (Petitioner), is the state agency charged with enforcing the statutes and regulations governing the practice of optometry in the State of Florida. However, at the time the complaints in this cause were filed, this responsibility was assigned to the Agency for Health Care Administration. Respondent, Rick J. Billings, O.D., is, and has been at all times relevant to this proceeding, a licensed optometrist in the State of Florida, having been issued License No. OP 0001816 in 1983. Respondent is a Board-certified optometrist and has practiced in Sarasota, Florida, for 13 years. Patient D.R. first presented to Respondent on August 18, 1992. At the time of the initial visit, Patient D.R., a ninety- year old female, was accompanied by her niece, Phyllis Glass. During that initial visit Respondent performed a pre- operative examination, including a vision test, on Patient D.R. Based on his examination, Respondent diagnosed a cataract in Patient D.R.’s left eye and recommended surgical removal of the cataract by Harry B. Grabow, M.D. Notwithstanding this recommendation, Patient D.R. was free to return to her former ophthalmologist had she chosen to do so. Dr. Grabow is an ophthalmic surgeon, Board-certified in ophthalmology in the State of Florida and by the American Board of Eye Surgery. Dr. Grabow has been in private practice in Sarasota, Florida, for 20 years and his medical practice is known as the Sarasota Cataract Institute. Patient D.R. was first seen by Dr. Grabow on September 2, 1992, and again for a pre-operative visit on September 18, 1992. Dr. Grabow performed surgery for the cataract of Patient D.R.’s left eye on September 22, 1992. During his treatment of Patient D.R., Dr. Grabow provided her with written instructions regarding pre-operative and post-operative care and activity, and with medications or prescriptions and written instructions for their use. These printed instructions had been previously discussed with Respondent. Dr. Grabow saw Patient D.R. post-operatively on the first post-operative day, September 23, 1992, and then discharged her to return to the care of Respondent. Thereafter, Respondent assumed responsibility for Patient D.R.'s care. On October 5, 1992, Patient D.R. presented to Respondent for a post-operative visit. At that time, Respondent conducted a problem-specific post-operative examination of Patient D.R. The examination included tests for visual acuities, far and near, corrected and uncorrected, to assess the patient's need for glasses; keratometry; refraction assessment; external examination; slit-lamp pupillary examination; test of macular regions; and bio-microscopy. Respondent was unable to perform a tonometry because Patient D.R. refused. The results of the October 5, 1992, post-operative examination of Patient D.R. were recorded on a form provided by Dr. Grabow; supplied all the information about Patient D.R. that Dr. Grabow needed; and was completed by Respondent in a format that was useful to Dr. Grabow. During the October 5, 1992, office visit, Respondent scheduled Patient D.R. for a re-check in four weeks. However, the patient cancelled her appointment. Thereafter, someone from Respondent’s office called Patient D.R. to make an additional follow-up appointment, but the patient refused, believing that a follow-up visit was unnecessary. Respondent kept the required written optometric records regarding Patient D.R. and otherwise met the applicable standard of care. The written optometric records made and maintained by Respondent were such that a similarly trained optometrist could have treated Patient D.R. after review of her record. The tests performed by Respondent on Patient D.R. during her October 5, 1992, visit were appropriate in a post- operative co-management situation. Likewise, Respondent properly recorded the examinations and the results thereof. During Patient D.R.’s post-operative visit, Respondent did not list medications or re-instruct Patient D.R. regarding medication use. Because Respondent made no changes in the post- operative medication or instructions given by Dr. Grabow, it was unnecessary for Respondent to make notations concerning them. Respondent would have made such notations only if he were changing the previously issued instructions or writing a new prescription. Respondent did not record any information relative to patient education because verbal and written instructions concerning eye care had been provided to Patient D.R. by Dr. Grabow. Furthermore, it was unnecessary for Respondent to repeat or elaborate on those instructions, absent a change or an indication that the patient did not understand the instructions. In this case, there was neither a change in Dr. Grabow’s instructions nor any indication that Patient D.R, did not understand those instructions. On or about October 8, 1992, Dr. Grabow received from Respondent the post-operative co-management information regarding Patient D.R. The information on Patient D.R. that Respondent provided was what Dr. Grabow expected and needed. Similarly, Dr. Grabow determined that the tests performed by Respondent on Patient D.R. during her post-operative visit were adequate for his purposes and met the standard of care for optometrists as well as opthalmologists. On November 26, 1991, prior to seeing Patient D.R., Respondent entered into a Supervised Co-Management Agreement (Agreement) with Dr. Grabow and Sarasota Cataract Institute. Prior to entering into the Agreement, Dr. Grabow and the Sarasota Cataract Institute determined that Respondent was capable of competent post-operative co-management of cataract patients. Moreover, it was determined that Respondent’s post- operative care record met the standard of care for an optometrist in that community. Pursuant to the Agreement, Respondent was permitted to participate in the post-operative care of cataract patients. However, the ultimate responsibility for the care of the co-managed patient remained Dr. Grabow's, as the operating and supervising surgeon. It is Dr. Grabow's custom and standard practice to see his post-operative cataract patient only once. Because patient needs may vary, Dr. Grabow’s practice is to leave the frequency and duration of post-operative examinations to the discretion of the co-managing optometrist who assumes responsibility for the patient. Since entering into the Agreement with Respondent, Dr. Grabow has been satisfied with the care that Respondent rendered to patients which they co-manage, including Patient D.R. In all cases, Dr. Grabow has always provided whatever supervision was necessary, although no such supervision was required during the course of Patient D.R.'s post-operative care. There is no defined standard of care in the statutes or the Board's rules that apply to co-management of post- operative cataract patients. The standards are left to the discretion of the co-managing physicians. Here, the protocol crafted by Dr. Grabow and Respondent became the standard of care, and the post-operative care of Patient D.R. met the applicable standard of care as well as the expectations of Dr. Grabow. The eye examinations required of an optometrist in a post-operative co-management situation are left up to the professional judgment of the doctor or doctors involved, and depending on the type of cataract surgery, the techniques used by the surgeon and the agreement between the co-managing physicians. Respondent performed an examination consistent with that judgment. At all times material hereto, there were no published requirements that specified or enumerated the examinations that should be performed on post-surgery cataract patients. However, with regard to the examinations performed on Patient D.R. during her post-operative care visit, Respondent provided care within the applicable community standard. Respondent's notations of the results of the examinations are consistent with the standard of care. There are no statutes, rules, or guidelines requiring an optometrist to provide patients with instructions regarding their medication or to record a rescheduled visit in the patient's medical record. In this case, based on the Agreement and his previous discussions with Dr. Grabow, Respondent knew what medications and instructions Patient D.R. had been given by Dr. Grabow. In this regard, Respondent met the standard of care. At all times relevant to this proceeding, Medicare permitted a global fee for cataract surgery, which was allowed to be divided in co-management care between an ophthalmologist and optometrist. Under the Medicare-prescribed fee schedule, optometrists who provided post-operative care were able to collect 20% of the global fee; and the operating and supervising physician could receive 80% of the global fee. The division of the global fee between Dr. Grabow and Respondent in Patient D.R.'s case was in compliance with Medicare regulations. Pursuant to 1992 Medicare rules related to billing, the doctor who assumed care in the post-operative period and received the permitted 20% of the global fee was responsible for the care of the cataract patient for up to 90 days after the patient’s first post-operative visit to that physician. After he had seen the patient for one post-operative visit, the doctor was allowed to bill for this twenty percent. No specific number of visits was required in order to bill for 20% of the global fee. However, Medicare did require that the co-managing optometrist assume responsibility for the post-operative care of the patient for the ninety-day period. In 1992, Respondent charged $220.00 for post- operative care for cataract patients. These charges included seeing the patient a minimum of one time after the surgery and being available for a ninety-day period thereafter. Consistent with this fee schedule, Patient D.R. as Medicare patient, was charged and paid a co-payment or estimated deductible of $44.00. Respondent's billing service then, billed the difference, $176.00 to Medicare. This post-cataract surgery care bill submitted to Medicare by Respondent was proper as to the amount claimed for the services provided. With respect to the type of claim that was being filed, however, Respondent's billing service mistakenly filed the claim for Patient D.R.’s post-operative case as an unassigned claim. As a result of the claim being incorrectly designated as an unassigned claim, Medicaid sent 80% of the Medicare approved amount for the post-operative services, $174.86, to Patient D.R. In late January 1993, Patient D.R.’s niece received a call from a member of Respondent’s office staff concerning the $174.86 check. During the conversation, Ms. Glass was told that the charge for post-operative services was $220.00 and that the $174.86 check had been sent to Patient D.R. in error. Subsequently, Ms. Glass telephoned Respondent to discuss the matter. Respondent explained to Ms. Glass that the check $174.86 represented his portion of the total charge for post- operative cataract services. Respondent further explained that this amount included his being available to Patient D.R. for ninety days from October 5, 1992, the date of her post-operative visit to Respondent's office. Respondent's representations and those of his staff were substantiated in the Explanation of Medicare Benefits Statement (Explanation) sent to Patient D.R. According to the Explanation, which was dated November 9, 1992, Respondent’s charge for “care after [cataract] operation" was $220, but the Medicare approved amount for these services was $218.57. After deducting the 20% co-payment amount paid by Patient D.R. to Respondent, the Medicare approved payment for post-operative care was determined to be $176.86. The Explanation noted that because the provider did not accept assignment, Patient D.R. would receive this payment. After receiving the Explanation and communicating with Respondent's office and billing service, Patient D.R. and her family incorrectly assumed that Respondent’s bill for Patient D.R.'s post-operative care was fraudulent. Ms. Glass did not believe that Respondent performed post-operative services for her aunt, and apparently misunderstood or was unaware of the co- management agreement between Dr. Grabow and Respondent. In fact, Ms. Glass and/or her husband were so concerned about Respondent's bill that they wrote letters of complaint to various governmental agencies “alerting them to the fact that we [feel] that there was a miscarriage of justice.” Respondent’s billing records related to Patient D.R.’s post-operative care were reviewed by experts in the area of Medicare and the Medicare Fraud Branch Operations. These reviews failed to disclose any indication that Respondent was guilty of fraud, deceit, negligence or incompetence, or misconduct in the practice of optometry. Similarly, there was no finding that Respondent improperly billed Medicare for services provided to Patient D.R. The Medicare check in the amount of $176.86 for post- operative services Respondent provided to Patient D.R. was never forwarded to Respondent nor did he ever receive payment for these services. In 1992, a co-management situation such as occurred in this case was not deemed to be an improper fee division or receiving a fee for a referral. The arrangement was legal, and pursuant thereto, it was appropriate for the optometrist and the ophthalmologist to both receive payment from Medicare for the services they performed. There was nothing found in review of Patient D.R.'s record to indicate an unlawful kickback in cash or in kind nor a violation of Section 455.657, Florida Statutes. Except for the complaints arising out of the Respondent's treatment of Patient D.R., Respondent has not been the subject of any other disciplinary action by the Board.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered dismissing the Amended Administrative Complaint against the Respondent, Rick J. Billings, O.D. DONE AND ENTERED this 24th day of March, 1998, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 24th day of March, 1998. COPIES FURNISHED: William C. Childers, Esquire Thomas Wright, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 A. S. Weekley, Jr., M.D., Esquire Holland & Knight LLP 510 Vonderburg Drive Suite 3005 Brandon, Florida 33511 Angela T. Hall, Agency Clerk Department of Health 1317 Winewood Boulevard Building 6 Tallahassee, Florida 32399-0700 Pete Peterson, Esquire Department of Health 1317 Winewood Boulevard Building 6, Room 102-E Tallahassee, Florida 32399-0700
The Issue Whether Respondent violated Subsections 458.331(1)(d), 458.331(1)(m), 458.331(1)(t), 458.331(1)(ll), and 458.331(1)(nn), Florida Statutes (2001),1 and, if so, what discipline should be imposed.
Findings Of Fact The Department is the state agency charged with regulating the practice of licensed physicians pursuant to Section 20.43 and Chapters 456 and 458, Florida Statutes. Dr. Dangl, whose address of record is 3900 Clark Road, Suite E-1, Sarasota, Florida 34233, was issued Florida license number ME 71286 to practice medicine in Florida. During all relevant periods of time, he was not board-certified by the American Board of Medical Specialties or by any agency recognized by the Board of Medicine. Dr. Dangl is the holder of a D.M.D. degree from the Washington University School of Dental Medicine in St. Louis, Missouri. He is not licensed as a dentist in Florida, but he has previously held dental licenses in Missouri, Pennsylvania, and Virginia. He is specialty certified by the American Board of Oral and Maxillofacial Surgery. This specialty is related to the practice of dentistry. During all relevant periods of time, Dr. Dangl's office was fully and properly registered as an office surgical facility. During all relevant periods of time, Dr. Dangl did not have hospital privileges. On August 17, 2001, C.S., a female who was at that time 63 years old, came to Dr. Dangl's office for a consultation regarding facial rejuvenation and body contouring. Dr. Dangl saw C.S. and recommended "that she consider cervicofacial rhytidectomy with full face carbon dioxide laser resurfacing and autogenous fat transfer to the facial area." He further determined that the "degree of liposity in the abdomen and flanks is minimal and this can also be treated at the same time with low-volume tumescent liposuction." Prior to her consultation with Dr. Dangl, C.S. had seen an advertisement for Dr. Dangl in the "Sarasota Herald-Tribune." The advertisement listed Dr. Dangl as "Kurt Dangl, M.D., FAACS" and underneath his name appeared the words "Board Certified." From reading the advertisement, C.S. assumed that Dr. Dangl was board-certified in cosmetic or plastic surgery. C.S. returned to Dr. Dangl's office on August 21, 2001, for preoperative counseling. She signed consent forms for the procedures to be performed. The consent forms listed potential risks and complications involved with the procedures. Complications included infection, wound breakdown, and skin necrosis. The consent forms stated that Dr. Dangl did not guarantee specific results and that wound healing was outside the control of the patient and Dr. Dangl. On the printed consent forms the abbreviation "D.M.D." followed Dr. Dangl's name. No evidence was presented that the consent forms were being used as advertisements. C.S.'s medical records in Dr. Dangl's files indicate a blood sample was taken from C.S. on August 21, 2001, and sent to AccuLab. An AccuLab report dated August 22, 2001, indicated that C.S. had a slightly lowered hemoglobin level of 35.5. Based on a notation on the report, it appeared that Dr. Dangl reviewed the report on August 23, 2001. There is a handwritten note on the AccuLab report that the hemoglobin count was "ok for planned procedure." Dr. Dangl did not advise C.S. prior to the surgical procedures that her hemoglobin count was low. Dr. Dangl's records indicate that C.S. gave a medical history prior to the surgery and that Dr. Dangl performed a physical examination of C.S. prior to the surgery. C.S. advised Dr. Dangl that she had had her coccyx removed about six weeks before her scheduled cosmetic surgery. On August 28, 2001, C.S. returned to Dr. Dangl's office to have Dr. Dangl perform a face and neck lift, laser resurfacing of the face, removing fat from her abdomen and flanks, and transferring some of the fat from the abdomen and flanks to specific areas in her face. Betsy Shecter, who is licensed as an advance registered nurse practitioner in Florida, was the nurse anesthetist for C.S.'s procedures. Ms. Shecter's first contact with C.S. on August 28, 2001, occurred at 13:05, when she interviewed C.S. and then escorted C.S. to the operating room. At 13:15, C.S. was given valium, and an IV infusion of propofol and Sufenta was placed in C.S.'s arm around 13:20. Propofol is an anesthetic and Sufenta is a synthetic narcotic. C.S. was prepped and draped around 13:30, and a local anesthesia was injected at 13:35. Because the local anesthesia required about 20 to 30 minutes to become active, Dr. Dangl did not make the first incision until 14:05. The liposuction procedure to harvest the fat for a fat transfer occurred between 14:05 and 15:00. After liposuction, a local anesthesia was injected in the areas where the face lift would be performed. At 15:20, a garment was applied to the areas where fat had been harvested to keep the swelling down. Sequential leg compressions were put in place to avoid blood clots. The actual face lift started around 15:30 and ended around 20:20, when Ms. Shecter put Opticane ointment and corneal shields in C.S.'s eyes for the laser procedure. The laser procedure began around 20:25. At around 21:00, Ms. Schecter turned off the propofol drip to which Demerol had been added. The actual laser surgery stopped at approximately 20:55. The eye shields were removed at 21:15. The recovery time in the operating room commenced at 21:00 when the drugs were stopped and ended around 21:45. The recovery time continued until C.S. was discharged at 22:30. At the time of her discharge, C.S.'s vital signs were stable, and she was alert and oriented. C.S. was told prior to the surgery that someone would have to stay with her overnight after the surgery. C.S. made arrangements for her daughter and C.S.'s sister to stay overnight with her. C.S.'s sister had training and experience as a certified nurse assistant. Prior to the surgery, Dr. Dangl told C.S. that she would probably be ready to go home around four or five o'clock (16:00 or 17:00). She made arrangements with her daughter to pick her up around 17:00. When her daughter inquired from Dr. Dangl's office at 17:00 whether her mother was ready to leave, she was advised that surgery had not been completed. C.S. was not discharged until over five hours after her daughter first contacted Dr. Dangl's office. C.S.'s daughter became visibly upset when she saw her mother after the surgery and wanted to have C.S. admitted to a hospital. Because of the daughter's agitation, arrangements were made for a licensed practical nurse, Ruth Schneider, to stay overnight with C.S. C.S.'s daughter and sister had some difficulty in getting C.S. into the car for the trip home because of the sequential leg compressions, which C.S. wore home. Dr. Dangl and Ms. Shecter put C.S. in the car. At the time that C.S. was put in the car, C.S. was able to stand on her own and able to walk with support. When C.S. arrived home, Ms. Schneider assisted C.S. into her home. At that time, C.S. was alert and oriented and could ambulate with assistance. When C.S. got in her home, she was able to drink and take nourishment. Ms. Schneider helped C.S. ambulate to the bathroom. C.S. sat in a recliner and slept some during the night. At the close of Ms. Schneider's eight- hour shift, she left C.S. in the care of C.S.'s sister. C.S. was scheduled for a follow-up visit with Dr. Dangl on August 29, 2001, but C.S.'s sister was unable to arouse C.S. and get C.S. up to go to the doctor's office. Dr. Dangl's office was advised that C.S. could not come to his office. Dr. Dangl came to C.S.'s home around nine or ten o'clock in the evening of August 29, 2001, for a follow-up visit. He removed the dressings from her wounds and applied an antibiotic ointment. Dr. Dangl apparently did not have bandages with him that he could place on the surface of the wounds because he asked the sister for sanitary napkins to use as a dressing. C.S.'s sister retrieved sanitary napkins from the bathroom, and Dr. Dangl, using scissors from a nearby basket, cut the napkins up and used them to dress the wounds. He reused the Ace-type bandages which he had removed and placed them over the sanitary pads. C.S. was instructed to come to Dr. Dangl's office on August 31, 2001, for her 72-hour postoperative evaluation. On August 31, 2001, C.S.'s sister took C.S. to Dr. Dangl's office. C.S.'s sister did not accompany C.S. into the treatment room. Dr. Dangl removed the dressings and inspected the wounds. There was no evidence of hematoma, seroma, or infection. He noted that there was a "small area of devascularization immediately anterior to the left tragus on the left side" and described the areas as "about the size of a quarter." His notes indicate that the area would be "followed expectantly and debrided as necessary." He was to follow up with C.S. in 48 or 72 hours. When Dr. Dangl came out of the treatment room, he saw C.S.'s sister and asked her what was wrong with her. She explained that she was tired from being up all night with C.S. Dr. Dangl asked the sister why she did not take one of the sleeping pills that he had prescribed for C.S. The sister replied, "What? Why would you tell me to do that, take someone else's medicine?" Prior to this conversation, Dr. Dangl had not examined the sister in any way, gotten her medical history, or asked her whether she was taking any other medications. Over the next several days, C.S. complained to her sister that she was burning, hurting all over, and was not able to sleep or rest. On September 3, 2001, C.S.'s daughter called Dr. Dangl's office and advised that C.S. had a foul smelling discharge in front of her left tragus. Dr. Dangl called in a prescription for antibiotics for C.S. and told C.S.'s daughter that he wanted to see C.S. the following day. Dr. Dangl saw C.S. in his office on September 4, 2001. His examination of C.S. revealed that the size of the devascularized area in front of her left tragus had increased four times. There was some foul smelling yellow-brown discharge coming from this area as well as from several areas under the mandible approximately following the locations of the previously placed drains. He debrided the devitalized area and irrigated the discharge areas with an antibiotic solution and hydrogen peroxide. An intravenous antibiotic was administered, and wound cultures were obtained from various sites. Dr. Dangl again saw C.S. in his office on the evening of September 4, 2005. There was a minimal amount of drainage and no foul smelling odor. On September 5, 2001, C.S. again presented to Dr. Dangl's office for postoperative infection evaluation and treatment. There was a mild purulent discharge in the left anterior neck and at the left post auricular area. Dr. Dangl debrided the wound area and irrigated the wound area with sterile saline. C.S.'s pain medication was increased. Dr. Dangl saw C.S. in his office on September 6, 2001, for further wound treatment. The laboratory results of the wound cultures indicated a light growth of E. coli. Dr. Dangl administered an antibiotic intravenously and removed necrotic tissue. C.S. returned to Dr. Dangl's office on September 7, 2001. Her temperature was 100.6 degrees Fahrenheit, and she was complaining of significant discomfort. Dr. Dangl debrided the wound area. He examined the abdomen and flank incisions and found no evidence of infection or other signs of untoward wound healing. C.S.'s daughter accompanied her mother to Dr. Dangl's office on September 7, 2001, and expressed her concerns about her mother's condition. The daughter felt that her mother might benefit from hospitalization. Dr. Dangl referred C.S. to Dr. Manual Gordillo for evaluation and determination of the need for hospitalization. Dr. Gordillo treated infectious diseases. Dr. Gordillo saw C.S. and advised C.S. and her daughter that the treatment for the infection could be done in the hospital or on an outpatient basis, but expressed his opinion that admission to the hospital was borderline. C.S. opted for hospitalization and was admitted to Doctors Hospital of Sarasota on September 7, 2001. After C.S. was admitted to the hospital, additional cultures were taken of the wound sites as well as the sites in the abdomen where fat had been harvested. Based on the laboratory results, C.S. had a scant growth of E. coli from her face wound culture and a moderate growth of staphylococcus aureus from abdominal wound culture. C.S. was placed in isolation because of the staph infection. C.S. was experiencing a great deal of pain from her wounds while she was in the hospital. Because of her difficulty with pain management, she was put on a PCP pump to help control the pain. While she was in the hospital, Dr. Dangl visited her several times to observe. He did not perform any treatment on C.S. while she was hospitalized. C.S. told Dr. Dangl that she wished that he would not visit her while she was in the hospital, but he continued to come. The evidence is not clear and convincing that C.S. conveyed to Dr. Dangl that she did not want his services any longer, particularly in light of C.S.'s paying office visits to Dr. Dangl for treatment after she was discharged from the hospital. However, the evidence is clear and convincing that C.S. did not want Dr. Dangl to visit her in the hospital and that she told him so. Dr. Dangl's medical records do not establish a medical basis for continuing to see C.S. in the hospital after she asked him not to do so. C.S. was discharged from the hospital on September 13, 2001. At that time, she was feeling much better, her wounds were stable, and her wounds were not clinically overtly infected. She was directed to follow up with Dr. Dangl as soon as the following day and to follow up with Dr. Gordillo within a week. After her discharge from the hospital, C.S. continued to see Dr. Dangl on September 15, 17, 19, and 21, 2001. Dr. Dangl changed the dressings and, on two of the visits, did some minimal debridement. C.S. discontinued seeing Dr. Dangl after her office visit on September 21, 2001. On September 24, 2001, C.S. began seeing Dr. John Leikensohn, a plastic and reconstructive surgeon, for wound treatment. He diagnosed C.S. as having massive skin necrosis. When C.S. began seeing Dr. Leikensohn, she was asked to sign a medical release for her medical records from Dr. Dangl, and she did so. Dr. Leikensohn's staff contacted Dr. Dangl's office by telephone to get C.S.'s records. The medical release was sent by facsimile transmission to Dr. Dangl's office with a request for C.S.'s records. By October 2, 2001, Dr. Leikensohn had not received the records from Dr. Dangl. Dr. Leikensohn asked C.S. and C.S.'s daughter to stop by Dr. Dangl's office and get a copy of the records. C.S. went to Dr. Dangl's office and personally asked his staff for her records, but was not given the records. She also submitted a written request for her records, but did not receive them pursuant to the written request. Barbie Beaver, Dr. Dangl's office coordinator, does not recall when or from whom she actually received a request for C.S.'s records, but she does remember sending C.S.'s medical records to Barbara Dame, Dr. Dangl's risk manager, for her review on September 27, 2001. When Dr. Dangl's office received a request for a patient's records, she would advise Dr. Dangl and he would decide what to do. She gave a request for C.S.'s medical records to Dr. Dangl, and he instructed her to send them to Ms. Dame for review prior to releasing the records. Ms. Beaver does not recall when she actually sent C.S.'s records to the person who requested them. During his treatment of C.S., Dr. Dangl wrote several prescriptions for C.S. The prescription scripts contained the abbreviation "D.M.D." after his name. No evidence was presented that the prescriptions were intended to be used for advertising purposes. Dr. John J. Obi, a board-certified plastic surgeon, testified as the Department's expert witness. It is Dr. Obi's opinion that it would have been good medical practice to have advised C.S. of her low hemoglobin prior to surgery, but that because the blood level was not dangerously low, he could not "say that's a complete deviation from the standard of care." Dr. Obi further opined that Dr. Dangl exceeded the eight-hour limitation on elective cosmetic surgery in a physician's office when he performed the procedures on C.S. on August 28, 2001. Dr. Obi's opinion is based on his incorrect understanding that the anesthesia was stopped at 22:00. Thus, even if the time for calculating surgical procedures ran from the time the anesthesia was first administered at 13:15 until it was stopped at 21:00, the length of time for the surgical procedures was seven hours and forty-five minutes. Dr. Obi opined that the recovery time for C.S. was insufficient. Again he based his opinion in part on his incorrect assumption that the anesthesia was discontinued at 22:00. Dr. Obi creditably testified that Dr. Dangl's continuing to see C.S. in the hospital after she told him that she did not want him to visit fell below the prevailing standard of care. Dr. William Frazier, the expert who testified on behalf of Dr. Dangl, gave no opinion on whether Dr. Dangl's continued hospital visits after being told not to visit by C.S. violated the standard of care. Dr. Obi opined that it was a violation of the standard of care for Dr. Dangl to tell C.S.'s sister to take some of C.S.'s prescription sleeping pills without examining or taking a medical history of the sister. Dr. Frazier was of the opinion that the conversation between Dr. Dangl and C.S.'s sister did not fall below the standard of care. Dr. Frazier's opinion was based on his misunderstanding that C.S.'s sister had asked Dr. Dangl if it was appropriate for her to take a sleeping medication that she already had.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Dr. Dangl violated Subsections 458.331(1)(m), 458.331(1)(t), 458.331(1)(ll), and 458.331(1)(nn), Florida Statutes; finding that Dr. Dangl did not violate Subsection 458.331(1)(d), Florida Statutes; imposing an administrative fine of $2,000 for the violation of Subsection 458.331(1)(nn), Florida Statutes; imposing an administrative fine of $3,500 for violations of Subsection 458.331(1)(t), Florida Statutes; imposing an administrative fine of $1,000 for the violation of Subsection 458.331(1)(ll), Florida Statutes; imposing an administrative fine of $1,000 for the violation of Subsection 458.331(1)(m), Florida Statutes; suspending his license for two years; and requiring Dr. Dangl to attend continuing medical education classes to be specified by the Board of Medicine. DONE AND ENTERED this 16th day of August, 2005, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 16th day of August, 2005.
The Issue This proceeding was initiated when HRS proposed to deny San Marco's application for Certificate of Need No. 3304 for an ambulatory surgical center in Jacksonville, Duval County, Florida. San Marco filed a timely petition for formal hearing. Initially four intervenors were involved: Baptist, Memorial, Surgical Services of Jacksonville, Inc. and Medivision of Duval County, Inc. Surgical Services filed its Notice of Voluntary Dismissal on March 7, 1985, and Medivision withdrew on October 28, 1985. At the hearing, San Marco offered evidence through eight witnesses and 28 exhibits; HRS presented one witness and one exhibit; and the two intervenors presented nine witnesses and 26 exhibits. Certain exhibits, by stipulation of the parties, were entered as "Hearing Officer Exhibits." Those four exhibits included the state agency action plan, the petitioner's application for CON, a three-volume state health plan and the District IV health plan The primary issue is whether San Marco is entitled to Certificate of Need No. 3304 for an ambulatory surgical center which will include two operating rooms. During the course of the proceeding several ancillary issues developed; those issues are summarized here and are addressed in the body of this recommended order: In determining need for a free-standing ambulatory surgery center, is it appropriate to consider evidence of out- patient surgical services provided by hospitals? (Petitioner's Motion in Limine, T-9). Is the project proposed by San Marco an "ambulatory surgical center" as defined in subsection 381.493(3)(a), Florida Statutes? (Respondent's Motion to Dismiss, T-500). Should the intervenors, Baptist and Memorial be dismissed for failure to establish standing? (Petitioner's Motion for directed verdict, T-1182). The briefs, memoranda and proposed orders of the parties have been carefully considered in the preparation of this Recommended Order. A specific ruling on each proposed finding of fact is included in the Appendix attached hereto. On March 25, 1986, Petitioner filed a Motion for Restricted Reopening of Record. Basis for the motion is Medivision's withdrawal of its application for certificate of need. The motion is denied.
Findings Of Fact The Parties San Marco is a limited partnership. The owners are Stuart Yachnowitz, individual general partner and sole limited partner; Surgi-Centers of America, Inc., (SCA), a Florida corporation, corporate general partner; and Jacksonville Women's Health Organization, Inc., a Florida corporation, (JWHO), corporate general partner. The sole shareholders of SCA are Stuart Yachnowitz, his father, Joseph Yachnowitz and Susan Hill. The owners of JWHO are Joseph and Stuart Yachnowtiz. (T-47, 48, CON application pp. 20-23). San Marco intends to include local physicians in the ownership of the surgicenter. (CON application p. 40) The surgieenter will be managed by Y and S Management Corporation, the company now providing management services to JWHO. Y and S Management Corporation is owned by Joseph and Stuart Yachnowitz. Including JWHO, it manages eight licensed abortion clinics throughout the country as well as two free-standing ambulatory surgery centers (FSACs) which primarily perform abortions. Susan Hill, the chief operating officer for Y and S for the past ten years, prepared the CON application for the surgicenter. (T-47-49, 108-111). The building at 1561 San Marco Boulevard in Jacksonville, currently occupied by JWHO for its licensed outpatient abortion clinic, will be renovated and occupied by San Marco. The facility will be expanded from approximately 3000 square feet to 4700 square feet. Two operating rooms (ORs) will be added along with ancillary facilities necessary for licensure as an ambulatory surgical center. (Petitioner's Exhibit #1, CON application p. 4, T-52, 54, 55). Abortions will continue to be performed at the facility at an estimated rate of 168 procedures a month. (Petitioner's Exhibit #2, T-102, 103). Other surgical procedures will be added in the categories of gynecology, general surgery, and plastic surgery at the projected rate of 15 per month for the first month of operation to 90 per month after a little over a year's operation. The 90 additional procedures per month is anticipated to continue through the second year of operation. (Petitioner's Exhibit #2, CON application p. 40, T- 102, 103). San Marco anticipates drawing some patients for the additional procedures from its existing caseload and utilizing some physicians who currently practice at the abortion center. (T-62, 63, 101, 102, 247). Memorial is a not-for-profit acute care hospital, located in Duval County in close proximity to the San Marco facility. Since May 1985, Memorial has been providing outpatient surgery services in a dedicated outpatient facility adjacent to the acute care hospital. The same day surgery" facility contains two laser rooms and four operating rooms. (T-854, 913, 914). Baptist is a not-for-profit acute care general hospital also located within close proximity to the San Marco facility. It currently provides outpatient surgical services in twelve ORs and 3 cystoscopy rooms in its main facility. Sometime around August 1987, its new adjacent 17-story structure, The Pavillion, is anticipated to open. The fourth floor of that facility will be dedicated to outpatient surgery and will include four operating rooms and two cystoscopy rooms. (T-939, 984, 987, 988, 1045, 1047). HRS reviewed San Marco's application and determined that it should be denied on the following basis: "There appears to be an insufficient projected number of outpatient procedures to allow this facility to be viable." (State Agency Action Report, September 6, 1984). The State and Local Health Plans The 1985-1987 State Health Plan does not directly address the need for additional ambulatory surgical centers. It adopts as an objective that ". . . By 1989, 30 percent of all surgical operations should be performed on an outpatient basis." (Vol. II p. 81). It addresses ambulatory surgical centers as an alternative delivery system which lowers costs by substituting less costly services. (Vol. II p. 76). And, it outlines a brief history of the increase of ambulatory surgical centers in Florida during the decade of the 1980s. It acknowledges, "As in the case of hospitals, saturation of the marketplace for outpatient surgery has caused new entrants into the field to be more highly specialized in order to attract sufficient business. (Vol. II p. 27). HRS District IV includes Duval, Nassau, Baker, Clay, St. Johns, Flagler and Volusia counties. The 1985 District IV Local Health Plan adopts sub-area boundaries in planning for certain specialized services, including ambulatory surgery. Sub-area A is comprised of Baker, Nassau, Duval, Clay and St. Johns counties. (p. 112). In contrast to the State Health Plan, it makes specific recommendations: that sub-area boundaries should be used for planning purposes; that no additional units should be approved prior to the adoption of state rules; and that no ambulatory surgery units should be added to the district through 1986, when the agency will review the matter again. (p. 20). Utilizing 1983 data to base its projections and the need methodology of a challenged draft state rule, it concludes that Sub-area A has a surplus of 14 ambulatory surgical units. (p 143). Existing Like Facilities and Other Alternatives to the Proposed Service. Ambulatory surgery is typically performed in three types of facilities: general hospitals which mix inpatient and outpatient surgery in main operating rooms; hospitals which maintain separate "dedicated" outpatient operating rooms, sometimes even in adjacent buildings; and free-standing surgical centers which are unassociated physically or administratively with a hospital. (T. 387-390). Testimony in this proceeding was virtually unanimous as to the distinct disadvantages of serving surgical outpatients in a non-dedicated operating room setting. The mingling of' less ill or well outpatients with seriously ill inpatients increases the opportunity for contagion, heightens patient anxiety, deprives patients of access to their families, presents scheduling problems (including the bumping of outpatients in emergencies), and generally increases the cost of the service to the outpatient consumer. (T-386, 388-392, 1125- 1128). Both Baptist and Memorial have recognized the need for separate, dedicated operating rooms. The comparison of hospital-based dedicated ambulatory surgery rooms with free-standing ambulatory surgery rooms stirs somewhat more controversy. There are advantages and disadvantages to both. A hospital-based unit may or may not be more accessible to the physicians. While doctor's offices are often near hospitals, parking still is a problem. While some patients might prefer to avoid a hospital setting altogether, some are comforted by the proximity in the event of an emergency or decision to recuperate overnight. While costs are generally lower in a free-standing facility, there may be an advantage to having the expensive equipment immediately available in some cases (T-241-246, 392, 758-760,996, 1000-1001). If comparing non-dedicated ORs to free-standing ambulatory centers is comparing apples to oranges, then comparing hospital-based ambulatory centers to free-standing ambulatory centers is comparing red apples to green apples. Personal preferences often dictate the choice, but either one will make a pie. There exists no adopted rule governing methodology for determining need for ambulatory surgery centers. In this proceeding, each party presented its own methodology through an expert witness. Those methodologies are described as follows: Petitioner's Need Methodology Howard Fagin, PhD, was qualified as an expert in Health Planning and Health Economics without objection. (T-377) In his opinion there is a need for additional ambulatory surgery rooms. His opinion is based on a four-step process which includes: Analysis of the service area and population within that service area; Review of existing facilities providing comparable or related services; Examination of the utilization of those services within the existing facilities; and Analysis of the need for new health care facilities based upon population and need for new services in the area. 393, 394) Dr. Fagin identified Duval County as the primary service area, and Nassau, Baker, Clay and St. Johns counties as the secondary service area. The surrounding counties depend on Duval for their medical care in many cases. Together, the primary and secondary service areas comprise HRS District IV, Sub- area A (Local Health Plan, p. 112). Population figures are taken from those compiled and projected by the Executive Office of the Governor. (T.-396) For several reasons it is difficult to obtain data on out-patient surgical procedures in Florida. Out-patient surgery is a relatively new phenomenon; some hospitals do not separate in-patient from out-patient procedures in reporting; other hospitals count cases rather than procedures. (T-398) Dr. Fagin felt comfortable with data obtained from the state and from the N. E. Florida Health Planning Council, as adjusted with the use of data obtained from Baptist and Memorial for 1982, 1983, and 1984. (Petitioner's exhibits #11, 12 and 13) For 1984, he figured 31.1 percent of the surgical cases in Duval County were out-patient cases, with the trend increasing. (T-403) Petitioner's Exhibit #15 is the summary of Dr. Fagin's need analysis with two columns, one assuming an out-patient surgery rate of 35 percent of total surgeries, and the other assuming a rate of 40 percent. The number of available ambulatory surgery rooms (24) is based upon the availability of four rooms in one recently opened free-standing ambulatory center (AMI) and twenty other free-standing or dedicated (used only for out-patients) operating rooms in Duval County hospitals. The analysis assumes that the rooms will be operated five days a week, two hundred and fifty days a year (5 days x 52 weeks, minus 10 days for holidays and "down-time"). The figure of 960 cases per year, per room, is further derived from the assumptions the room will be operated 6 hours a day, an average case (including preparation, surgery, and cleanup) will take 1.25 hours, and the rooms will be utilized 80 percent of the time. In addition to the number of cases described to dedicated and free-standing rooms through that process, 3000 cases are presumed to be done each year in non-dedicated operating rooms. This figure is derived from rounding off the reported 3030 out-patient cases in non-dedicated units in 1983. The rationale for including those cases is that due to lack of sufficient free-standing units, the out-patient services must be provided in the regular hospital OR environment. The number of such cases, according to Dr. Fagin, should decrease as the number of free-standing units increases. (T. 414-415). Dr. Fagin's methodology applied to various hypothetical fact situations yields the following conclusions as to need for (+), or excess of (- ), free-standing ambulatory surgery operating rooms: Assuming a service area including all of HRS District IV, Sub-area A, 24 currently available rooms; and 960 cases per room per year: (Petitioner's Exhibit #15) 35 percent 40 percent + 6 rooms + 10 rooms Same assumptions as A, above: (intervenor`s Exhibit #16) 30 percent rate + 1 room Same assumptions as A, above, except limited to Duval County: (Intervenor Exhibit #17) 30 percent 35 percent 40 percent -4 rooms -1 room +2 rooms Same assumptions as A, above, except 31 existing rooms, instead of 24: (Intervenor Exhibit #18) 30 percent 35 percent 40 percent not calculated -2 rooms +3 rooms Same assumptions as A, above, except 31 existing rooms and service area limited to Duval County: (Intervenor Exhibit #19) 30 percent 35 percent 40 percent -11 rooms -8 rooms -5 rooms Same assumptions as A., above, except 1200 cases per room per year, instead of 960: (Intervenor Exhibit #20) 30 percent 35 percent 40 percent -4 rooms -1 room +3 rooms Same assumptions as A, above, except 1200 cases per room and 31 existing available rooms: (Intervenor Exhibit #21) 30 percent 35 percent 40 percent -11 rooms -8 rooms -4 rooms Same assumptions as A, above, except 1200 cases per room, 31 existing available rooms and Duval County only: (Intervenor Exhibit #22) 30 percent 35 percent 40 percent -15 rooms -13 rooms -10 rooms HRS Need Methodoloy Reid Jaffe, Medical Facilities Consultant for the Office of Community Medical Facilities, was qualified as an expert in health care planning with emphasis on certificate of need. (T-533) He explained the ambulatory surgical center need methodology as summarized in DHRS Exhibit #1. The Department typically uses a single county as its planning area for ambulatory surgery applications. (T-556). Therefore, the data is based on Duval County population and services provided by Duval County facilities. To obtain the volume of surgical procedures in Duval County hospitals, letters were written requesting the break-out for the period February 1984-January 1985. While the process is not an exact science, Mr. Jaffe feels that since the Department asks for the same type of information over a period of time, the anomalies in the figures will become obvious. (T-569). Based upon the returns to the questionnaire, the Duval total surgery rate, (out-patient and in-patient) was determined as 97.7 per 1000 population; the out- patient surgery rate was determined to be 30.2 per 1000 population. The July, 1987 population projection was 623,091. Need was projected at both 30 percent out-patient to total surgeries and 40 percent out-patient to total surgeries. The out-patient surgical potential (number of procedures) is derived from subtracting the hospital out-patient surgical volume from the projected number of procedures needed at a 30 percent and 40 percent rate. From that line was deducted the projected breakeven procedures for each of three free-standing ambulatory surgery centers in various stages of development in Duval County. The 30 percent rate yielded a bottom line of 5,922 excess procedures, and the 40 percent rate yielded a bottom line of 165 procedures remaining for some other facility to perform (unmet need). Since HRS considers the facility breakeven point to be considerably more than 165 procedures per year, it concludes that no additional facilities are required at this time. HRS did not explain its assumption that the rate of surgeries performed on an out-patient basis at hospitals would remain constant (30.2 per 1,000 population), while the overall percentage of out-patient surgeries to total surgeries would increase to 40 percent. (DHRS #1, T-569-576). Intervenor's Need Methodology Michael Swartz testified for Memorial and Baptist as an expert in health care planning and hospital administration. (T-704) He rejected the second-hand data utilized by both Petitioners' and HRS' experts. He devised a poll that was sent to all area hospitals and attempted to verify the responses through direct contacts and, in some instances, a walk-through of the facilities and review of hospital records. Information reported in State Agency Action reports was used for St. Luke's, since that one hospital failed to respond. (T- 704-707, 711-713). Like the other need methodology experts in this proceeding, Mr. Swartz relied on population projections from the Executive Office of the Governor. (T- 711). The geographical service area was considered Duval County, because that is what the state considers and in Mr. Swartz' opinion an ambulatory surgery center draws from a less than 30-minute driving period. (T-712). Mr. Swartz found in his data gathering that, while the number of surgeries per 1000 population has fluctuated only slightly, the mix of surgeries (in-patient to out-patient) has shown a dramatic increase in out-patient procedures. (Intervenor's Exhibit #5, T-722). After determining what he considered were the actual numbers of surgeries performed in 1983 and 1984, the actual number of operating rooms in Duval County, and the actual amount of time spent for each case, including clean-up, he determined that the bottom line showed a utilization rate of only 27.8 percent of existing surgical suites in Duval County in 1984. (Intervenor's Exhibit #6, T-729). Utilizing a fixed use rate of 103.3 surgery cases per thousand, Mr. Swartz projected an excess capacity of 109,214 cases in hospitals in 1986 and 1987, and an excess capacity for 19,279 cases in free-standing surgical centers (including AMI, Surgicare III and Medivision) in 1986 and 1987. (Intervenor's Exhibit #12 and #14, T-749, 750). The most fatal flaw in Mr. Swartz' ultimate conclusion, that there is a current and projected excess of surgery suites in Duval County, is that after his painstaking data-gathering process he lumped together all types of existing operating rooms and assumed they were all equally appropriate to handle in- patient and out-patient surgeries. This assumption is contrary to the weight of evidence in this proceeding. Of the three methodologies presented, I find Dr. Fagins most reasonable. It requires some adjustments, however, to conform to the evidence. Proceeding from Petitioner's Exhibit #15, I find the 40 percent out-patient surgery rate reasonable and consistent with credible expert testimony from all sides in this case. (Howard Fagin - T-413; Reid Jaffe - T-573; Rena Blackmer - T-106l; Carol Whittaker-T- 990: Eileen Fullernveider, T- 1125). Utilization of Subdistrict A as the service area is also 4 appropriate here. It is consistent with the District IV local health plan and recognizes the fact that Jacksonville draws from outlying counties for the sophisticated range of medical services it provides. (T-254, 255) while ordinarily free-standing surgery centers might be more neighborhood oriented and draw from a closer geographical area, it is noted that Duval is the only county in Subdistrict A with free-standing or dedicated operating rooms and for that reason patients could be expected to travel into Jacksonville. (Petitioner's Exhibit #14) The one-hour travel time addressed in the CON application, p. 226, would include some travel from the outlying counties. Reid Jaffe, the HRS expert, does not agree with the local health plan because it would be unlikely that a resident of a county that has a hospital or multiple hospitals in it and that have ambulatory surgical programs, to bypass those closer facilities just to go to Jacksonville." (T-554, 555). In the absence of dedicated ambulatory surgical programs, however, some patients very likely would travel to Jacksonville. The continued projection of 3000 cases in non-dedicated operating rooms is reasonable, since not all ambulatory surgery patients would travel to Jacksonville. Further, even when it completes its new ambulatory center, Baptist anticipates continuing to conduct approximately 2096 of its out-patient surgeries in the main ORs. (T-1063, 1064, 1085). Patient and physician loyalty would also account for some continued out-patient surgeries in those hospitals without dedicated ORs. The population projection for 1988 is appropriate, given a two-year planning horizon and the fact that the final hearing in this proceeding was continued until the end of 1985. The surgical rate of 102.94 per 1000 population is slightly higher than the 97.7 rate utilized by HRS but, just under the 103.3 rate utilized by Intervenor's expert, Howard Swartz. (Intervenor's Exhibit #14). Petitioner's Exhibit #15 understates the available ambulatory surgery rooms projected for 1988. A second free- standing ambulatory surgery center has been approved for Jacksonville and has completed its legal proceedings: Surgicare III, with 3 operating rooms. (T-562, Surgical Services of Jacksonville v. HRS, 479 So.2d 120, Affirmed 11/18/85). The record in this proceeding does not clearly reveal the status of a third surgical center, Medivision, with two rooms dedicated to opthomologieal surgery. Since that facility may still be in legal limbo, its rooms are not being counted. While Intervenor, Baptist, on cross examination posited a hypothetical application of Petitioner's methodology which included seven additional available rooms, no competent evidence followed up to substantiate any more than three additional beds. The available ambulatory surgery rooms factor in the methodology is therefore adjusted to 27. Petitioner's methodology also understates "available capacity" by understating the number of cases which could be handled per room, per year. While Dr. Fagin's methodology utilized 960 cases per room, per year, the weight of evidence and expert opinion established that at least 1300 cases per room, per year is a more realistic approximation. Intervenor's need expert, Michael Swartz, determined capacity based on ten available hours per day, five days a week, at 75 percent effici-ency (American College of Surgeons Standard) to be 2,077 cases per room, per year. (Intervenor's Exhibit #9, T-735- 737). The Hill-Burton standard utilized to determine the need for construction funds in the 1970's was 1200 cases per year, based upon data collected in the 1960s when the average time for a ease was 2 hours. (T-740, 741). Average time today is far less. (T-149, 240, 1064) Petitioner's own projected utilization assumes a capacity for 2 operating rooms, with evening and Saturday scheduling to be 300 procedures a month. (Petitioner's Exhibit #2). This translates into 1800 procedures per year, per-room. while recognizing that counting procedures rather than cases yields a higher number, San Marco never asserted that it anticipates performing two procedures for almost every case it handles. Yet this ratio is the only means of reconciling the difference between its expert's projection and that of its administrator. The above-described adjustment to Petitioner's need methodology results in the following adaptation of Petitioner's Exhibit #15: 40 percent Am. Surg. Subdistrict A 1988 Population Surgical Rate Total Surgery 861,120 102.94/1000 pop. 88,644 Ambulatory Surgery 35,457 Available Am. Surg. rooms 27 Available capacity (1300 cases) 35,100 Am. Surg. in Hospitals 3,000 Net Need Cases -2,643 Net Need Rooms - 2 Quality Of Care San Marco will occupy a building presently occupied by the Jacksonville Women's Health Organization, a licensed abortion clinic. If the certificate of need is granted, the existing building will be remodeled to provide two operating rooms and ancillary facilities required for licensure as an ambulatory surgical facility. HRS witness Reid Jaffe does not question the ability of the structure to meet requirements for licensure and does not question the ability of the proposed center to provide quality care. (T-584). The center will develop bylaws and protocols to maintain quality of care. To practice at the center, a physician must be licensed in Florida and must have privileges in good standing at a local hospital (T-59, 60). Jaroslav Fabian Hulke, M.D., was accepted as an expert in obstetrics and gynecology. He has had extensive experience in teaching and conducting out- patient surgery. (Petitioner's Exhibit #7). He has become personally familiar with Y & S Management's facilities and with their staff through his work at the center in Raleigh, North Carolina. He has also observed the facility in Jacksonville and assisted Susan Hill in developing the equipment list for the facilities. His high commendation of Miss Hill, her facilities and the planned equipment was without equivocation; his testimony as to the anticipated quality of care to be offered by this facility is most credible. (T-351, 353, 355). Anesthesia classifications range from I to IV depending on the condition of the patient. Class I and II are relatively healthy. The San Marco center will handle class I and II; some hospital out-patient units handle class III patients on a selected basis. (T-114, 141, 1120). Statistics on emergencies and deaths in free-standing ambulatory centers are not available now. The Free-standing Ambulatory Surgical Association (FASA) is in the process of gathering data. (T-1129, 1153, 1154). Depending on how they are run, equipped and staffed, the free-standing centers are considered extremely safe. (T-1128). Nothing in this proceeding would hint that the proposed administration, staffing or equipment for San Marco is less than high quality. Staffing By their Prehearing Stipulation filed on October 25, 1985, the parties agreed that there exists in Duval County an adequate labor pool of health manpower and management personnel to staff an ambulatory surgical facility. San Marco has the ability, experience and intention to obtain adequate, well- trained personnel to provide staffing for the proposed center. (T-72-75, 232- 236, 351-352). Physical and Economic Accessibility The parties have stipulated that the proposed facility is geographically available to all residents of Duval County. (Prehearing Stipulation, filed October 25, 1985). While the center will focus on the Duval County area, it also will likely draw from surrounding counties to a lesser degree. The existing abortion center already serves the wider area and as found in paragraph 12 above, no free-standing ambulatory center or dedicated out- patient ORs exist in Subdistrict A outside Duval County. For that reason, patients could be expected to drive as much as an hour to get to the facility. (CON application, p. 226). San Marco claims that it will serve 15 percent medicaid and 5 percent medicare patients. (CON application pp. 91-136). The Raleigh-Surgi-Center was used as a model since it is the one facility that receives medicaid reimbursement for non-abortion procedures. (T-89,160). However, while Medicaid does not reimburse for abortions, the State of North Carolina provides state funds and apparently those patients are computed in Raleigh's 21.6 percent figure. (T-89,90). The validity of the model is undermined by the fact that no such reimbursement occurs in Florida. (T-161). Even though the 20 percent Medicaid and Medicare projection is overstated, economic accessibility is enhanced by the willingness of the center to reduce fees for abortion procedures for otherwise Medicaid eligible patients by $50.00 or $60.00, which sum represents the management fee portion of the procedure cost. (T-158-160). More significantly, the projected standard fee for other than abortion procedures, $300.00 - 400.00, is substantially lower than fees at hospitals, including hospitals with separate ambulatory units. (T- 57, 81-82, 907, 1070, 1071, Petitioner's Exhibits #19, 20, 21, 22). Capital Costs and Financial Feasibility The total anticipated project cost for the proposed center is $246,000.00, including $80,000.00 for renovation of the building and approximately $133,000.00 for the purchase of equipment. (T-94-98, 172-173, 327). Capital is available for project start-up through the personal funds of millionaires, Stuart and Joseph Yachnowitz. (T-172). In its review of the application, HRS concluded: "There appears to be an insufficient projected number of out- patient procedures to allow this facility to be viable." (State Agency Action Report, Hearing Officer Exhibit #1). At hearing, HRS witness Reid Jaffe testified that because of the co-mingling of revenues from the abortion center and the proposed ambulatory surgery center, the financial feasibility of the project could not be determined. (T. 588, 589). On the other hand, if the revenues are co-mingled and if the projections in the applicant's pro formas are accurate, then the facility ought to do better than break even. (T-600-601). Christopher Fogel, Petitioner's expert accountant, represents Y & S Management and the ten out-patient facilities owned by Joseph and Stuart Yachnowitz. (T-182, 183) His financial projections for the proposed facility are found in Petitioner's Exhibits #5 and #6. The first projection is based upon the fee of $300.00 per procedure, for one hour of OR time, and the second is based upon $400.00, for 1.3 hours of OR time. The projections presume the facility would continue to offer its existing services (abortions) at its current level and expand to 250, 500 or 1000 procedures per year. At the $300.00 per procedure level, the facility would begin to make money with 500 additional procedures a year. However, by adding back 50 percent of the management fees (profit in the fees available to the Yachnowitz') and adding back depreciation and amortization, a positive cash flow results without any additional procedures, and increases substantially for 250, 500 and 1000 procedures at both the $300.00 and $400.00 per procedure rate. (T-198-206). Given the worst case scenario (no additional procedures), the owners are losing money only for tax purposes, but are actually increasing cash flow through the legitimate tax deduction of a loss which is not a loss of cash. (T-206). H. Impact on Competition The introduction of a free-standing ambulatory center in Duval County had a positive dynamic effect on existing traditional providers of surgical care in Duval County. Prices were lowered and more hospitals began out-patient surgery programs of their own. While the changes in costs and methods of surgical services is also attributable to pressure and incentives from insurers, no one disputes that the competition from AMI (the one free-standing facility in Duval County that is currently operational) was healthy. (T-639, 640, 1132, 893-894, 1061, 996- 997, 239). HRS health care planning expert, Reid Jaffe is of the opinion that currently the four ORs at AMI, the two opthalomological ORs at Medivision, and the 3 general ORs of Surgicare III (approved but not yet opened) are sufficient competition to the hospitals and to each other (T-564- 565, 643). No one seriously contends that the addition of San Marco's 2 ORs would put an existing facility out of business. Memorial's Chief Financial Officer, Earl Winston Lloyd, expects his facility's new out-patient unit to continue to be profitable with or without San Marco. Memorial's out-patient facility has exceeded Memorial's expectations in its productivity and profitability (T. 871- 874). John Anderson, Chief Financial Officer at Baptist, is concerned that Baptist will lose at least 35 procedures per month which are currently being performed at Baptist by physicians who have indicated an interest in practicing at San Marco. (Intervenor's Exhibit #23, T-943-945). However, he doesn't know whether those same doctors are performing out-patient surgeries in other facilities or whether those surgeries might be the ones that are taken to San Marco. (T-976). Rena Blackmer, Director of Surgical Services at Baptist, testified that when competing out-patient units opened at A.M.I., Memorial and St. Lukes, she felt initially that Baptist was losing a share of the market, but there has not been a continuing adverse effect. (T-1062). In 1985, Memorial`s excess revenue over expenses was approximately $2.5 million, with gross patient revenues of $80-82 million. (T. 863, 864). In 1985, excess revenue over expenses for Baptist was approximately $10 million. A $4.6 million loss on refinancing a debt is not included in that total; however, the $4.6 million is a balance sheet entry which impacts the income statement and is not a cash item. (T-956, 957) Total operating revenue in 1985 was $96 million. (T-955) David Mobley M.D. is a plastic surgeon who has been medical director of the Jacksonville Womens Health Organization since 1976. He practices at Baptist Medical Center, and his name appears on Intervenor's Exhibit #23 as one of the doctors whose out-patient surgeries the hospital is concerned about losing to San Marco. Dr. Mobley performs in his private office approximately ten surgeries a week that he would like to transfer to San Marco. Among as those cases are performed in his office, he is reimbursed only the fee that he receives for the same procedure done in a hospital. He absorbs the cost for his operating room at his office, his staff and supplies. (T- 247, 248). For the patient or his insurer however, the cost for the procedure would be at least twice as much in a free-standing surgery center as in the physician's office. (T-268). San Marco: Abortion Clinic or Ambulatory Surgical Center? From all the evidence in this proceeding the uncontrovertible fact emerges that when and if it is approved, San Marco Surgi-Center will merge with the Jacksonville Women's Health Organization and the two entities will make up a single health care facility: the building is the same; the equipment is the same; the owners are primarily the same; the managers are the same; and for purposes of predicting financial success, the revenue and expenses of the two entities have been considered one and the same. San Marco projects that even after two years of operation as a surgical center, a majority of its procedures will remain abortions. (Petitioner's Exhibit #2). Abortions are accomplished in health care facilities through a variety of surgical techniques, the most common of which is dilation and evacuation (D & E). (T-346, 347). Even though D & E's are expected to predominate at the facility in terms of projected number of procedures (168 per month, compared to 90 other surgical procedures per month, by June 1988), the D & E's will not predominate either in gross revenue from fees or in the anticipated OR time. San Marco anticipates the average patient charge for surgeries other than abortions to be $400.00 per case and the average OR time to be 1.3 hours. (T-93, 149). The non-medicaid patient charge for a D & E is $185.00, and the time in the OR room is generally about twenty minutes. (T-148, 158). Taking the same month, June 1988, and multiplying the number of abortions first by fee, then by OR time, yields a total of $31,080 in fees and 55.4 hours in the OR room. The same process for the 90 other surgical procedures yields $36,000.00 in fees and 119.7 hours OR time.
Recommendation Based on the foregoing, it is recommended that Certificate of Need #3304 be denied. DONE and ORDERED this 2nd day of April, 1986, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-3712 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in substance in paragraph 3. Adopted in paragraph 1. Adopted in substance in paragraph 2. The surgical procedures are summarized by category in paragraph 3. Adopted in substance in paragraphs 2, 16 and 24. Rejected as cumulative and unnecessary. Adopted in substance in paragraphs 16 and 19. Adopted in substance in paragraphs 25 and 26. The statement of John Anderson's testimony is unnecessary, Rejected as cumulative and unnecessary. Adopted in substance in paragraph 26. Rejected as cumulative and unnecessary. Substantially adopted as summarized in paragraph 26. Adopted in part in paragraph 23, otherwise rejected as unnecessary. Adopted in part in paragraph 23, otherwise rejected as unnecessary. Adopted in part in paragraph 23, otherwise rejected as unnecessary. Adopted in substance in paragraph 12 and 21. Adopted in substance in paragraph 12, 13 and 21. Adopted in substance in paragraph 13. Adopted in substance in paragraph 13. Adopted in substance in paragraph 4. Adopted in substance in paragraph 5. Adopted in part in paragraph 5, otherwise rejected as unnecessary. Rejected as irrelevant and unnecessary. Adopted in paragraph 20. Rejected as irrelevant. Rejected as explained in paragraph 22. Rejected as unnecessary. Policy memorandum #7 is addressed in Conclusion of Law No. 3; otherwise this is rejected as a finding of fact. Rejected as unnecessary. Rejected as repetitive. Adopted in substance in paragraph 24 and 26. Adopted in substance in paragraph 21. Adopted in paragraph 9. Rejected as cumulative. Adopted in paragraph 9, otherwise rejected as contrary to the weight of evidence or unnecessary. Adopted in part in paragraph 29, otherwise rejected as unnecessary. Adopted in substance in paragraph 28. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in substance in paragraph 28. Adopted in paragraph 28. Adopted in part in paragraph 28, otherwise rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in paragraph 29 as to the profit of $10 million dollars, otherwise rejected as unnecessary. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. As addressed in conclusions of law #10 and #11, the impact on Baptist was found to be minimal and insufficient to support "standing". Adopted in paragraph 10. Rejected as unnecessary. Rejected as unnecessary. Adopted in substance in paragraphs 10 and 11. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in substance in paragraph 11. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary, except as to the apples/oranges analogy, which is adopted in paragraph 9. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in paragraph 11. Adopted in paragraph 10, as to the characterization of Dr. Fagin's testimony. Otherwise, rejected as summary of testimony rather than findings of fact. The adoption of 40 percent as reasonable is found in paragraph 12. Rejected as contrary to the weight of the evidence. HRS Need Methodology is rejected in paragraph 10.(b) and paragraph 12 as being less reasonable than Petitioners' experts methodology. Rejected as essentially argument, rather than findings of fact. Rejected as contrary to the weight of evidence. Rejected as repetitive. Adopted in substance in paragraph 33 and Conclusion of Law #3. Rejected as argument unsupported by the weight of evidence. Rejected. See paragraph 7 for discussion of State Health Plan. Rejected as argument, rather than finding of fact. No paragraph of this number is found in Petitioner's Proposed Findings of Fact. Adopted in Conclusions of Law, paragraph 4. Rulings on Joint Proposed Findings of Fact Submitted by the Respondent and Intervenors. (Note, the numbers in the left column conform to the numbering of the joint proposed findings) 1. Adopted in substance in paragraph 1, 2 and 3. Adopted in paragraph 6. Adopted -In paragraph 4. Adopted in paragraph 5. 1. Adopted in paragraph 7. Adopted in paragraph 8. Rejected as irrelevant. Adopted in part in paragraph 8, otherwise rejected as unnecessary. Rejected as irrelevant. Adopted in substance in paragraph 10(b). Rejected as contrary to the weight of the evidence. Adopted in part in paragraph 10, otherwise rejected as unnecessary. Rejected as a re-statement of testimony, rather than finding of fact 10.c. Description of Mr. Swartz' methodology is provided in paragraph Rejected as irrelevant. Rejected as irrelevant. 13 - 21. Rejected as unnecessary. Adopted in substance in paragraph 10. Rejected as unnecessary. Rejected as contrary to the weight of evidence, except as reflected in paragraph 10. Adopted in part in paragraph 10.b., otherwise rejected as unnecessary. 25A. Adopted in part in paragraph 10, otherwise rejected as unsubstantiated by competent substantial evidence. Adopted in part in paragraph 10, otherwise rejected as unnecessary. Adopted in part in paragraph 22 and 23, otherwise rejected as unnecessary. 1. Adopted in substance in paragraph 31. Adopted in substance in paragraph 31. Rejected as contrary to the evidence by considering all uncontroverted testimony and evidence describing the facility. Adopted in part in paragraph 32 and 33, otherwise rejected as irrelevant. Adopted in part in paragraph 32 and 33, otherwise rejected as irrelevant. Rejected as contrary to the weight of the evidence. Adopted in part in paragraph 31, 32 and 33, otherwise rejected as irrelevant. Rejected as irrelevant. Rejected as contrary to the weight of the evidence. 1. Rejected as unnecessary. Rejected as argument that is unnecessary or unsupported by competent substantial evidence. Adopted in substance in paragraph 27. 1. Rejected as cumulative. Rejected as cumulative. Rejected as unnecessary. Adopted in part in paragraph 4, 5 and 10, otherwise, rejected as unnecessary. Adopted in substance in paragraph 9. Adopted in substance in paragraph 9. Adopted in part in paragraph 4 and 5, otherwise rejected as unnecessary. Rejected as cumulative. Addressed in Conclusion of Law 6. 1. Adopted in paragraph 17. Rejected as irrelevant. Rejected as irrelevant. 1. Rejected as cumulative. 2. Rejected as mere re-statement of testimony rather than a finding of fact. 1. 1. 1. 1. Adopted in paragraph 20. Adopted in part in paragraph 24, otherwise rejected as irrelevant or contrary to the weight of evidence. Rejected as irrelevant. 1. Adopted in part in paragraph 26, otherwise rejected as irrelevant. Adopted in paragraph 24. Rejected as irrelevant. 1. Addressed in Conclusion of Law 4. 1. Addressed in Conclusion of Law 4. 1. Rejected as unnecessary argument. Adopted in part in paragraph 27, otherwise rejected as unnecessary. Rejected as the description of an exhibit and characterization of testimony. Adopted in part in paragraph 30, otherwise rejected as unnecessary. 1. Adopted in paragraph 24. COPIES FURNISHED: William J. Page, Jr., Secretary Department of HRS 1323 Winewood Blvd. Tallahassee, Florida 32301 Steve Huss, Esquire General Counsel Department of HRS 1323 Winewood Blvd. Tallahassee, Florida 32301 Chris H. Bentley, Esquire William E. Williams, Esquire Jeannette Andrews, Esquire Post Office Box 1739 Tallahassee, Florida 32302 Douglas Mannheimer, Esquire Richard Power, Esquire Post Office Drawer 11300 Tallahassee, Florida 32302 Michael J. Dewberry, Esquire Christopher Hazelip, Esquire 1300 Gulf Life Drive Jacksonville, Florida 32207 Robert Meek, Esquire Post Office Box 240 Jacksonville, Florida 32201 =================================================================
Findings Of Fact On or about December 13, 1984, Petitioner applied to Respondent for a CON for an ambulatory surgical center (ASC). Respondent assigned CON number 3677 to Petitioner's application. Petitioner seeks to construct a two operating room, free standing ASC at 1710 West Colonial Drive in Orlando, Orange County, Florida. The primary area to be served by this application is Orange County, and the facility as proposed is reasonably accessible to Orange County residents. Orange County is located within Respondent's District VII, which is also comprised of Osceola, Brevard and Seminole Counties. Stuart and Joseph Yachnowitz are owners of Y and S Management and are partners in the application here at issue. Y and S Management will provide medical management services at this facility, as it provides at nine other facilities throughout the country which performed approximately 17,500 outpatient surgical procedures in 1985, primarily gynecological. Two of the facilities managed by Y and S Management are licensed as ASCs under the laws of the states in which they are located. The chief operating officer of Y and S Management, Susan Hill, prepared the CON application which is here at issue. Financing for this project will be provided from the personal funds of Stuart and Joseph Yachnowitz. No funds will be borrowed for this purpose. They have sufficient liquid personal funds to fully finance the project cost of $473,000, as well as operating costs. Petitioner will lease 6,500 square feet on the first floor of a professional building to be constructed at 1710 West Colonial Drive in Orlando from West Colonial Properties, Ltd., at $12 per square foot. This property is owned by Stuart and Joseph Yachnowitz. An abortion clinic known as Orlando Women's Health Center, which they also own, is located next door at 1700 West Colonial Drive. The facility as proposed can reasonably be expected to meet licensure requirements for an ASC. Ambulatory surgical procedures to be performed at Petitioner's facility will include, but not be limited to abortions, tubal ligations, hernia repairs, diagnostic laproscopies, eye surgery for cataracts, hand surgery, plastic surgery, tonsillectomies, and dilatation and curettage. Equipment cost estimates for this project of $161,158 are realistic and complete. Staffing requirement estimates of 11.54 F.T.E., and salary requirements of approximately $182,000 annually are also realistic and complete. Petitioner estimates that for 1987 and 1988, 20% of all cases will be paid by Medicaid, 5% by Medicare, and 75% will be insurance and private pay, with 4% of this figure ultimately being bad debt or indigent care. With total cases estimated for 1987 and 1988 to be 1700 and 2100, respectively, total net revenues for 1987 and 1988 are estimated to be $732,000 and $903,000, respectively. Providing services to Medicaid patients in 20% of its cases would be beneficial to the community since this is a high level of service to patients who are typically underserved. Assuming that 20% of the cases handled at Petitioner's facility have multiple procedures, the projected charge rates for 1987 are $326 per case for Medicare and Medicaid, and $489 per case for private pay and insurance. These are reasonable and competitive charges. The projected charge rate for private pay and insurance is simply 150% of the Medicare and Medicaid rate, which in turn is based on the projected case mix considering the various levels of reimbursement. Petitioner will pay Y and S Management a fee of $50 per case for management services. The financial pro forma prepared for Petitioner demonstrates that using a conservative approach that somewhat overestimates expenses, Petitioner will reach the break-even point at 1400 cases, after allowing for management fees, depreciation and amortization. Using a less conservative, but more typical approach to estimating expenses, Petitioner will break-even at 1100 cases. Need in the service area exceeds the conservative break-even point and Petitioner estimates it will handle 1700 cases in its first year of operation and 2100 in its second. These are reasonable estimates. Respondent has not promulgated a rule setting forth a methodology for determining need for an ASC. However, Respondent has utilized an evolving non-rule policy in evaluating the need for such facilities. Reid Jaffe, Respondent's expert in health care planning, explained the methodology used in this case which resulted in his determining that in July, 1987, there will be a need for additional ambulatory surgical facilities in Orange County sufficient to recommend approval of Petitioner's CON application. Specifically, Jaffe's methodology is as follows: Acquire data from the local health council regarding the number of inpatient and outpatient procedures performed by existing providers, as reported for the current calendar year (1985) by hospitals in the appropriate service district (District VII). Acquire data from the Governor's Office of the population estimate for the appropriate service area (Orange County) for the current and planning horizon years. Using this data, calculate the current overall surgical and outpatient surgical use rates per 1000 population for hospitals in the service area. Using the projected population for the planning horizon year (1987) and the current use rates calculated in (c) above, calculate the projection of overall surgical procedures in the planning horizon year. Multiply projected overall surgeries by 40% to establish total number of out-patient surgeries to be performed in the planning horizon year. Subtract from (e) all outpatient surgical procedures to be performed in hospitals, other ASCs in the service area, as well as the financial break-evens of all CON approved free-standing outpatient surgery centers in the service area. After performing these calculations and subtractions, the number of outpatient surgical procedures remaining are compared to the break-even of the CON applicant at issue. If the remaining number is larger than the applicant's break even, a quantitative need is demonstrated. Applying Jaffe's methodology to this case and applying data he obtained from the Local Health Council of East Central Florida, as reported to it by hospitals in District VII for calendar year 1985, as well as population data for Orange County he obtained from the Governor's Office, it appears that a total of 83,054 surgical procedures were performed in District VII in 1985, with 21,084 of these being outpatient procedures performed in a hospital. Using a July, 1985, population estimate for Orange County of 556,384, the overall surgical use rate for Orange County is 83,054 divided by 556,384 over 1000, or 149.27 surgical procedures per 1000 population; the use rate for outpatient procedures performed in hospitals is 21,084 divided by 556,384 over 1000, or 37.89 outpatient procedures performed in hospitals per 1000 population. Multiplying the overall surgical use rate of 149.27 by 574,599 (projected Orange County population for July 1987) over 1000 and applying a factor of 40% yields a projection of 34,308 outpatient surgical procedures to be performed in 1987. The use rate of 37.89 for outpatient services performed in a hospital is then multiplied by 574,599 over 1000 to obtain 21,722 which is the projected number of outpatient procedures which will be performed in a hospital in 1987. By subtracting this number (21,722) from the projection of total outpatient surgical procedures to be performed in 1987 (34,308) you identify 12,536 procedures which could be performed in ASCs in 1987. The reported number of outpatient procedures being performed in existing ASCs and the break-evens of CON approved facilities are calculated to be 5,488 (Surgical Services 2,693; MediVision 903; AMI Single Day Surgery 1,832; Surgical Associates 60) which is then subtracted from 12,536 to leave a need of 7,048 outpatient procedures which could be performed in ASCs which are not now approved for this service area. Since Petitioner has a conservative break-even point of 1400 cases, and a more typical break-even point of 1100 cases, a quantitative need has been identified which far exceeds Petitioner's break-even point. Jaffe testified that in his experience this is the largest margin between break-even and available procedures he has seen in reviewing CON applications. A need analysis conducted by Howard E. Fagin, Ph.D., who was accepted as an expert in health care planning, facility planning and operations analysis, also confirms that there is a quantitative need for the ASC proposed by Petitioner. The methodology used by Dr. Fagin starts by calculating a target utilization for ambulatory surgical operating rooms. Assuming that a facility operates 250 days/year, 6 hours/day, it takes 1.25 hours/case and that there are 1.2 procedures/case with a utilization rate of 75%, a target utilization of 1,080 procedures/year for an ambulatory surgical room is thereby determined. In 1985 there were 10 approved hospital "dedicated" ambulatory surgical rooms in Orange County, and 9 approved rooms in free-standing ASCs (Surgical Services-5, AMI Single Day Surgery-2, MediVision-2) not counting the 2 rooms approved in CON 3313 for Surgical Associates which are used for no more than 60 cases per year. Multiplying these 19 rooms by the target utilization of 1,080 procedures/year results in a calculation of 20,520 total utilization in available dedicated and free-standing ASC rooms. Data from the Local Health Council of East Central Florida for 1985 indicates that 11,413 outpatient procedures were performed in hospital, non-dedicated, operating rooms. Therefore if we take Jaffe's projection of 34,308 outpatient surgical procedures to be performed in 1987, and subtract 20,520 (total utilization in available dedicated and free-standing ASC rooms) and also subtract 11,413 (outpatient procedures performed in hospital, non-dedicated, rooms), we arrive at a need of 2,375 procedures in 1987 and 3,770 procedures in 1989. Since Petitioner's break-even is conservatively 1400 cases, and again assuming 1.2 procedures per case, Petitioner's conservative break-even is 1680 procedures, which is within the need which will exist in 1987, and well within the need in 1989. The need methodology and opinion of Intervenor's expert, Dr. Deborah Kolb, is rejected because she incorrectly: (a) considered Orange and Seminole Counties as comprising a two county service area; (b) included all existing inpatient hospital based operating rooms, regardless of whether they are dedicated to outpatient surgery, in arriving at her conclusion that there is excess capacity; and (c) assumed all hospital operating rooms are available for outpatient surgery without modification. Ambulatory surgery is typically performed in three types of facilities: hospitals which utilize their operating rooms for both inpatient and outpatient surgery; hospitals which maintain separate "dedicated" outpatient operating rooms, sometimes even in separate facilities adjacent to the main hospital; and free-standing ASCs which are not associated with a hospital. There are definite disadvantages to serving outpatients in hospitals without "dedicated" outpatient operating rooms, including the "bumping" of outpatients in emergencies and increased costs to the patient for services. On the other hand there are advantages and disadvantages to the other two modes of delivering ambulatory surgical services. Hospital based "dedicated" rooms are obviously closer to a hospital in case an emergency develops, and some patients may prefer this proximity to additional equipment and emergency medical staff. On the other hand, costs at a free-standing ASC are generally lower, and some patients prefer to avoid a hospital atmosphere altogether. Surgical procedures performed at ASCs have grown from 10% of all procedures in the early 1970s to 40% currently, and are projected to grow to 50% in the near future. This growth is somewhat the result of a change in Medicaid/Medicare reimbursement policies which now pay 80% for procedures performed in a hospital and require a 20% co-payment by the patient, but which pay 100% for procedures performed in an ASC and require no patient co-payment. The decision to have outpatient surgery performed at one or the other of these types of facilities is primarily the result of patient preference. However, it is clear that the increasing utilization of ASCs is a market force that is driving the cost of hospital outpatient services down. Respondent issued its original notice of intent to deny Petitioner's application on or about May 17, 1985, and on June 14, 1985, Petitioner filed its Petition for Formal Hearing. Thereafter, Respondent reconsidered its position and on March 6, 1986, notified the parties that it intended to grant Petitioner's application. The reason for this reconsideration was that when the initial denial was made, Respondent's projections of procedures were premised on the use of a 30% outpatient surgical factor. Subsequently, the Respondent began using 40% in its projection of the total volume of surgical procedures which might be performed on an outpatient basis. Given the fact that the reason Petitioner was initially denied was due to insufficient procedures, and utilization of the new projection of outpatient volume indicated there would be sufficient volume to support the facility, Respondent determined to support Petitioner's application. The notice of change of position was prepared by Reid Jaffe, who based his testimony at hearing on the 40% factor, and was approved by Robert E. Maryanski, Administrator of Community Medical Facilities, and Marta V. Hardy, Deputy Assistant Secretary for Health Planning and Development. Since Respondent has not adopted a need methodology rule for ambulatory surgical centers, the increase in the factor used to calculate outpatient surgeries from overall surgeries performed was not accomplished through rule-making proceedings. In 1985 Respondent used a factor of 30%, but in early 1986 increased this to the 40% applied in this case.. Intervenor provides services similar to those which Petitioner will perform, and has four free-standing, "dedicated" operating rooms which are used for ambulatory surgery. It also has 17 operating rooms that are used for both in and out-patient surgery. The Intervenor opposes Petitioner's application. In 1985, Intervenor made a profit of $10.9 million on total revenues collected of $184 million; it had an actual total of $37.4 million in uncompensated care which includes partial or no payments, charity, bad debt, and contractual patients. For 1986, it projects an $18.9 million profit on collected revenues of $211 million, with projections of actual uncompensated care of approximately $52 million. In 1985, 2% of Intervenor's costs were for providing indigent care, and this totaled approximately $6 million. Petitioner projects net revenues of approximately $900,000, and it has not been established if this will have any impact on Intervenor's revenues. According to Billie June, Assistant Director of Operating Rooms at Florida Hospital who was accepted as an expert in surgical nursing, and the management and operation of surgical units from a nursing standpoint, Intervenor has had considerable difficulty attracting qualified nursing staff for its operating rooms, and has had to develop its own qualified staff through an internship program. However, Petitioner's facility will not contribute to this difficulty or result in higher salaries. Susan Hill testified based on her experience since 1973 of managing and hiring staff in the Orlando area of the type needed to operate an ASC, that she has had no difficulty obtaining the cooperation of physicians in the area and in attracting fully qualified staff. Based on Hill's experience with other ASCs managed by Y and S Management throughout the country as well as her experience in Orange County, it is found that the staffing needs of Petitioner's proposed facility can be met with nursing and medical staff available in the area. It is found as a matter of fact that there is a need in Orange County for the two operating room ASC proposed by Petitioner, that Petitioner has the ability and will provide quality care, the project is financially feasible, Petitioner will work with and help to meet the needs of health maintenance organizations and will promote cost effectiveness in Orange County. Petitioner's proposal is consistent with the goals, objectives and recommended actions in the 1985-87 Florida State Health Plan and the local health plan. The State Plan encourages the existence of ASCs and the removal of obstacles to the use of outpatient surgery; the local plan provides that applicants for an ASC must demonstrate a willingness to provide services to underserved patient groups and considers the provision of ambulatory surgery to the underserved population to be a desirable objective. In this case Petitioner intends to provide 20% of its cases to Medicaid patients, and another 4% to indigents.
Recommendation Based on the foregoing, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order granting Petitioner's application for CON number 3677. DONE and ENTERED this 23rd day of October, 1986, at Tallahassee, Florida. DONALD D. CONN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of October, 1986. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Chris H. Bentley, Esquire Post Office Box 1739 Tallahassee, Florida 32302 Douglas Mannheimer, Esquire Post Office Drawer 11300 Tallahassee, Florida 32302 E. G. Boone, Esquire Jeffrey Boone, Esquire Gregory Roberts, Esquire Post Office Box 1596 Venice, Florida 34284. APPENDIX Rulings on Petitioner's Proposed Findings of Fact: 1. Adopted in Findings of Fact 1, 2. 2,3. Adopted in Finding of Fact 3. Adopted in Finding of Fact 6. Adopted in Finding of Fact 5. Adopted in Finding of Fact 7. Adopted in Finding of Fact 11. Adopted in Findings of Fact 11, 22. Adopted in Finding of Fact 9. Adopted in Finding of Fact 2. Adopted in Findings of Fact 2, 14. 12,13. Adopted in Finding of Fact 20. Adopted in Finding of Fact 7. Adopted in Finding of Fact 20. Adopted in Finding of Fact 8. Adopted in Findings of Fact 3, 8. Adopted in Findings of Fact 4, 7. Adopted in Finding of Fact 4. Adopted in Finding of Fact 2. Adopted in part in Finding of Fact 15 but otherwise rejected as cumulative and unnecessary. Adopted in Finding of Fact 19. 23-25. Rejected in Finding of Fact 18 and otherwise rejected as irrelevant and not based on competent substantial evidence. Rejected as cumulative and unnecessary. Rejected in Finding of Fact 18. Adopted in Findings of Fact 12-14. Adopted in Findings of Fact 12, 13. Adopted in Findings of Fact 13, 14. 31-35. Adopted in Finding of Fact 15. 36,37. Rejected as irrelevant and unnecessary. 38. Adopted in Finding of Fact 22. 39,40. Adopted in Finding of Fact 23. 41. Rejected as a Finding of Fact since this is a request for further ruling on Petitioner's Motion to Limine which was granted at hearing. Petitioner filed a Motion in Limine on June 11, 1986 to exclude depositions taken of John Hutchens on April 23, 1986 and June 5, 1986. This is the motion dealt with at the prehearing conference on June 23, 1986. The only deposition of John Hutchens offered by Intervenor and admitted was one taken on June 20, 1986 (I-2). Therefore, Petitioner's motion and the prior ruling is moot since the depositions to which the motion was directed were not offered at hearing. 42-45. Adopted in Finding of Fact 22. Rulings on Intervenor's Proposed Findings of Fact, as set forth beginning on page 3: 1. Adopted in Finding of Fact 12. 2-16. Rejected in Finding of Fact 15, and otherwise irrelevant and cumulative. 17,18. Rejected in Findings of Fact 12-14, 22. 19-26. Adopted in part in Finding of Fact 14, but otherwise rejected as contrary to competent substantial evidence. 27,28. Adopted in part in Findings of Fact 12, 13, but otherwise rejected as contrary to competent substantial evidence. 29. Rejected in Findings of Fact 12-15 and otherwise as argument rather than proposed findings of fact. 30-34. Adopted and rejected in part in Finding of Fact 16 and otherwise rejected as contrary to competent substantial evidence. Adopted in part in Finding of Fact 19, but otherwise rejected as irrelevant. Adopted in Findings of Fact 13, 14. 37,38. Rejected as irrelevant. 39,40. Adopted in part in Finding of Fact 16. Adopted in part in Findings of Fact 2, 3 but otherwise rejected as contrary to competent substantial evidence. Adopted in part in Finding of Fact 6, but otherwise rejected as irrelevant. 43,44. Rejected in Finding of Fact 22. 45-47. Rejected in Finding of Fact 7. Adopted in Finding of Fact 7. Rejected in Finding of Fact 7. Rejected in Findings of Fact 3, 5, 7 and 22. Adopted in part in Finding of Fact 3. Rejected as contrary to competent substantial evidence. 53,54. Adopted and rejected in part in Finding of Fact 21. Adopted in part in Findings of Fact 11, 22 but otherwise rejected as irrelevant. Rejected as cumulative and unnecessary. 57-59. Rejected as simply a summation of testimony, irrelevant and contrary to competent substantial evidence. Adopted in part in Findings of Fact 13, 14 and 16 but otherwise rejected as contrary to competent substantial evidence. Rejected as irrelevant. 62,63. Rejected in Finding of Fact 21 and otherwise irrelevant and contrary to competent substantial evidence. Rejected in Findings of Fact 4, 7. Adopted and rejected in part in Finding of Fact 8. Rejected in Findings of Fact 11, 22. Rejected in Finding of Fact 22 and otherwise irrelevant and contrary to competent substantial evidence. Adopted in part in Finding of Fact 20, but otherwise rejected as irrelevant. Rejected as irrelevant. Adopted in Finding of Fact 16; rejected in Finding of Fact 21 and otherwise rejected as contrary to competent substantial evidence. Rejected in Findings of Fact 4, 5 and otherwise rejected as irrelevant. 72-75. Adopted in part in Findings of Fact 19-21, but otherwise rejected in Findings of Fact 21, 22 and as irrelevant. 76-79. Rejected as irrelevant, cumulative argument which does not provide citations to the record contrary to Rule 221-6.31(3), Florida Administrative Code.
Findings Of Fact The applicants, MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., are wholly owned subsidiaries of MediVision Inc., which maintains its corporate offices in Boston, Massachusetts. MediVision, Inc., was incorporated in January, 1984, to promote the development of outpatient eye surgery, in part through the development and operation of outpatient eye surgery centers. MediVision of Miami, Inc., and MediVision of Northern Dade County, Inc., will each be responsible for the development and operation of the projects proposed in their respective applications. MediVision, Inc., was organized by several individuals in response to a study conducted by Bain and Company, a strategic consulting firms as part of a consulting engagement in which those persons were involved. The study disclosed several demographic and health care delivery trends which prompted MediVision management to pursue the development of outpatient eye surgery centers. Those trends are: an overall movement of all types of surgery from an impatient to an outpatient setting; the increase in the nation's elderly population, and the fact that the likelihood of a person developing cataracts increases dramatically with age; the technological improvements in the provision of cataract surgery; the growth in the number of cataract surgeries performed nationally; and, a change in the manner in which Medicare reimburses a facility for outpatient surgery performed upon Medicare recipients. Medicare, since 1982, has reimbursed licensed freestanding ambulatory surgical facilities at a flat rate for the provision of such surgery, with no cost to the patient. For the same surgical procedures performed in a hospital outpatient setting, Medicare will reimburse the facility its costs of providing the surgery; the patient is responsible to pay the Medicare deductible and 20 percent co-insurance. Various subsidiaries of MediVision Inc., presently operate eight outpatient eye surgery centers nationwide; two are located in Florida. Other MediVision subsidiaries are developing three additional centers in Florida, pursuant to certificates of need issued by the Department of Health and Rehabilitative Services. Both parties employed the same quantitative need methodology. The methodology employs the following steps: acquire data regarding number of impatient and outpatient surgical procedures performed by existing providers; using this data, calculate current overall surgical use rate and outpatient surgical use rate for county; using the projected population for the year in question and the current use rate, calculate projected number of surgeries; multiply total projected surgeries by 40 percent to establish total outpatient surgery pool for year in question; subtract from result of step 4, all outpatient surgical procedures projected to be performed in hospitals and operating freestanding ambulatory surgery centers; subtract financial break-evens of all certificate of need approved freestanding outpatient surgery centers from this pool; and, after subtractions the number of surgical procedures remaining are compared to the break-evens of certificate of need applicant at issue. If the pool is larger than break-evens the condition is satisfied. If the pool is smaller than break-evens the condition is not satisfied. The quantitative methodology provides a reasonable approach to the evaluation of need for ambulatory surgical facilities. The basic methodology has been employed by the Department since 1982; in December, 1985, the Department began to employ a "40 percent outpatient factor" in implementing the policy. Accordingly, looking toward the planning horizon of 1988, the methodology projects that 40 percent of all surgeries in Dade County will be performed on an outpatient basis. The 40 percent outpatient factor is reasonable for use in these proceedings. The prevailing literature suggests that 40 percent of all surgeries can be expected to be performed on an outpatient basis. Within Florida, many counties are already performing in excess of 30 percent of all surgeries on an outpatient basis. Trends in health care delivery and reimbursements including the growth in pre-paid health care organizations, such as health maintenance organizations; professional review organizations, which monitor the appropriateness of hospital admissions; and Medicare reimbursement incentives will contribute to an increase in the percentage of surgeries performed in an outpatient setting. While employing the same quantitative need methodology, the parties' health planning experts arrived at different conclusions as to whether the methodology projects need for the facilities at issue in these proceedings. The differences in outcome are attributable to two issues: (1) the calculation of a base-year use rate; and (2) the calculation of "break-evens" for previously approved, but non-operational, ambulatory surgical facilities. Each expert relied upon the same basic data source in calculating a base-year surgical use rate, employing data collected by HRS and reported in the most current State Agency Action Report prepared by the Department relative to Dade County. Such Action Report (CON Action No. 4095) lacked complete data regarding the total number of surgeries performed in Dade County during the base-year (1984-5), in that six of the thirty-three acute care hospitals in Dade County failed to report. Because it is necessary to have complete data in order to establish an accurate base-year surgical use rate, Mark Druash who was engaged to undertake a need analysis by the applicants, referred to earlier State Agency Action Reports to acquire surgical procedure data for the six hospitals which had failed to report. Such documents are reliable data sources upon which to base a need analysis. In calculating a county's surgical use rate, health planners take into consideration the total population within the county. Accordingly, the total number of surgeries provided within the county must also be considered. In that six Dade County hospitals failed to report data and HRS' health planner did not acquire data relative to those facilities, the surgeries performed at those hospitals were not included in his calculation of a surgical use rate. If the total population of a county is considered in calculating a surgical use rate, but something less than the total number of surgeries is considered, the calculation results in an artificially deflated use rate. As the base-year use rate drives all of the remaining calculations in the quantitative methodology, an error in the calculation of the use rate will be carried through the entire methodology. The ultimate effect of a deflated use rate is to project a smaller number of surgical procedures, as compared to a use rate calculated upon complete data. HRS calculated a base-year surgical use rate for Dade County of 78.2 surgeries/1000 population. MediVision calculated a base-year surgical use rate of 92.8/1000 population. The variance in the use rates is attributable solely to the fact that Druash acquired and employed in his calculations surgical procedure data from all Dade County hospitals previously relied upon by HRS; while HRS relied upon incomplete data. In that Druash's calculations are based on a complete data based the surgical use rate of 92.8/1000 population is found to be more accurate and reliable than the rate of 78.2/1000 population calculated by HRS from incomplete data. The parties differ in their calculation of "break- evens for previously approved, but not yet operational, ambulatory surgical facilities. The break-even calculation is an integral part of the quantitative need methodology. The purpose of subtracting from the available outpatient surgical pool the "break-evens" of approved, but not yet operational ambulatory surgical facilities is to assure that there exists need for the project proposed adequate to allow both such project and previously approved facilities to operate in a financially viable manner. The "break-even" approach is also intended to promote competition; rather than assuming that all of the procedures projected by a facility will be performed in such facility; the approach allocates to the facility only that number of procedures it needs to generate sufficient revenues to cover its expenses. Druash who participated in the development of the quantitative methodology during his tenure with HRS, testified that the "break-even" approach was selected because it would promote competition among providers by approving enough applicants so that they would be "hungry" for the residual surgeries projected by the methodology. The purpose of calculating a financial break-even is to ascertain at what point a project's cash flow will equal its expenditures. The generally accepted method for calculating a financial break-even requires that fixed costs be separated from variable costs. The concept of variable costs is the basis for the computation of a break-even. Fixed costs are those which remain constant regardless of the volume of business conducted by an entity; variable costs are those that change directly with volume. In the operation of an ambulatory surgical facility, virtually all expenses related to medical supplies are variable. If no patients are treated, no medical supplies are needed, and no expenses are incurred. If 100 patients are treated, 100 units of medical supplies are needed, with resultant expense. Certain expenses involved in the operation of an ambulatory surgical center are totally fixed, such as debt service and property taxes. All other expenses are variable to some degree e.g. salaries, utilities, and maintenance. Depreciation and amortization of property and equipment are not considered as expenses in a break-even analysis, as those items do not represent cash expenditures. As mere accounting recognitions of prior investment, depreciation and amortization should not be included in a calculation of a cash flow break-even. HRS' methodology for calculating financial break-evens for ambulatory surgical procedures treats all expenses as fixed, and includes amortization and depreciation among those expenses. By HRS' admissions the Department, "in lieu of attempting to determine what is fixed and what is variable . . . will use a somewhat more crude method". Where a financial break-even is calculated treating all costs as fixed, the resulting break-even number is artificially inflated. By the Department's reckoning, the effect of treating all expenses as fixed is to "add a cushion" to its approvals of prior applications. HRS' expert acknowledged, however, that differentiating between fixed and variable costs in performing a financial break-even analysis is the "preferred methods no question". Lovell Jones, a certified public accountant and expert in health care finance, performed revised break-even analyses for previously approved, but not yet operational, ambulatory surgical facilities. Jones first acquired expense and revenue data from the certificate of need applications submitted by previously approved applicants. Then, treating only medical supplies as variable expenses, and excluding amortization and depreciation from the list of fixed expenses, he calculated the actual financial break-even of each approved, but not yet operational, facility. Jones' analysis finds the collective break- even of all previously approved, but not yet operational, facilities to be 17,996 procedures, whereas the Department's "crude" analysis results in a collective break-even of 25,736. Jones' method of calculating break-even, which was agreed to be technically correct by both parties, is more accurate and reliable than the method employed by the Department. Using the agreed-upon quantitative methodology, the surgical use rate calculated by Druash, and the break-even numbers calculated by Jones, there is projected to exist in 1988 a pool of 5006 outpatient surgical procedures that could be provided by the applicants in these proceedings. Subtracting the break-even numbers of the two proposed facilities, there will exist a residual pool of greater than 3600 procedures. Accordingly, there exists a quantitative need for the two proposed facilities. Furthers the residual pool of greater than 3600 procedures represents an adequate "cushion" to satisfy the concerns of HRS that previously approved facilities be given the opportunity to operate in a financially viable manner. The proposed facilities will improve access to services for both Medicare and indigent patients. Medicare patients receiving surgery at the facilities will be treated free of cost, with the Medicare program having full responsibility for payment. All other patients will be treated at the facilities regardless of ability to pay. The proposed facilities will promote competition in that management intends the charges to commercial patients to be less than the prevailing charges in the community. Where an ambulatory surgical facility enters a market, hospital charges for similar services tend to decrease. The proposed facilities will promote cost containment, as it is more costly to render care in a hospital outpatient department than in a freestanding ambulatory surgical facility. Hospital outpatient departments, which are reimbursed by Medicare for their costs of providing services, do not have the same incentive to reduce costs as do freestanding ambulatory surgery facilities, which are reimbursed at a predetermined flat rate for the provision of services. Accordingly, Medicare has encouraged the use of freestanding ambulatory surgical facilities by incurring all responsibility for payments at no cost to Medicare recipients. The Department's sole concern regarding the financial feasibility of the proposed facilities arises out of its position that there exists no need for the facilities. Accordingly, the Department questions whether the facilities will enjoy utilization sufficient to generate the revenues necessary to their viable operation. In that need for the facilities has been found to exist, it follows that the facilities will be able to generate adequate numbers of surgeries to achieve break-even in their second years of operation. Several other factors indicate that the facilities will experience utilization sufficient to achieve break-even in their second years of operation: The marketing and community education activities proposed by the applicants will encourage utilization. In its existing surgical facility in Orlando, MediVision, Inc., has undertaken similar activities, which have resulted in substantial surgical referrals to the facility; There exists a residual pool of approximately 5,000,000 untreated cataracts nationally; Medicare reimbursement policies which allow Medicare recipients to receive treatment at licensed freestanding ambulatory surgical centers at no cost to the recipient will encourage utilization of the proposed facilities; The applicants' pricing structure, for both Medicare and commercial patients, will encourage utilization of the proposed facilities; and Two local ophthalmology group practices have expressed strong interest in performing surgery at the proposed facilities. Each group presently performs in excess of 1000 surgeries annually, which volume is greater than the break-even volume necessary to be achieved at each facility.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Lawn it is RECOMMENDED that a Final Order be entered approving the applications of Petitioners to establish and operate freestanding ophthalmic ambulatory surgical centers in Dade County, Florida. DONE and RECOMMENDED this 6th day of June, 1986, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of June, 1986. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert A. Weiss, Esquire The Perkins House, Suite 101 118 North Gadsden Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
